PT BANK MANDIRI (PERSERO) TBK Fitch Ratings Indonesia has affirmed PT Bank Mandiri Taspen's (Bank Mantap) National Long-Term Rating at 'AA(idn)'.
The Outlook is Stable. Fitch has also affirmed the ratings on the bank's rupiah-denominated senior bonds at 'AA(idn)'.
'AA' National Long-Term Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.
Key Rating Drivers
Support-Driven Ratings: Bank Mantap's National Long-Term Rating is driven by our expectation of extraordinary support from its parent,
Anchored to Parent's IDR: The subsidiary's rating is linked to its parent's Long-Term Issuer Default Rating (IDR), as we deem that extraordinary support would be allowed to flow from the Indonesian sovereign through Mandiri, if necessary. This is based on our view of the high reputational risk for Mandiri, and in turn the government, should Bank Mantap, a state-owned bank subsidiary, be allowed to fail. A default by Bank Mantap would also be a politically sensitive issue for the government given its role as a bank for retired civil servants.
High Support Propensity: We believe Bank Mantap is a strategically important subsidiary for Mandiri as it provides a foothold for the parent in the lucrative pension loan business, a fast-expanding banking segment that Fitch regards as low risk because the loans are secured against borrowers' regular pension payments. Parental support propensity is enhanced by name sharing, a record of capital injections, funding origination support, and Bank Mantap's increasing contribution to the parent.
Strong Parental Support Ability: Fitch believes that Mandiri will be able to provide support to Mantap due to the subsidiary's relatively small size, with assets that accounted for less than 3% of the parent's consolidated assets as of
Standalone Credit Profile: Bank Mantap's standalone profile does not drive its ratings. The profile reflects its small franchise in the Indonesian banking sector, acceptable asset quality and profitability, above-industry average loan growth that puts some pressure on its capitalisation and funding, which mainly rely on high-cost time deposits. Its capitalisation and funding benefit from ordinary support from the parent, mainly through regular capital injections and depositor referrals.
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade in Mandiri's National Long-Term Rating would lead to a downgrade of Bank Mantap's National Long-Term Rating. A perceived decline in the parent's propensity to provide support could also result in negative rating action. This may arise from a sustained performance slippage that weakens Bank Mantap's contribution to the parent, a reduction in Mandiri's ownership, or a diminishing role in the parent's overall strategy.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Fitch may take positive action on the National Long-Term Rating if we believe that Bank Mantap has become more integral and strategically important to Mandiri's overall business. This perceived greater importance may stem from a substantial increase in Mandiri's ownership or a much larger contribution to the parent. However, we believe this is unlikely in the short term.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Bank Mantap's debt programme and bonds issued under the programme are rated at the same level as its National Long-Term Rating, in accordance with Fitch criteria. This is because the instruments represent direct, senior obligations of the company and rank equally with all its senior obligations.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade in Bank Mantap's National Long-Term Rating would lead to a corresponding upgrade of its issue ratings.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Any downgrade of Bank Mantap's National Long-Term Rating would lead to a corresponding downgrade of its issue ratings.
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
Bank Mantap's National Long-Term Rating is driven by our expectation of extraordinary support from its parent, Mandiri, and the Indonesian sovereign as ultimate shareholder, if needed.
RATING ACTIONS
Entity / Debt
Rating
Prior
PT Bank Mandiri Taspen
Natl LT
AA(idn)
Affirmed
AA(idn)
senior unsecured
Natl LT
AA(idn)
Affirmed
AA(idn)
Page
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VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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