PT Bank Mandiri (Persero)

The negative ratings outlook on Mandiri reflects a one-in-three chance of a downgrade over the next 12 months. We will lower the rating on Mandiri by a notch if: (1) we downgrade the sovereign rating on Indonesia by a notch; and (2) tough operating conditions lead to lowering of asset quality or capital levels. We will revise the outlook on Mandiri to stable if economic headwinds in the Indonesian banking sector abate. We could also revise the outlook back to stable following a similar revision in the sovereign rating if Indonesia's external or fiscal positions improve materially. The starting point for our rating on Mandiri is 'bb+', same for any bank operating predominantly in Indonesia. Economic risks faced by banks

...PT Bank Mandiri's (Presero) capitalization to remain strong. We expect Mandiri's high profitability will help sustain its capital, despite likely high loan growth and high dividend payouts. Bank Mandiri remains one of the most profitable banks in the region. Credit cost likely to stay at above 2% in 2021 and trend downward thereon. Mandiri's total COVID-related restructured loan book is sizable although it remains low in comparison with the industry average. The bank considers about 11% of its restructured loans to be at high risk of becoming nonperforming. As the economy recovers, we expect further trimming in the restructured loans portfolio, which would also lead to tapering in credit costs over the next two years. The bank has also already taken additional provisioning overlay, which should also support lower credit costs....

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