PEFINDO affirmed the ratings of Lembaga Pembiayaan Ekspor Indonesia (“BEXI” or “ the Agency”), its outstanding Bond II/2005, Bond III/2006 and Bond IV/2009 at “ AAA”. The outlook for the rating is “stable”. The ratings reflect BEXI’s sovereign status following the implementation of Republic of Indonesia Law No. 2/2009, its strong position in export credit industry, as well as sound capitalization and liquidity profiles. However, the ratings are constrained by the Agency’s weak asset quality indicators due to high loan concentration risk. BEXI was initially established in 1999 under the name of PT Bank Ekspor Indonesia (Persero), a state owned bank focused on export financing. Following the implementation of Law No. 2/2009, BEXI’s status has been transformed into a government agency, and starting 1 September 2009, the Agency has one main office located in Jakarta and three representative offices in Surabaya, Medan, and Makassar.

Supporting factors for the above ratings are:

•   Sovereign status following the implementation of Law No. 2/2009.
PEFINDO views that the Agency as having a sovereign, based on Law No. 2/2009 concerning Indonesia Eximbank (“the Law”). With this law, BEXI is transformed into a government agency from a bank which was under the supervision of Bank Indonesia. Article 39 which states that enactment of another law is needed to dissolve this agency, which indicates BEXI’s superior legal standing. Evident of support is also stipulated in Article 19 (3) which states that any shortfall of BEXI’s capital below IDR 4.0 trillion must be topped by the government using the state budget. In addition GOI may also provide loan or grant to the Agency, as mentioned in Article 23(1).

•    Strong position in export credit segment
BEXI has maintained its strong position in export credit segment at end of December 2009, the Agency booked total gross loans of IDR 9.3 trillion which represented 19.4% of total export credit, up from 13.7% as of FY08 when BEXI recorded total gross loan of IDR 9.6 trillion. With its current status as Indonesia Eximbank, BEXI will have a stronger competitive advantage as the Agency will be able to enter new potential markets beyond the reach of commercial banks, including buyers’ credit as well as providing export insurance and guarantee services. In addition, the sovereign status will enable the Agency to obtain cheaper funding which should result in more flexible pricing compared to its competitors. Based on these factors, PEFINDO views that BEXI will be able to maintain its strong position in export credit going forward.

•    Sound capitalization and liquidity profiles.

During the year under review, BEXI has maintained strong capitalization and liquidity profiles. Backed by equity injection of IDR 3.0tn from GOI at the establishment in 1999 combined with profit accumulation, the agency could maintain strong CAR figure of 43.4% as of FY09 and 45.8% as of FY08. This high CAR has given BEXI’s flexibility in expanding its business with less concern on solvency. The Agency’s liquidity profile is also regarded as strong, with liquid assets amounting to IDR3.4tn as well as short-term loans o IDR 6.5tn as of FY09, which could fully cover its current borrowing maturities amounting which could fully cover its current borrowing maturities amounting to IDR 5.5 tn. The Agency is also expecting to receive additional capital injection of IDR2.0tn from GOI by this year, which will further strengthen its capitalization and liquidity indicators.
The ratings are constrained by:

•    Weak asset quality indicators due to high loan concentration risk.
The agency is exposed to high concentration risk as a result of its business focus and relatively limited number of customers. All of BEXI”s customers are engaged in export-related activities and should exports decline as occurred recently its debtors business declined and occurred recently its debtors’ business declined and adversely impacted their financial capabilities. Moreover, at the end of 2009, the Agency had a relatively small number of debtors whit its 10 largest debtors contributing 34.4% to total outstanding loans. The recent global economic downturn has affected some of BEXI’s large debtors, resulting in the Agency’s asset quality deterioration. At the end of FY09, BEXI recorded a high NPL ratio of 10.4%, significantly up from 5.5% at end of FY08. Going forward, PEFINO views that BEXI’s asset quality will remain under pressure as the Agency’s loan profile will remain concentrated and future business activities will still include providing loans to higher credit risk profile enterprises in related to the Agency’s function to boost the country’s export activities.

OUTLOOK
A ‘stable’ outlook is assigned to the above ratings. With its sovereign status, BEXI should be able to strengthen its business position in export financing business by tapping new potential markets combined with better funding flexibility going forward.  The Agency’s effort to recuperate its asset quality indicator will be challenged by BEXI’s high concentration risk given the Agency’s specific business model.
 

FINANCIAL HIGHLIGHTS
As of/for the year ended             Dec-2009       Aug-2009      Dec-2008      Dec-2007
                                                        (audited)               (audited)              (audited)              (audited)

Total Assets (IDR Bn)               12, 972.44       12, 016.74     11,191.26      10,292.04

Total Equity (IDR Bn)                    4,356.75          4,343.75      4,285.24          4,166.08
Total Gross Loans (IDR Bn)       9,279.12           9,576.22       9,577.09        6,387.90
Net Interest Revenue (IDR Bn)      170.14              424.89          559.91           467.67
Net Income (Loss) [IDR Bn]             35.16                 92.34          241.65           278.40
NIR/Avg. Earning Assets [%]           4.13%              5.54%           5.24%              4.93%
Cost to Income[%]                           25.27%            20.57%        20.66%           20.73%
ROAA[%]                                              0.84%              1.19%           2.25%             2.92%
NPL (3-5)/Gross Loans [%]           10.42%                9.7%           5.45%              1.34%
Loan Loss Reserve/NPL (3-5)[%]56.66%            55.16%         52.58%         152.09%
Risk Weighted CAR [%]                    43,4%            45.83%         40.88%           60.25%
USD Exchange Rate [IDR/USD]      9,395             10,080          10,900               9,393

CREDIT PROFIL

Corporate Rating  id AAA/Stable

Rated Issues

Bond IV/2009                     id AAA/Stable

Bond III/2006                     id AAA/Stable

Bond II/2006                      id AAA/Stable

Rating Period

April 21, 2010 - Apr.1, 2011

Rating History   

April 2009                            id AAA/Stable

Feb 2009                             id AAA/Stable

Mar2008                              id A+/Positive

Mar 2008                                  id A/Stable

Sept 2007                               id A-/Stable

Aug 2006                                id A-/Stable

May 2006                                id A-/Stable

Sources: Indonesia Rating Highlight, PEFINDO February 2011.p.61