Fitch Ratings Indonesia has affirmed PT Bank Commonwealth's (PTBC) National Long-Term Rating at 'AAA(idn)' and National Short-Term Rating at 'F1+(idn)'.

The Outlook is Stable. The bank's senior debt rating has also been affirmed at 'AAA(idn)'.

'AAA(idn)' National Ratings denote the highest rating assigned by the agency in 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 or monetary union.

'F1(idn)' National 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. Where the liquidity profile is particularly strong, a '+' is added to the assigned rating.

Key Rating Drivers

Support-Driven Rating: PTBC's national ratings reflect Fitch's view of a high likelihood of timely extraordinary support from its higher-rated parent, Commonwealth Bank of Australia (CBA, A+/Stable/a+), if required.

Linked to its Parent's VR: PTBC is 99%-owned by CBA and its ratings are linked to the Viability Rating of its parent, as we believe there is sufficient uncertainty that support from the Australian government would flow through CBA to PTBC in the event of stress. Instead, we believe that potential support will most likely depend on CBA's own financial resources.

Considerable Ability to Support: Our view of CBA's ability to support its subsidiary considers the parent's high credit rating and PTBC's small size within the group, with total assets and equity accounting for only 0.2% and 0.5%, respectively, of its parent's consolidated assets and equity at end-2021.

High Propensity to Support: Our support assessment is also based on our view that PTBC is important to CBA's overseas presence, especially in south-east Asia's largest economy, as well as the synergies between the parent and subsidiary as manifested in the name association, support in key areas, including technology, risk management, liquidity and capital support, and appointment of key personnel.

Standalone Credit Profile: PTBC's standalone credit profile does not drive its ratings, but reflects the bank's small franchise, weak profitability and pressured asset-quality metrics. These factors are counterbalanced by satisfactory capitalisation and funding profiles, which benefit from ordinary support from CBA.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

National Rating Relativity: A downgrade of PTBC's National Long-Term Rating would most likely arise from a weakening in its overall credit profile relative to the universe of entities rated on the Indonesia national rating scale. This could result from a minimum of a three-notch downgrade in CBA's Viability Rating or a reduction in its propensity to provide support.

Parent's Propensity to Support: A weakening of CBA's propensity to provide support to PTBC could stem from major ownership changes or a very significant reduction of PTBC's role in the group, which may arise from a very significant deterioration in the group's perception of its business prospects in Indonesia.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

No Upside: There is no rating upside for PTBC's National Ratings as they are at the highest point on the scale.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

Senior Debt Rating: PTBC's senior unsecured bonds are rated at the same level as its National Long-Term Rating in accordance with Fitch's criteria, as they constitute its direct, unsubordinated and senior unsecured obligations and rank equally with all its other unsecured and unsubordinated obligations. Indonesia does not have a sophisticated resolution framework, and we believe that these obligations have average recovery prospects.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A downgrade of PTBC's National Long-Term Rating would lead to a corresponding downgrade of the bank's senior unsecured bond rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

PTBC's senior bond rating has no upside potential as it is at the highest point on the scale.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

PTBC's support-driven ratings are linked to CBA's VR based on our expectation of extraordinary support.

RATING ACTIONS

Entity / Debt

Rating

Prior

PT Bank Commonwealth

Natl LT

AAA(idn)

Affirmed

AAA(idn)

Natl ST

F1+(idn)

Affirmed

F1+(idn)

senior unsecured

Natl LT

AAA(idn)

Affirmed

AAA(idn)

Page

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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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