Rating Action: Moody's revises Panin Bank's outlook to positive from stable; affirms ratingsGlobal Credit Research - 14 Dec 2021Singapore, December 14, 2021 -- Moody's Investors Service has today revised Pan Indonesia Bank TBK (P.T.)'s (Panin Bank) rating outlook to positive from stable.At the same time, Moody's has affirmed the bank's Baa3 long-term local and foreign currency deposit ratings, as well as its ba1 Baseline Credit Assessment (BCA).The rating action reflects the significant increase in Panin Bank's capitalization, which Moody's expects will remain at high levels over the next 12-18 months.The full list of affected ratings is provided at the end of this press release.RATINGS RATIONALEThe change in outlook reflects the sharp increase in Panin Bank's capitalization, with the bank's Common Equity Tier 1 ratio rising to 27.8% as of 30 September 2021 from 20.5% two years ago. Moody's expects Panin Bank will maintain the regulatory capital ratio -- which is now the highest among Moody's-rated banks in Indonesia -- given the bank's conservative track record in terms of loan growth and dividend payouts.The asset risk on Panin Bank's balance sheet remains high, with restructured loans that are classified as current constituting more than 22% of the bank's gross loans as of 30 September 2021. However, Moody's expects the restructured loans to decrease as more borrowers recover financially and exit debt relief programs amid a recovery in economic activities. Panin Bank's strong loan-loss reserves, which amounted to 156.2% of the bank's nonperforming loans as of the same date, will also mitigate the asset risk.Moody's expects Panin Bank's profitability to remain stable over the next 12-18 months. Although the bank will reduce loan-loss provisions as its asset quality improves, the uplift to its profitability will likely be offset by the absence of large security gains seen in previous quarters. The bank's net interest margin (NIM) will also stabilize as further reductions in deposit rates, which has driven the expansion of its NIM in previous quarters, will increasingly be limited. The bank's return on average assets was unchanged at 1.5% in the first nine months of 2021 when compared with a year ago.Panin Bank's deposit franchise will remain modest compared with Moody's-rated banks in Indonesia. The share of current and savings accounts in the bank's deposits increased to 43.6% as of 30 September 2021 from 37.8% a year ago, but remained lower than the 60.2% for the industry as of the same date. Nevertheless, the bank has ample of liquidity on its balance sheet to meet deposit and debt obligations, with its average liquidity coverage ratio for the third quarter of 2021 rising to 247.1% from 116.2% last year because of the contraction in its gross loans.Panin Bank's Baa3 long-term deposit ratings are one notch higher than the bank's ba1 BCA, reflecting Moody's assumption that the probability of support from the Government of Indonesia (Baa2 stable) will be high in times of need. The support assumption considers the bank's designation as a domestic systemically important bank by the local financial regulator, as well as its moderate market share of around 2% of loans and deposits as of 30 September 2021.Panin Bank's ratings do not incorporate any affiliate support uplift from Australia and New Zealand Banking Grp. Ltd (Aa3 stable, a2), given the latter's intention since 2013 to divest its stake in Panin Bank. The Australian bank owned 38.8% of Panin Bank's shares as of 30 September 2021.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSMoody's could upgrade Panin Bank's ratings if the bank's capital remains at high levels and its asset quality improves substantially over the next 12-18 months.Given the positive outlook, a downgrade of Panin Bank's ratings is unlikely. However, Moody's could return the outlook to stable if a significant amount of the bank's restructured loans default and weigh down on its profitability. A material decrease in the bank's capital will also be negative for the ratings.The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Pan Indonesia Bank TBK (P.T.) is headquartered in Jakarta and reported consolidated assets of IDR200 trillion ($14.0 billion) as of 30 September 2021. LIST OF AFFECTED RATINGS Outlook Actions: ..Issuer: Pan Indonesia Bank TBK (P.T.)....Outlook, Changed To Positive From StableAffirmations:..Issuer: Pan Indonesia Bank TBK (P.T.).... Adjusted Baseline Credit Assessment, Affirmed ba1.... Baseline Credit Assessment, Affirmed ba1.... Short-term Counterparty Risk Assessment, Affirmed P-2(cr).... Long-term Counterparty Risk Assessment, Affirmed Baa2(cr).... Short-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed P-2.... Long-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed Baa2.... Short-term Deposit Rating (Foreign and Local Currency), Affirmed P-3.... Long-term Deposit Rating (Foreign and Local Currency), Affirmed Baa3, Outlook changed to Positive from StableREGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Tengfu Li Analyst Financial Institutions Group Moody's Investors Service Singapore Pte. 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