Fitch Affirms ANZ Indonesia's 'AAA(idn)' Rating; Outlook Stable

(The following statement was released by the rating agency) Fitch Ratings-Jakarta-August 19: Fitch Ratings Indonesia has affirmed the National Long-Term Rating of PT Bank ANZ Indonesia (ANZI) at 'AAA(idn)' and its National Short-Term Rating at 'F1+(idn)'. The Outlook is Stable. 'AAA' National Long-Term Ratings denote the highest rating assigned by the agency in its National Rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country or monetary union. 'F1' National Short-Term Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under the agency's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country or monetary union. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating. KEY RATING DRIVERS ANZI's National Ratings are support-driven and reflect Fitch's view that the bank's higher-rated parent has high propensity and ability to provide timely support to its subsidiary, should it be needed. ANZI is 99%-owned by Australia and New Zealand Banking Group Limited (ANZ, AA-/Negative/aa-). Fitch believes ANZ has a strong ability to support its Indonesian subsidiary as the parent has a high credit rating and ANZI's consolidated assets accounted for just 0.2% of its parent's consolidated assets at end-1Q19. However, we believe currency transfer and convertibility risks - reflected in Indonesia's Country Ceiling of 'BBB' - could represent a significant constraint on ANZI's ability to receive support from its Australia-based parent. Fitch's view on ANZ's propensity to provide support to ANZI is based on the large potential for damage to the parent's reputation if the subsidiary were to default, significant synergies between the parent and subsidiary manifested by alignment in key areas (operational, risk management, and key personnel), a shared name, and the parent's majority ownership. ANZI's standalone profile does not drive its rating but reflects Fitch's view of the bank's small franchise, above-average risk appetite, moderate asset quality and profitability, healthy capitalisation and a funding profile that benefits from ordinary support from ANZ. ANZI's market share accounted for about 0.3% of total banking industry assets at end-1Q19. All of the bank's lending is to the corporate segment, with a large portion to commodity-related sectors, which can be volatile as borrower performance tends to be closely correlated with commodity prices. Its non-performing loan ratio of 1.4% was lower than the Indonesian banking industry's 2.5% and its return on assets of 2.4% was in line with the sector's 2.1%. The bank's Tier 1 capital ratio of 37% was considerably higher than the industry's 22%, and its loan-to-deposit ratio of 138% was also much higher than the 93% industry average. RATING SENSITIVITIES Downward rating pressure on the National Ratings may arise from a perceived weakening of support from the parent, including major changes to ownership. A significant weakening in the parent's financial strength could also have a negative effect on the ratings, although Fitch believes this to be a remote prospect in the near-to-medium term due to the rating differential between the parent and Indonesia's Country Ceiling. There is no rating upside as the ratings are already at the highest point of the National Rating scale. Contact: Primary Analyst Iwan Wisaksana Director +62 21 2988 6807 PT Fitch Ratings Indonesia Financial Institution DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof. Dr. Satrio Kav 3-5 Jakarta, Indonesia 12940 Committee Chairperson Grace Wu Senior Director +852 2263 9919 Media Relations: Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com; Leslie Tan, Singapore, Tel: +65 6796 7234, Email: leslie.tan@thefitchgroup.com. Additional information is available on www.fitchratings.com Applicable Criteria Bank Rating Criteria (pub. 12 Oct 2018) https://www.fitchratings.com/site/re/10044408 National Scale Ratings Criteria (pub. 18 Jul 2018) https://www.fitchratings.com/site/re/10038626 Short-Term Ratings Criteria (pub. 02 May 2019) https://www.fitchratings.com/site/re/10073011 Additional Disclosures Solicitation Status https://www.fitchratings.com/site/pr/10086438#solicitation Endorsement Policy https://www.fitchratings.com/regulatory ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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