Friday, Dec 19, 2008
The following is a press release from Fitch Ratings:
Fitch Ratings-Jakarta/Singapore-19 December 2008: Fitch Ratings has today affirmed PT Bank Syariah Mandiri's (BSM) National Long-term rating at 'A+'(idn) and the bank's subordinated Islamic bond I/2007 at 'A(idn)'. The Outlook is Stable.
BSM's rating is largely driven by support from its parent bank, state-owned Bank Mandiri (Persero) Tbk ('BB'/'AA+(idn)'), as reflected in the sole ownership and the financial and technical assistance provided in the development of BSM's sharia banking operations. BSM's financial performance has also improved, albeit from a moderate base.
The issue rating reflects Fitch's opinion of BSM's ability to meet its financial commitment on a timely basis, as specified in the bond documentation, which includes principal repayment in full at maturity and a quarterly return paid to bondholders which is calculated based on a fixed, predetermined ratio ('nisbah') assigned on revenues generated by a pool of assets. The quarterly return can vary from time to time depending on the performance of the reference assets.
Bank Mandiri continues to provide technical assistance in the development of BSM's banking infrastructure and has committed more financial resources through a planned IDR500bn capital injection, of which IDR100bn has been made in June 2008 with the rest to be injected in four equal installments up to July 2010. This is expected to help keep BSM's total CAR at a minimum of 12% (end-9M08: 11.5%). Fitch also derives comfort from the existence of cross default clauses which exist in Bank Mandiri's offshore borrowings to support its subsidiary as well as its written commitment to the central bank to support BSM in the event of financial difficulty.
BSM's profitability improved in 9M08 as pre-provision profit increased to 4.8% of average assets from 3.8% thanks to better net financing margin and stable operating expenses. Higher provision expenses kept pre-tax ROA at 2.0% in 9M08, up from 1.5% in 2007. Meanwhile, non-performing financing (NPFs) declined to 5.0% of gross financing amid higher write-offs and due to the denominator effect of significant financing growth of 48% yoy at end-9M08. Tougher operating conditions in 2009 may exert pressure on BSM's performance, although Fitch understands that management has initiated certain actions to minimise the impact.
BSM started as a conventional bank back in 1973 and was converted into a sharia bank in 1999. BSM is a wholly-owned subsidiary of Bank Mandiri.
Contacts: Yanto Umar, Jakarta, +62 21 5290 2461/ yanto.umar@fitchratings.com; Tan Lai Peng, Singapore, +65 6796 7219/ laipeng.tan@fitchratings.com; Julita Wikana, Jakarta, +62 21 5290 2462/ julita.wikana@fitchratings.com; Ambreesh Srivastava, Singapore, +65 6796 7218/ ambreesh.srivastava@fitchratings.com.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: shivani.sundralingam@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
(END) Dow Jones Newswires
19-12-08 0941GMT
