OREANDA-NEWS. Fitch Ratings Indonesia has affirmed the ratings of Indonesia-based PT Bank Central Asia Tbk (BCA), PT Bank Danamon Indonesia, Tbk (Danamon) and PT Bank Pan Indonesia Tbk (Panin). The rating Outlooks are Stable. A full list of rating actions is provided at the end of this commentary.

'AAA(idn)' Long-Term National Ratings denote the highest ratings assigned by Fitch on its national rating scale for that country. This rating is assigned to issuers or obligations with the lowest expectation of default risk relative to all other issuers or obligations in the same country.

'AA(idn)' Long-Term National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs only slightly from that of the country's highest rated issuers or obligations.

'F1(idn)' Short-Term National Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under the agency'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

IDRs, VIABILITY RATINGS AND NATIONAL RATINGS
BCA's IDRs, Viability Rating (VR) and National Ratings reflect Fitch's view that its strong credit fundamentals will continue to be underpinned by its business model, which focuses on low-risk transactional banking. The fundamentals will remain comparable with higher rated peers' in emerging markets. However, the credit profile is constrained by BCA's operating environment, where the developing financial market is more susceptible to systemic liquidity and funding risk than in developed markets. BCA has demonstrated resilient and strong performance during 2015's challenging operating conditions, with improved profitability and sound asset quality. It benefited from high interest rates thanks to its large low-cost current and savings deposits (CASA) base. BCA's Tier-1 capital ratio remains sound at 18.1% at end-2015, supported by strong internal capital generation.

Danamon's IDRs, VR and National Ratings reflect its relatively weaker funding profile and internal capital generation, counterbalanced by a strong capital profile (Tier-1 capital ratio at 18.8% at end-2015). The rating also considers its weakened asset quality due to exposure to commodity-related industries. Nonetheless, downside risk shows signs of moderation in Fitch's view. Funding and liquidity weaknesses are highlighted by the bank's reliance on high-cost non-CASA deposits and above-peer loan-to-deposit ratios.

Panin's IDRs and VR reflect its modest and weaker earnings compared with higher-rated Indonesian banks, counterbalanced by improved capital and satisfactory asset quality. Panin's core capital is strong, with a Tier-1 ratio of 17.5% at end-2015. Despite a weaker operating environment, the bank's profitability was moderately resilient in 2015 thanks to manageable asset quality with low credit costs.

SUPPORT RATINGS AND SUPPORT RATING FLOORS
The Support Ratings and Support Rating Floors of BCA, Danamon and Panin reflect Fitch's view of a moderate probability of extraordinary state support being made available, if needed. Fitch believes these three banks are systemically important to Indonesia as BCA, Danamon and Panin are the third, sixth and seventh largest banks in Indonesia by assets, respectively.

RATING SENSITIVITIES

IDRs, VIABILITY RATINGS AND NATIONAL RATINGS
BCA's ratings are sensitive to significant changes in its business model that may result in greater appetite for risk or sharp deterioration of the operating environment, which would be indicated by a lower sovereign rating. Improvements in the operating environment, perhaps stemming from, but not limited to, an upgrade of the sovereign rating, may result in rating upside for the bank.

Danamon's ratings are sensitive to its funding and liquidity profile. Rating upside for Danamon may result from material improvement in its franchise, leading to improved funding and liquidity metrics while maintaining sound asset quality and profitability.

For Panin, rapid loan expansion, which could negatively affect its capital and funding position in a difficult economy, may result in a downgrade to the bank's VR. However, as Panin's 'BB' IDR is at the same level as its Support Rating Floor, the IDR will not be affected by a downgrade of the bank's VR unless considerations underpinning its 'BB' SRF also weaken. Sustained improvements in its ability to generate capital and profitability would be positive for its VR.

SUPPORT RATINGS and SUPPORT RATING FLOORS
A change in Fitch's view of the government's ability and willingness to provide extraordinary support would affect these banks' Support Ratings and Support Rating Floors. Recent approval of the Financial System Crisis Prevention and Mitigation Law by the Indonesian parliament does not materially change the likelihood of government support for systemically important banks. However, Fitch will review the potential impact on Support Ratings and Support Rating Floors as further key details on the law become available.

FULL LIST OF RATING ACTIONS
BCA:
Long-Term IDR affirmed at 'BBB-'; Outlook Stable
Short-Term IDR affirmed at 'F3'
National Long-Term Rating affirmed at 'AAA(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Viability Rating affirmed at 'bbb-'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB+'

Danamon:
Long-Term IDR affirmed at 'BB+'; Outlook Stable
Short-Term IDR affirmed at 'B'
National Long-Term Rating affirmed at 'AA+(idn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1+(idn)'
Viability Rating affirmed at 'bb+'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB'

Panin:
Long-Term IDR affirmed at 'BB'; Outlook Stable
Short-Term IDR affirmed at 'B'
Viability Rating affirmed at 'bb'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB'