Indonesian State Banks May Be Downgraded

Moodys Investors Service said it has put on review for possible downgrade the financial strength ratings of five Indonesian state banks.

The five banks were Bank Dagang Negara, Bank Ekspor Impor Indonesia, Bank Negara Indonesia, Bank Rakyat Indonesia and Bank Tabungan Negara.

The agency said it expected the continued financial crisis would cause serious deterioration in the already weak asset quality of the state banks.

However, the Indonesian governments plan to merge several of the banks raised the possibility of capital increases or other arrangements that could strengthen the banks, it said.

While details of the mergers were unclear, the agency said the fall in the value of the rupiah and tight liquidity have increased the need to restructure the state banks.

 

The agency, which earlier downgraded Indonesias foreign currency deposit ceiling, said it had also downgraded the long-term deposit rating of Bank Dagang Negara to Ba3 from Ba1 and its long term senior debt to Ba1 from Baa3.

It said the banks financial strength rating of E plus was on review for a possible downgrade.

Long-term deposits of Bank Ekspor Impor Indonesia were also downgraded to Ba3 from Ba1 while its long-term senior debt stood at Ba1 from Baa3.

Its financial strength rating of D was put on review.

As for Bank Negara Indonesia, its long-term deposits were downgraded to Ba3 from Ba1 and its long-term senior debt to Ba1 from Baa3. Its D plus financial strength rating was on review.

Bank Rakyat Indonesias long-term deposit rating was cut to Ba3 from Ba1 and its long-term senior debt to Ba1 from Baa3. Its financial strength rating of E plus was on review.

Bank Tabungan Negara had its long-term deposits revised to Ba3 from Ba1 and its long-term senior debt to Ba1 from Baa3. On review is its D plus financial strength rating.

Meanwhile, Moodys said yesterday it put the deposit and bank financial strength ratings of Indonesias Bank Danamon on review for possible downgrade.

The action reflected the deepening of the financial crisis in Indonesia, Danamons higher than average risk profile, and the uncertainties created by the change in the banks ownership, the rating agency said in a statement.

It said its review of Bank Danamon would focus on the impact of the current crisis on asset quality and earnings, as well as on the banks ability to raise additional capital through the markets or from major shareholders.

The Salim Group of Indonesia is expected to buy 19 percent of Bank Danamon and Credit Suisse First Boston

the remaining 10 percent.

The ratings for Bank Danamon are as follows:

* for long-term foreign currency deposits Ba3 on review for possible downgrade, having been changed from Ba2 to Ba3 due to the latest downgrade of the Indonesian foreign currency deposit ceiling.

* for short-term foreign currency deposits Not Prime.

* for bank financial strength - D on review for possible downgrade.

Moodys has downgraded Indonesias foreign currency ceiling for bonds to Ba1 from Baa3, and that of its bank deposits to Ba3 from Ba1.

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