20240417_BBKP_Laporan Hasil Pemeringkatan_31626695_lamp1.pdf

4/5/24, 5:07 PM                                          Fitch Affirms Bank KB Bukopin at 'AAA(idn)'; Outlook Stable

default, considering the shared branding and the group's presence in various segments
of Indonesia's financial sector.


Weak Financial Performance: KB Bank's weak financials, reflected in its very weak
asset quality and profitability, is an important input in our assessment of the parent's
propensity to support KB Bank. It can have an impact on propensity to support if weak
financial performance persists over a longer period.


RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating
Action/Downgrade

Negative rating action could arise from a decline in its credit profile relative to the
universe of entities rated on our Indonesian National Rating scale. It could also emerge
from a material deterioration in our assessment of the parent's rating. For instance, a
two-notch downgrade of Kookmin's VR to 'bbb+' would lead to a downgrade of KB
Bank's National Long-Term Rating.


A decline in the parent's propensity to provide support - either perceived or real - would
be the more likely trigger for downward rating pressure in the medium term. This could
arise from major ownership changes or further deterioration in KB Bank's performance
despite Kookmin's efforts to support KB Bank's operations. However, Fitch believes
these are unlikely to occur in the near term.

Factors that Could, Individually or Collectively, Lead to Positive Rating
Action/Upgrade

There is no rating upside for KB Bank's National Long-Term Rating, as it is already at the
highest point on the scale.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

The senior unsecured bonds are rated at the same level as KB Bank's National Long-
Term Rating, in line with Fitch's Bank Rating Criteria, as they constitute the bank's direct
and senior unsecured obligations and rank equally with all its other senior unsecured
and unsubordinated obligations.


KB Bank's deferrable Tier 2 subordinated bonds are rated two notches below its
National Long-Term Rating. Both notches are for loss severity, reflecting the bond's
subordination and our view of poor recovery prospects compared with senior
unsecured obligations. The Tier 2 debt instruments have an embedded permanent
write-down feature (principal and/or interest in full or in part) that can be triggered
when the bank approaches its point of non-viability.

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There is no additional notching for non-performance risk, as we believe that non-
performance is neutralised by potential parental support from Kookmin. This approach
differs for local banks that do not benefit from high levels of parental or sovereign
support. For a typical Indonesian bank, Fitch's standard notching for non-performance
risk for similar subordinated bonds is one notch - to account for the risk of going-
concern losses from the deferral of coupon and/or principal.


KB Bank's bonds incorporate features that allow coupons to be deferred and
accumulated if the bank's capital position falls below its minimum requirement, which
we believe would be unlikely due to our expectations of parental support.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

Any downgrade of KB Bank's National Long-Term Rating would lead to a corresponding
downgrade of the issue ratings. A downgrade of the subordinated debt rating could also
result from a reassessment of non-performance risk, leading to a widening of notching.


This would most likely result from a material decline in KB Bank's common equity tier 1
(CET1) capital, such that we believe capital buffers over the coupon omission triggers
are thin, according to Fitch's Bank Rating Criteria. This could happen if the CET1 ratio
falls below 6.5%. However, we believe this scenario to be unlikely given our belief of
parental support and KB Bank's minimum capital adequacy requirement of 10%, which
is significantly above our aforesaid trigger level.


Positive rating action for the senior debt is not possible as the rating is already at the
highest point on the National Rating scale. An upgrade of the subordinated debt rating is
also unlikely based on the criteria.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING

The principal sources of information used in the analysis are described in the Applicable
Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

KB Bank's support-driven National Long-Term Rating is credit-linked to Kookmin's VR,
based on our expectation of extraordinary support.

                                                  RATING ACTIONS



     ENTITY / DEBT                      RATING                                                        PRIOR 


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4/5/24, 5:07 PM                                          Fitch Affirms Bank KB Bukopin at 'AAA(idn)'; Outlook Stable


     PT Bank KB Bukopin,                                                                                AAA(idn) Rating
                                           Natl LT
     Tbk                                                                                                Outlook
                                                                                                        Stable
                                           AAA(idn) Rating Outlook Stable


                                           Affirmed



         senior unsecured                                                                               AAA(idn)
                                           Natl LT       AAA(idn)         Affirmed



         subordinated                                                                                   AA(idn)
                                           Natl LT       AA(idn)        Affirmed



VIEW ADDITIONAL RATING DETAILS
FITCH RATINGS ANALYSTS

Lucky Ariesandi, CFA
Director
Primary Rating Analyst
National
+62 21 4000 0840
lucky.ariesandi@fitchratings.com
PT Fitch Ratings Indonesia
DBS Bank Tower 24th Floor, Suite 2403 Jl. Prof.Dr. Satrio Kav 3-5 Jakarta 12940


Saswata Guha
Senior Director
Committee Chairperson
+91 22 4000 1741
saswata.guha@fitchratings.com

MEDIA CONTACTS

Vivian Kam
Hong Kong
+852 2263 9612
vivian.kam@thefitchgroup.com


Leslie Tan
Singapore
+65 6796 7234
leslie.tan@thefitchgroup.com


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Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of
the transaction parties participated in the rating process except that the following
issuer(s), if any, did not participate in the rating process, or provide additional
information, beyond the issuer’s available public disclosure.

APPLICABLE CRITERIA

National Scale Rating Criteria (pub. 23 Dec 2020)
Bank Rating Criteria (pub. 16 Mar 2024) (including rating assumption sensitivity)



ADDITIONAL DISCLOSURES

Solicitation Status
Endorsement Policy

ENDORSEMENT STATUS

PT Bank KB Bukopin, Tbk                                                                              -



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