The ratings on Indonesia's PT Bank Mandiri (Persero) reflect the bank's adequate underlying profitability and capitalization, and its good liquidity. These are, however, counterbalanced by the bank's weakened asset quality, as a result of compliance with the central bank's stricter loan classification guidelines. The ratings also acknowledge Bank Mandiri's franchise as the largest bank in the system with majority (69%) government ownership. Nevertheless, Bank Mandiri remains subject to the volatility associated with operating in a high risk and developing economic environment. The bank's asset quality weakened over the first half of 2005, largely attributed to the central bank's stricter loan classification guideline. In absolute terms, the bank's gross NPLs increased sharply to about Indonesian rupiah (Rp) 25.2 trillion (US$2.52 billion)
