JAKARTA: Fitch Rating, a global rating agency, has placed PT Bank Mega Tbk's national long term 'A+(idn)' Rating and subordinated debt 'A(idn)' rating on rating watch negative.At the same time, Fitch has affirmed the bank's individual rating at 'D' and support rating at '4'. This act followed Bank Indonesia's announcement that it has imposed sanctions on Bank Mega as a result of weak internal control.
In a press statement published today, Fitch said that the Rating Watch Negative reflects the potential negative impact that the sanctions would have on Bank Mega's business profile and funding.Under the sanctions, the bank is prohibited from opening new branches, from renewing or opening new deposit on call and from offering negotiable certificates of deposits in one year.Fitch believes the sanctions would limit the bank's rapid growth in the medium term. The sanctions would also adversely affect the bank's short and medium-terms liquidity profile given its reliance on time deposits and the less steady nature of this type of funding.Despite the possibility that the bank's funding may contract, liquidity at present remains reasonably robust given Bank Mega's low loans-to-deposits ratio. Currently, the loans-to-deposits ratio is 55% in the end of March 2011. This, together with its adequate capital buffer, has resulted in the Individual rating being affirmed.Fitch expects to resolve the Rating Watch Negative once there is evidence of improvement of Bank Mega's internal controls and of the impact on the bank's credit profile from the sanctions.Fitch also notes that the bank must set up an escrow account to cover potential losses of up to IDR191 billion stemming from the ongoing dispute between the bank and its depositors, namely PT Elnusa Tbk and Batu Bara district administration. However, Fitch believes that the potential losses can be absorbed by the bank's net income.The MEGA-coded stock slightly increased 0.70% or IDR25 to IDR3,575 at the Jakarta Stock Exchange as of 2.27 p.m. local time.(NOM)
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