Fitch Ratings Indonesia has affirmed the National Long-Term Rating and National Short-Term Rating of PT BFI Finance Indonesia Tbk (BFIF) at ‘A+(idn)’ and F1(idn), respectively. The rating Outlook has  been revised to Positive from Stable. A full list of rating actions may  be found at the end of this commentary. 

‘A’ 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.

‘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. On Fitch’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 – National RatingsBFIF’s ratings are derived from the company’s strong standalone performance as one of the largest independent finance companies in Indonesia. The ratings also take into account BFIF’s relatively small footprint in the Indonesian financing industry. It accounts for around 3% of total system assets and is heavily reliant on wholesale funding. The Positive Outlook reflects Fitch’s expectation that BFI will continue to sustain sound financial performance and balance sheet strength to withstand market volatility and macroeconomic headwinds. 

BFIF’s solid financial performance during the first nine months of 2015 was driven by the company’s continuous efforts in managing asset quality. The efforts include the implementation of a risk-driven grading concept for new dealers. Its non-performing loan (NPL) ratio remained low and manageable at 1.6% at end-9M15 (2014: 1.5%) despite its exposure to the used automobiles and heavy equipment segments which are viewed to be of higher risk than new car financing.

The company’s capital profile has consistently been stronger than most peers, underpinned by solid internal capital generation. Fitch believes BFIF’s consistently low leverage at below 2x and maintenance of positive asset-liability gap should provide the company with an adequate cushion to withstand market shocks.

 RATING SENSITIVITIES – National RatingsA deterioration in asset quality that could adversely impact the profitability and capitalization is likely to result in its Outlook being revised to Stable or a rating downgrade in the event of a notable weakening of asset quality. Sustainable growth that results in greater market share while maintaining solid asset quality may lead to a rating upgrade. 

RATING SENSITIVITIES – Debt RatingsThe ratings of BFIF’s rupiah-denominated senior bonds and medium-term notes are the same as the company’s National Long-Term Ratings in accordance to Fitch’s criteria. Any changes in the National Long-Term Ratings would affect the issue ratings. 

Full list of rating actions:- National Long-Term Rating affirmed at ‘A+(idn)’; Positive Outlook- National Short-Term Rating affirmed at ‘F1(idn)’- Bond Programme I BFI Finance and its tranches under the programme affirmed at ‘A+(idn)’- Bond Programme II BFI Finance and its tranches under the programme affirmed at ‘A+(idn)’ and ‘F1(idn)’- Medium Term Notes BFI Finance Indonesia IV 2015 affirmed at ‘F1(idn)’

The material has been provided by InstaForex Company – www.instaforex.com