Fitch: Indonesia banks stay strong

Fitch Ratings said it noted that profitability at several of its rated large- to mid-sized Indonesian banks have remained generally strong in 2008 and the first half of 2009 and their pre-provision profits should be able to absorb the increase in credit costs as loan quality deteriorates in 2009 and possibly into 2010.

The agency also said it expects the extent of deterioration in non-performing loans to be moderate with the Indonesian economy expected to post positive albeit weaker GDP growth. This underpins the stable outlooks for most Indonesian banks.

Nevertheless, the management of loan quality will remain a major challenge for banks in Indonesia due to the more volatile operating conditions, poor corporate debt history and the evolving state of the banks' risk management.

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