Fitch Mengafirmasi Peringkat BFI Finance Indonesia di 'AA-(idn)' dengan Outlook Stabil

Jakarta, February 27, 2024 - Fitch Ratings Indonesia has affirmed PT BFI Finance Indonesia Tbk's National Long-Term Rating at 'AA-(idn)'. The Outlook is Stable. Fitch has also affirmed the National Short-Term Rating at 'F1+(idn)' and local-currency issuance ratings at 'AA-(idn)'.

The 'AA' National Long-Term Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.

The 'F1' National Short-Term Ratings indicate the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under the agency's National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country or monetary union. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating.



Satisfactory Profile Underpins Ratings: BFI Finance's ratings reflect its established market position as Indonesia's largest standalone finance and leasing company, above-peer profitability backed by its niche in used-car financing, modest leverage, and adequate liquidity coverage. These factors should support the Company's debt repayment capacity through economic cycles.

Used-Vehicle Financier: We expect BFI Finance to remain focused on its niche in used-vehicle financing. This mainly consists of used-car financing, where BFI Finance has a leading market share of around 20% compared to its more modest share of overall finance and leasing sector receivables of 3%-4%. BFI Finance has diversified into other business segments, such as heavy-equipment financing and property-based financing, but these lines are likely to remain modest relative to the overall portfolio.

Resilient Asset Quality: We view BFI Finance's product mix as being of higher-risk, but its established underwriting practices and risk controls help it to mitigate asset quality fluctuations. Its non-performing financing (NPF) ratio rose slightly to 1.4% by end-2023 (2021: 1.0%) as a cyberattack in 2Q23 impeded financing growth and collection capabilities. Nonetheless, the NPF ratio remains below the industry's 2.4%, and credit provisions covering 255% of NPFs provide a buffer against further potential delinquencies.

We understand from BFI Finance that new impairment formation has eased, and the Company has implemented preventive measures to strengthen defences against future cyberattacks.

Above-Industry Profitability: Wide net interest margins in BFI Finance's main business of used-car financing underpin its healthy profitability. They also provide an adequate buffer against the risk of higher provisioning or funding costs. Pretax profit/average assets declined to 8.8% in 2023 (2022: 11.9%) due to higher provisioning and other costs following the cyberattack. Nevertheless, BFI Finance's profitability remained well above the industry average of 5.6% at end-2023. Furthermore, we believe BFI Finance has the flexibility to pass on higher funding costs to its customers, who tend to be less price sensitive.

Moderate Leverage Supports Ratings Profile: Fitch expects BFI Finance's capitalisation to be supported by adequate internal capital generation and the Company's conservative leverage tolerance. BFI Finance's debt/tangible equity remained modest at 1.4x as of 2023 (2022: 1.4x), and we do not expect an excessive increase in leverage as the Company grows. Its moderate leverage is key to maintaining adequate buffers against asset impairment and liquidity stress.

Satisfactory Liquidity Buffers: Fitch expects BFI Finance to maintain adequate liquidity coverage of short-term liabilities, supported by a substantial cash pool and committed undrawn facilities. Its liquidity coverage ratio, calculated as cash + undrawn committed facilities/short-term debt maturities, remained steady at 1.2x at end-2023 (2022: 1.2x). BFI Finance's liquidity coverage is supplemented by short-term receivables that exceed its short-term debt repayment obligations. Funding is mostly on a secured or partially secured basis, but it has access to a diversified and expanding pool of lenders as well as domestic bond markets.


Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Significant asset-quality deterioration, as indicated by an NPF ratio sustained above 2%, substantially higher leverage, or a deterioration in liquidity buffers that leads to short-term asset-liability mismatches, would be negative for the ratings. On the latter, a sustained decline in the liquidity coverage ratio below 2x of (cash + one year's expected receivables inflow discounted by 50% + unutilised committed facilities) relative to short-term debt maturities, would prompt negative rating action.

Sustained deterioration in BFI Finance's franchise, as indicated by a persistent decline in market share or operating income, may be negative to the ratings. A notable rise in risk appetite, such as loosened underwriting standards or a rapid expansion into untested or riskier products, or recurring operational incidents such as cyberattacks, which signal weaker-than-expected risk controls, would also be negative for the ratings.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Positive rating action is only possible if Fitch believes that the operating environment for Indonesia's finance and leasing companies has strengthened significantly, perhaps driven by an upgrade in Indonesia's sovereign rating or improvements in the sector's regulatory framework, coupled with a sustainable improvement in BFI Finance's franchise and financial profile. However, we do not expect such broad-based developments to occur within the next one to two years.



BFI Finance's bonds are rated at the same level as its National Long-Term Rating as they represent BFI Finance's direct obligations and rank pari passu with its other obligations in the same debt class.

The obligations are 50% secured against the Company's receivables, but we do not view this as providing credit enhancement, per Fitch's criteria for entities in Indonesia.


BFI Finance's bond ratings are sensitive to changes in its National Long-Term Rating. Any negative or positive action on the issuer's National Long-Term Rating will result in corresponding action on the bond ratings.

Additional information is available on Fitchratings