Indonesia’s newest and largest Islamic bank gets rating upgrade

Bank Syariah Indonesia, the country’s newest and largest Islamic bank, has received a rating upgrade from local agency Pefindo.

BSI, a merger of three state-owned banks, officially started operations on February 1.

Pefindo on Thursday (Feb 11) raised the bank’s rating from “idAA+/positive”  to “idAAA” with a stable outlook. This is the highest rating assigned by Pefindo for companies or financial institutions.

The previous rating of “idAA+/positive” was assigned to PT Bank BRI Syariah, the surviving entity of the merger.

The rating action reflects the realisation of the merger, which created the largest Shariah-compliant bank in Indonesia with total assets exceeding 214.7 trillion rupiah, or equal to approximately 40.4% of the Islamic banking industry and 2.4% of the banking industry as of June 2020 (pro forma figure), said Pefindo.

“The rating reflects Bank Syariah Indonesia’s very strong support from the major shareholders, very strong position in sharia banking segment, very strong capitalization, and very strong liquidity and financial flexibility profile. However, these strengths are partly offset by its moderate asset quality,” said Pefindo.

Bank Syariah Indonesia held 240 trillion rupiah ($17 billion) in assets at the end of 2020.

Pefindo said the bank's rating could be lowered if it sees a material decline of overall support from the major shareholders.

Bank Syariah Indonesia is the seventh largest bank in Indonesia and was formed from the merger of Bank Syariah Mandiri, BRI Syariah, and BNI Syariah. 

Indonesia's Islamic financial assets reached 1.802 trillion rupiah at the end of 2020, making up 9.89% of total financial assets, according to Deden Firman Hendarsyah, Director of Sharia Banking Licensing and Regulating at the Financial Services Authority (OJK).

Islamic banking assets reached 608.9 trillion rupiah and made up 6.51% of total banking assets at the end of last year.

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