JAKARTA. Moody's Investors Service has awarded a Baa2 rating to PT Adira Dinamika Multi Finance Tbk (ADMF) with a stable outlook.
The rating is three degrees higher than Adira's independent credit profile. According to Moody's, Adira will get very strong support and benefits from its parent company PT Danamon Indonesia Tbk (BDMN).
Moody's Vice President Simon Chen said that the company gave the rating because the holding company, Bank Danamon, controlled 92% of the ownership in Adira. In addition, Adira's vehicle financing business is in line with the current Bank Danamon business. Adira also has an increasingly important role in Bank Danamon's business growth and profitability.
Profitability, according to Moody's, is Adira's main strength. Over the past three years, Adira recorded a return on assets (ROA) of an average of 4.9%, which was driven by high net interest margin (NIM).
Adira's NIM rose to 14.5% as of September 30, 2018 from 10.6% in 2016. Adira benefitted from strong growth in the motorcycle and used vehicle segments which gave higher returns. These high returns, according to Moody's, help compensate for operational costs and high credit costs.
Meanwhile, Adira's independent credit profile is in Ba2 position. The rating considers established domestic networks and diverse operations to support business growth and strong capital and profitability.
Adira's independent credit profile also considers weak liquidity due to the large dependence on funding outside of third party funds, aka wholesale funding.
Moody's estimates that Adira's asset quality has remained stable for the next 12 months to 18 months, supported by a stable operating environment in Indonesia. (AM/MS)