Moody's Affirms Bank Tabungan Negara's Deposit Ratings, Downgrades BCA

Strategic Insights -

Moody's Investors Service has affirmed Bank Tabungan Negara's (BTN) Baa2/P-2 long-term and short-term deposit ratings, citing the bank's systemic importance, government support, and adequate liquidity. However, Moody's has downgraded the bank's Baseline Credit Assessment (BCA) and Adjusted BCA to ba2 from ba1, reflecting solvency risks and low provisioning levels relative to asset risks. The rating agency also noted that BTN's high level of restructured loans and accrued interest receivables pose a risk of overstating capital.

Key Takeaways:

  • Moody's has affirmed BTN's Baa2/P-2 long-term and short-term deposit ratings, with a stable outlook.
  • The bank's BCA and Adjusted BCA have been downgraded to ba2 from ba1, reflecting solvency risks and low provisioning levels.
  • BTN's high level of restructured loans and accrued interest receivables pose a risk of overstating capital, according to Moody's.
  • The bank's liquidity remains adequate, with liquid banking assets accounting for 17.8% of tangible banking assets as of March 2025.
  • Predictions include credit costs, net of recoveries, normalizing at around 0.8%-1.0% in 2025, with continued write-offs and a modest improvement in the net interest margin.
  • The bank's return on assets is expected to decline slightly to around 0.55%-0.65% in 2025.

Statistics:

  • BTN's capital ratio, measured by tangible common equity (TCE) as a percentage of risk-weighted assets, was strong at 15.3% as of March 2025.
  • The bank's risk-weight density was low at 43% as of March 2025.
  • Accrued interest receivables are equivalent to 36% of TCE or 3.1% of gross loans as of March 2025.
  • The bank expects only 10% of these accrued interest receivables to default, reducing the expected impact on its capital.
  • BTN's staged 3 loan ratio will remain elevated at around 5% due to a large stock of restructured loans.
  • The bank's LAR coverage ratio was weak at 17% as of March 2025.

Sources:

  • Moody's Ratings (Moody's), https://ratings.moodys.com/rmc-documents/432741
  • Bank Tabungan Negara (Persero) Tbk (PT), reported consolidated assets of IDR468.5 trillion ($28.3 billion) as of March 2025.