OREANDA-NEWS. Fitch Ratings Indonesia has affirmed the National Long-Term Ratings on PT BII Finance Center (BIIF) and PT CIMB Niaga Auto Finance (CNAF) at 'AA+(idn)' and on PT Wahana Ottomitra Multiarta Tbk (WOMF) at 'AA(idn)'. The agency has also affirmed their National Short-Term Ratings at 'F1+(idn)'. The Outlook is Stable, reflecting continued support from their higher-rated parents. A full list of rating actions is at the end of this commentary.

'AA' 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 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 RATINGS 
The ratings are driven by Fitch's view that the parents of BIIF, CNAF and WOMF would provide timely support to their subsidiaries, should it be needed. The subsidiaries play important roles in expanding their parents' consumer businesses in Indonesia.

Fitch views BIIF and CNAF as strategically important subsidiaries of PT Bank Internasional Indonesia Tbk (BII; BBB/AAA(idn)/Stable) and PT Bank CIMB Niaga Tbk (CIMB Niaga; BBB/AAA(idn)/Stable) respectively because of their strong linkages. The view is reinforced by their parents' full ownership and name sharing, strong operational alignment and provision of funding support. In the case of WOMF, the ratings reflect moderate linkage with BII; thus Fitch expects a moderate probability of extraordinary support from BII. BII owns 68% of WOMF.

The parents' commitment to their subsidiaries is underscored by their extension of capital support. CNAF obtained a IDR300bn capital injection from CIMB Niaga at end-2014 while WOMF recently received IDR200bn of fresh capital from BII through a rights issue that increased BII's stake in the subsidiary. The capital injections have helped the subsidiaries to maintain their gearing ratios at manageable levels. The funding support via joint-financing schemes, where the parents continue to bear the credit risk, remained substantial at about 50%-70% of the three subsidiaries' managed receivables in 2014.

The return on asset ratios of BIIF, WOMF, and CNAF declined in 2014 due to high interest rates, slower automobile sales, and increased market competition. A new regulation issued in 2Q14 by the Financial Service Authority (OJK) that limits consumer finance companies' insurance income put further pressure on CNAF's profitability in 2014. However, Fitch expects CNAF's profit to recover in the long run supported by the expected more supportive operating conditions. BIIF and CNAF's asset quality was more resilient than WOMF's as they focus on car financing, which is less sensitive to adverse economic conditions. WOMF extends loans mainly to motorcycle buyers, who are more likely to face difficulties repaying loans in economic downturns.

RATING SENSITIVITIES - NATIONAL RATINGS 
Any significant dilution in ownership by, or perceived weakening of support from, the parents would exert downward pressure on the ratings on BIIF, WOMF, and CNAF, including the possibility of multi-notch downgrades. However, Fitch sees this prospect as remote in the foreseeable future, given their strategic roles in expanding their parents' businesses in Indonesia's consumer financing market.

Rating upside could arise if BIIF and CNAF are perceived to be strategically more important to BII and CIMB Niaga, respectively. Evidence of stronger integration between parent and subsidiary (for example, if there is a significant increase in joint financing and cross-selling activities), and stronger parental support would also be positive for the ratings. The rating differential between BII and WOMF could narrow in the event BII increases its ownership in WOMF to above 75%, shares its name with WOMF, develops greater operational integration with the subsidiary, or provides other forms of tangible support to the subsidiary.

RATING SENSITIVITIES - DEBT RATINGS
The ratings of the consumer finance companies' rupiah-denominated senior bonds and medium-term notes are the same as their National Long-Term Ratings in accordance to Fitch's criteria. Any changes in the National Long-Term Ratings would affect these issue ratings.

Full list of rating actions:
BIIF
National Long-Term Rating affirmed at 'AA+(idn)'; Outlook Stable 
National Short-Term Rating affirmed at 'F1+(idn)'
Rupiah senior bond I/2012 affirmed at 'AA+(idn)'
Rupiah senior bond II/2013 affirmed at 'AA+(idn)'
Medium-term notes V/2013 affirmed at 'AA+(idn)'

WOMF
National Long-Term Rating affirmed at 'AA(idn)'; Outlook Stable 
National Short-term Rating affirmed at 'F1+(idn)'
Rupiah bond programme I / 2014 and its tranches under the programme affirmed at 'AA(idn)' and 'F1+(idn)'

CNAF: 
National Long-Term rating affirmed at 'AA+(idn)'; Outlook Stable 
National Short-Term rating affirmed at 'F1+(idn)'
Medium term notes affirmed at 'AA+(idn)'
Rupiah senior bonds I/2012 affirmed at 'AA+(idn)'.