Fitch Ratings Indonesia has affirmed
The Outlook on its National Long-Term Rating is Stable.
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'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
Support-Driven Ratings: ICBCI's National Ratings reflect our view of a high likelihood of extraordinary support from the bank's higher-rated parent,
Linked to Parent's IDR: The parent's Long-Term Issuer Default Rating (IDR) underpins the subsidiary's rating as we believe that extraordinary support would be allowed to flow from the Chinese sovereign to the Indonesian subsidiary through ICBC in times of need. This is based on our view of ICBCI's strategic importance to ICBC's growth prospect in
High Ability to Support: ICBC, as the world's largest bank, has a strong ability to support ICBCI, considering its high credit rating and the subsidiary's relatively small size. This is counterbalanced by potential constraints on transfer and convertibility risks, reflected in
Strong Support Propensity: We believe ICBC has high propensity to support ICBCI given our view that
Standalone Credit Profile: ICBCI's standalone credit profile does not drive its ratings. It mostly reflects the bank's nominal domestic franchise, higher risk appetite, and lingering asset quality issues. This is counterbalanced by its satisfactory profitability and funding profile which benefit from its association with the ICBC group.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
A material weakening in ICBC's ability to support ICBCI could result in a downgrade of ICBCI's ratings. Any significant weakening in ICBC's propensity to support its subsidiary may also put downward pressure on the rating. This could stem from a very significant deterioration in the group's perception of the strategic value of having a subsidiary in one of the largest economies in
A downgrade of ICBCI's National Long-Term Rating could also arise from a weakening in its overall credit profile relative to the universe of entities rated on
A downgrade could also occur if we believe that support from the Chinese sovereign is less likely to flow to ICBCI. This would lead us to link the subsidiary's rating to ICBC's 'bbb' Viability Rating rather than the 'A' Long-Term IDR. However, Fitch believes these prospects are unlikely in the near-to-medium term.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
There is no rating upside for the National Ratings as they are already at the highest point on the scale.
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
ICBCI's rating is credit-linked to the parent's Long-Term IDR, based on our expectation that extraordinary support would be allowed to flow from the Chinese sovereign.
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