Fitch: Stable Outlook for Indonesian Banks

Indonesia Finance

Tuesday, 20 December 2011 19:54

Written by Hans GN

Theindonesiatoday.com - Fitch Ratings says that the rating Outlook on Indonesian banks is Stable, and is a reflection of the resilient banking industry and sovereign's sound economic prospects.

"Indonesian banks should remain resilient to challenging conditions in the global economy. Steady earnings, adequate provisioning and sound capital provide a reasonable buffer against these challenges," says Julita Wikana, Director in Fitch's Financial Institutions group. Barring any severe knock-on effects from a still uncertain outlook on the global economy, Fitch expects the banks to continue delivering sound profitability in 2012 as lower funding costs and manageable credit costs offset competitive pressure. The agency expects lower, but still healthy loan growth, of 15%.

Fitch recently upgraded the Long-Term Foreign-Currency and Local-Currency Issuer Default Ratings (LTFC & LC IDRs) of eight Indonesian banks (for more information please see the rating action commentary, entitled "Fitch Upgrades 8 Indonesian Banks' IDRs on Sovereign Upgrade", dated 19 December 2011) following the change in Indonesia's sovereign Outlook.

Fitch expects net interest margin - among the highest in South Asia - to remain strong but under pressure, as the scope to reduce funding costs is limited. In addition, rising competition for market share may dampen NIM, to some extent.

Asset quality and credit costs are likely to remain manageable in 2012 amid still-favourable domestic economic conditions. However, any further improvement is likely to be moderate, as some risks may arise from the build-up of loans up to 90 days in arrears, together with a generally rapid pace of loan growth.

The pressure on capital is counterbalanced by greater earnings retention, lower loan growth and capital injection. As such, Fitch expects the equity-capital buffers to remain reasonable in light of healthy earnings, which act as a first line of defence against losses, and in view of the favourable local economy. (Theindonesiatoday.com)

» IDX Regains at Morning Close, Regional Mixed

Theindonesiatoday.com - Composite index of the Indonesia Stock Exchange (IDX) closed morning trade up 0.13% at 3,784.81, reversing earlier losses, while regional markets were mixed.

Latest News

» IDX Regains at Morning Close, Regional Mixed

» Danone's Sales Up 10.5%, Indonesia Top Driver

» Singapore Airline Passengers Increases 6.5% in February

» Listrindo Secured Supports for $300 Million Notes Tender Offer

» Sari Roti H1 Sales Surpasses Target

» Raisama Delays Drilling in South Block A Prospect, Sumatera

» Suspicious Transactions over Rp150 Billion, Nazaruddin Accounts Blocked

» Sound Oil Misses Target for Citarum PSC

» PetroAsian Enters Petroleum Trading Agreement

» Benakat Expects to Secure Loan Next Month

» Petra Foods Awaits Court Ruling on Transfer Pricing Allegation

» JP Morgan Client Boosts Ownership in CMNP

» KPK & Newsrooms Got Coffin + White Rats Packages

» Newmont to Seek $600 Million Loan from Banks

» Lawmakers Unsatisfied with Forensic Audit of Century Bailout

Latest News

Most Read

Industries

Politics

Law

People