ASEAN KEY DESTINATIONS
Fitch gives favorable ratings to Indonesia financials
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The outlook for Indonesia’s major finance companies is “generally stable,” according to Fitch Ratings, reflecting favorable domestic economic prospects that helped finance firms bring in strong earnings last year.
Fitch said the companies on its ratings radar — BCA Finance, Bhakti Finance, Wom Finance, BFI Finance, SMS Finance and BII Finance — showed improved performance last year thanks to low interest rates and robust economic growth.
“Although interest rates are likely to gradually increase due to inflationary pressure, sales of motorcycles, cars and electronic goods should remain favorable and underpin demand for consumer finance,” Iwan Wisaksana, a director in Fitch’s Financial Institutional Group, said on Thursday.
Fitch noted that potential non-performing loans due to strong financing growth were neutralized by strong earnings and positive economic growth.
Gunadi Sindhuwinata, chairman of the Indonesian Motorcycle Industry Association (AISI), said on Friday that the stable ratings strengthened the view that Indonesia would see a 15 percent increase in motorcycle sales to eight million units this year.
“Coupled with stable interest rates, multifinance companies help drive sales of motorcycles as well as automobiles because most purchases are financed through these companies,” said Gunadi, who is also president director of Indomobil Sukses Internasional.
About 70 percent of car and motorcycle purchases in Indonesia are financed with bank loans. Car sales are projected to grow as much as 15 percent to 850,000 units this year.
In its assessment, Fitch said gross non-performing loans in the multifinance industry stood at 2.4 percent of total financing at the end of 2010, “in line with the banking industry average of 2.6 percent.”
It also highlighted some challenges in the multifinance sector’s growth, though, including access to stable, low-cost funding. “Many finance companies depend heavily on bank loans, while access to capital market funding is available mostly to fincos with strong credit profiles and large franchises, including those that are bank-owned,” it said.
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