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. 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 quality of the bank's loan portfolio remained weak over the first half of 2006. In absolute terms, the bank's gross NPLs was mostly unchanged at about Indonesian rupiah (Rp) 27 trillion (US$3 billion) in June 2006. Of this amount, a major portion (61%) is represented by lending to corporate customers. Going
