PT BANK OCBC NISP TBK
Fitch Ratings has affirmed
At the same time, Fitch Ratings Indonesia has affirmed OCBC NISP's National Long-Term Rating at '
'
'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. Where the liquidity profile is particularly strong, a '+' is added to the assigned rating.
Key Rating Drivers
Support-Driven Ratings: OCBC NISP's IDRs and National Ratings are driven by its Shareholder Support Rating (SSR). Its SSR of 'bbb' reflects Fitch's belief that the bank's higher-rated parent,
OCBC NISP's Long-Term Local-Currency IDR is three notches above
Business Profile Drives VR: OCBC NISP's VR of 'bb+' is in line with its implied VR. It reflects the bank's business profile, which is comparable to those of its domestic mid-sized peers, and a risk profile that is better than that of its domestic peers. Fitch believes the bank's financial profile to be adequate, supported by an asset-quality profile that is better than the industry average and satisfactory capitalisation for its risk profile.
Anchored to Parent's VR: OCBC NISP's support-driven ratings are anchored to OCBC's VR, as we believe there is sufficient uncertainty that support will be allowed to flow from the
Stable Operating Environment Outlook: Fitch expects the operating environment (OE) for Indonesian banks to be stable in the near future, on the back of probable resilient GDP growth in 2023 and 2024, which should support the industry's loan demand and asset quality. We have maintained the OE score at 'bb+' with a stable outlook. The OE score is higher than the implied score in the 'b' category due to a positive adjustment for
Adequate Business Profile: OCBC NISP's business profile is assessed at 'bb+', in line with its implied score, and reflects its moderate domestic franchise, with adequate diversification and satisfactory management quality. Fitch believes that OCBC NISP also benefits from its association with the OCBC group, which improves its access to customers and the breadth of its product offerings.
Stable Asset Quality: Fitch expects the bank's reported non-performing loan (NPL) ratio to remain stable in the next 12-24 months as an improvement in asset quality is balanced by the impact of the partial expiration of the forbearance. This underpins our asset quality score assessment of 'bb+' with a stable outlook. OCBC NISP's NPL ratio stabilised at 2.3% in
Resilient Profitability Profile: Fitch expects OCBC NISP's profitability to be resilient in the near future. We believe the negative impact of rising interest rates on net interest margins is likely to be offset by high loan growth and falling credit costs, with the core metric of operating profits to risk-weighted assets (OP/RWA) being stable. OCBC NISP's earnings and profitability profile is assessed at 'bb', in line with the implied score, with a stable outlook.
Satisfactory Capital Cushion: Fitch expects OCBC NISP to maintain adequate capital buffer to weather potential asset-quality deterioration. However, there is very limited headroom at the current capitalisation and leverage score, and the common equity Tier 1 ratio could potentially fall below the 20% threshold for the 'bbb' implied category if loan growth turns out to be stronger than expected. This underpins our negative outlook on the score.
Improving Funding Profile: Fitch believes that OCBC NISP's funding profile has improved considerably in recent years, as reflected in the improvement in its deposits mix, which exceeded that at its mid-sized Indonesian bank peers. OCBC NISP has one of the lowest loan-to-deposit (LDR) ratios among major Indonesian banks as of
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
OCBC NISP's Long-Term Foreign-Currency IDR would be downgraded if
A five-notch downgrade of OCBC's VR would lead to a downgrade of OCBC NISP's Long-Term Foreign-Currency IDR and SSR. A two-notch downgrade would result in a downgrade in OCBC NISP's Long-Term Local-Currency IDR. However, Fitch believes the prospect of this occurring is remote in the near to medium term.
Downward pressure on OCBC NISP's ratings may also arise from a substantial weakening of support prospects from its parent, which may stem from a deterioration in the group's perception of its business prospects in
Deterioration in OCBC NISP's standalone credit profile is unlikely to affect its IDRs or National Ratings unless the factors underpinning parental support also weaken.
A downgrade of the National Long-Term Rating could also result from our assessment of a weakening in the bank's overall credit profile relative to the national rating universe of
A VR downgrade would most likely stem from a downward revision of the earnings and profitability score, such that we believe it would become the 'weakest link' in OCBC NISP's overall standalone credit profile. This could result from a sustained decline in its OP/RWA ratio to below 1.5%, which would most likely reflect deterioration in other key rating drivers.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upside potential for OCBC NISP's Long-Term Foreign-Currency IDR may result from an upward revision of
There is no rating upside for the National Ratings, as they are already at the highest point on the scale.
Positive rating action on the VR appears unlikely, as it would require a significant improvement in the standalone credit profile of OCBC NISP, resulting in a simultaneous positive action on multiple rating factors. This would most likely happen in conjunction with an upward revision of the OE score to the 'bbb' category, which would affect the assessment of other rating factors.
VR ADJUSTMENTS
The OE score of 'bb+' has been assigned above the 'b' category implied score on the following adjustment reason: sovereign rating (positive)
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
OCBC NISP's support-driven ratings are credit-linked to the VR of OCBC, based on our view of extraordinary support.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
(C) 2022 Electronic News Publishing, source
