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Investing.com -- Moody’s Ratings has revised the outlook for Bank Permata Tbk (P.T.) to negative from stable today. Concurrently, the credit rating agency has confirmed the Indonesian bank’s long-term (LT) and short-term (ST) foreign-currency (FC) and local-currency (LC) deposit ratings at Baa1/P-2. It has also maintained its LT and ST FC and LC Counterparty Risk Ratings at A3/P-2, its LT and ST Counterparty Risk Assessment at A3(cr)/P-2(cr) and its Adjusted Baseline Credit Assessment (BCA) at baa1.
The change in outlook for Bank Permata is primarily due to the adjustment of the outlook for its parent bank, Bangkok Bank Public Company Limited (BBL), to negative. The shift in BBL’s outlook was influenced by the negative outlook on the Government of Thailand’s ratings.
Bank Permata’s outlook alteration follows the change in BBL’s outlook to negative, a move driven by the change in Thailand’s outlook from stable to negative. If Thailand’s Baa1 issuer rating is downgraded, it could lead to a downgrade in BBL’s baa1 BCA, which would subsequently lower its ability to support Bank Permata. The Baa1 deposit ratings and baa1 adjusted BCA of Bank Permata include an assessment of a very high likelihood of support from BBL in times of need, resulting in a two-notch uplift from the bank’s baa3 BCA. This support assumption takes into account BBL’s controlling stake in the bank and the strategic importance of Bank Permata to the Group.
Future downgrades of the bank’s Adjusted BCA and ratings could occur if BBL’s ability or willingness to provide support decreases, including a reduction in capacity due to a downgrade of Thailand’s sovereign rating. Bank Permata’s Adjusted BCA and ratings could also be downgraded if its BCA is downgraded. This could happen if its nonperforming loan (NPL) ratio rises above 4%, its tangible common equity/risk-weighted assets ratio falls below 18%, or its net income/tangible assets drop below 0.5%.
An upgrade of Bank Permata’s ratings is unlikely as they are currently on a negative outlook. The upgrade of its adjusted BCA is also unlikely as it is closely tied to BBL’s BCA, which has limited upside potential as it is already at the same level as Thailand’s Baa1 sovereign ratings, currently on a negative outlook. However, Moody’s could change Bank Permata’s outlook back to stable if the outlook on BBL and Thailand’s sovereign rating stabilizes.
An upgrade of Bank Permata’s BCA would likely depend on a significant strengthening of its franchise, as well as improvements in its credit metrics including asset quality, profitability, and funding.
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