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Fitch Rates Bank Jambi 'A(idn)'; Outlook Stable
October 3, 2016 / 10:46 AM / a year ago

Fitch Rates Bank Jambi 'A(idn)'; Outlook Stable

(The following statement was released by the rating agency) JAKARTA, October 03 (Fitch) Fitch Ratings Indonesia has assigned PT Bank Pembangunan Daerah Jambi (Bank Jambi) a National Long-Term Rating of 'A(idn)'. The Outlook is Stable. 'A' Long-Term National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment to a greater degree than is the case for financial commitments denoted by a higher rated category. KEY RATING DRIVERS The rating reflects Fitch's view that Bank Jambi is important to the regional government of Jambi province on Sumatra island. Bank Jambi is owned by the government of Jambi province (27.32%), and by the government of municipalities (16.94%) and government of regencies (55.72%) in Jambi province. Although Bank Jambi is a small bank in the Indonesian banking industry (0.1% of system assets at end-June 2016), it has a strong franchise in Jambi (around 20% market share by assets) and has an important role in supporting development in the region. Based on its regional significance, Fitch expects potential, but limited, support from the central government due to its lower systemic importance compared with other larger banks in Indonesia. Strong support from the shareholders to Bank Jambi is evidenced in annual capital injections since 2012. The bank's Fitch Core Capital and Tier 1 capital adequacy ratios were 25.8% and 23.1%, respectively, at end-June 2016, higher than the industry Tier 1 average of 20.0%. Fitch expects further capital support from the shareholders to support the growth of Bank Jambi's business. Bank Jambi's asset quality is likely to remain manageable as 94% of the bank's loan portfolio comprises lower-risk loans to civil servants. The quality of these consumer loans remained sound at end-June 2016, with this segment's non-performing loan (NPL) ratio low at 0.2%. Excluding consumer loans, the NPL ratio has come down from peak of 18.0% at mid-2015 to around 5.5% at end-June 2016. The bank's total NPL ratio was 1.0% at end-June 2016. Bank Jambi's return on assets stood at 1.8% at end-June 2016, lower than historic levels due higher credit costs and below its development bank peers' average of around 2%. Fitch believes it will take some time for the bank to significantly expand its low-cost deposit franchise, which will be important for it to sustain profitability and manage liquidity. Its loan-to-deposit ratio stood at 97.9% at end-June 2016, above the industry average of 91.1%. The bank has a high deposit concentration risk, with its top 20 depositors accounting for around 70% of its total deposits, which means it faces higher risk of liquidity problems if there is any significant drawdown of funds by depositors. RATING SENSITIVITIES Downward rating pressure may arise from a weakening of the regional and central government's ability and/or propensity to provide extraordinary financial support to Bank Jambi. However, Fitch believes this to be a remote prospect in the near to medium term. Deterioration in the bank's standalone financial profile is unlikely to impact its National Ratings, as its rating is driven by expectation of support from the government. Upside potential for the bank's National Ratings may arise if Fitch is of the view that the bank's importance to the local economy has increased, such that the regional and central government have greater propensity to provide extraordinary financial support to Bank Jambi. Upside potential may also arise from considerable improvement in the bank's standalone profile, such as if it successfully closes the gap with its larger Indonesian peers in terms of the size of operations, assets and risk management, while maintaining sound asset quality, high core capitalisation and healthy profitability with predominantly low-cost funding base. However, Fitch views this as unlikely to happen in the near to medium term. Contact: Primary Analyst Priscilla Tjitra Associate Director +62 21 2988 6809 PT Fitch Ratings Indonesia DBS Bank Tower 24th Floor, Suite 2403 Jakarta, Indonesia 12940 Committee Chairperson Jonathan Lee Managing Director +886 2 8175 7601 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Date of Relevant Rating Committee: 29 September 2016 Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 15 Jul 2016) here National Scale Ratings Criteria (pub. 30 Oct 2013) here Additional Disclosures Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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. 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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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