Permata on negative watch

Fitch Ratings has placed PT Bank Permata Tbk’s national long-term rating of AAA (idn) on rating watch negative (RWN) and affirmed its national shortterm rating of F1+(idn).

The rating action follows an announcement by Bangkok Bank (BBL) on Dec 12 that it had entered into conditional share purchase agreements with Standard Chartered Bank and PT Astra International Tbk to acquire their 89.1% shareholding interests in Permata, subject to regulatory approval. BBL will seek to acquire Permata’s remaining shares from a public tender offer.

The AAA national long-term rating denotes the highest rating assigned by the agency in its national rating scale for that country, while the F1(idn) national short-term rating indicates 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 or monetary union.

Permata’s national ratings are driven by institutional support, reflected by Fitch’s view that Standard Chartered has the ability and high propensity to provide timely extraordinary support to its subsidiary, if needed.

Fitch says it’s likely that Permata will continue to benefit from institutional support, albeit from a different source, and the RWN reflects the possibility that the likelihood of receiving support could be lower after completion of the transaction. BBL’s ability to provide support is reflected in its viability rating, which is two notches lower than that of Standard Chartered. Permata’s ratings will also be driven by Fitch’s assessment of BBL’s propensity to provide support.

Fitch will resolve the RWN on Permata’s ratings on completion of the acquisition by BBL, expected in the second half of 2020.

The magnitude will depend on Fitch’s assessment of BBL’s ability and propensity to support Permata, but the downgrade is unlikely to exceed two notches.