Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Haegin who wrote (3929)	5/28/1998 7:10:00 AM
From: Thomas Haegin	Respond to of 9980

Repost: MOODY'S SAYS INDONESIA'S BANKING SYSTEM IS 'BROADLY INSOLVENT' Futures World News - May 27, 1998 07:29 Hong Kong-May 27-FWN--INDONESIA IS NOW FACED WITH A "broadly insolvent banking system," Moody's Investors Service said today. By U.S. standards, it estimated 30%-75% of the banks' loans are, or soon will be, non-performing. "Moreover, high interest rates--necessitated by the need to contain the expansion of the money supply in '98 and by the need to support the value of the rupiah--are wreaking havoc in the country's corporate sector and, in turn, the country's banks," Moody's said. In the long run, the rating agency said it believes Indonesia and its banking system will reestablish themselves. "But in the short run, social and political unrest continue to cause capital flight and will delay government efforts to deal with the crisis, as well as the return of foreign or domestic investment." Moody's average E financial strength rating indicates the banks' existing or impending insolvency and the need for outside support. The banks' long-term foreign currency debt ratings are Caa3 (below the B3 country ceiling) because of concerns about whether support will be available in enough quantity and with enough speed to prevent investors' losses. Long-term foreign currency deposit ratings are now all Ca, in line with the March 20 downgrading of Indonesia's foreign currency deposit ceiling, which reflects both past payment delays and the likelihood of future delays. The rating outlook is stable, Moody's said. "Illiquidity is so severe that most banks are unable to lend, and, in fact, many desperately need to collect outstanding loans in order to meet the demands of depositors and creditors to get their money back," Moody's said. The few banks in a position to lend--a handful of private banks, foreign banks, joint-venture banks and state banks--are largely unwilling to lend because of credit risk concerns. "This is part of the vicious cycle crippling the economy and again, in turn, the banking system," Moody's said. "Foreign currency availability is the biggest problem and many banks, particularly the private banks, simply have no foreign currency," the rating agency said. Despite the fact that most banks entered the crisis more-or-less match funded, this problem has spread to even the better banks. Meanwhile, Moody's said, rupiah illiquidity threatens "repayment ability at weaker and confidence-sensitive banks." Indonesian banks entered the crisis with minimal liquid assets, and even the rated private banks were overly dependent on "expensive, confidence-sensitive time deposits." Pre-crisis capital levels, measured as the cushion available to absorb potential losses in the loan portfolio, were stretched thin by growth in the private sector and extremely low in the state sector. Capital levels are even less adequate now in light of the decline in asset quality over the past few months, according to Moody's. Private banks' outlook is gloomy, Moody's said. "High levels of bad loans and high interest rates will limit interest collections. Banks that do not have ready access to cheap deposits may experience negative spreads on the loans that are paying interest. Loan loss provisions will be high."

To: Thomas Haegin who wrote (3929)	5/28/1998 7:12:00 AM
From: Thomas Haegin	Read Replies (1) \| Respond to of 9980

Repost: Moody's spotlights Japan bank sector's loan woes Reuters Story - May 27, 1998 03:31 ÿÿÿ By Fumiko Fujisaki ÿÿÿ TOKYO, May 27 (Reuters) - A slew of downgradings of Japanese banks by Moody's Investors Service throws into sharp focus the need for authorities to quickly solve the bad loan problems of the nation's banking sector, analysts said. ÿÿÿ On Wednesday the U.S. rating agency said it had cut ratings of five major Japanese banks, including Bank of Tokyo-Mitsubishi Ltd , the world's biggest bank, and put ratings of four others under review for possible downgrade. ÿÿÿ Moody's said in a statement that Japanese banks were "facing a third wave of asset quality problems because of weakening domestic economy, on top of existing problems resulting from the East Asian crisis and the collapse of the bubble economy." ÿÿÿ Analysts said it was rare for Moody's to downgrade Japanese banks in a group. In the past it has generally cut ratings of Japanese banks one by one, they said. ÿÿÿ "Moody's slew of downgradings shows that it is not a matter of specific Japanese banks any more," said Naohiko Hasegawa, a financial analyst at Nikko Research Center. ÿÿÿ "It seems to me that Moody's cut ratings of Japan's overall banking sector and this is a challenge to authorities to reorganise the sector without further damaging the already-deteriorated economy," he said. ÿÿÿ Aside from Bank of Tokyo-Mitsubishi (BTM) -- considered one Japan's healthiest banks -- the credit ratings of Dai-Ichi Kangyo Bank Ltd Sakura Bank Ltd Industrial Bank of Japan Ltd (IBJ) and Sumitomo Bank Ltdÿ were downgraded. ÿÿÿ Moody's also placed the ratings of the Long-Term Credit Bank of Japan (LTCB), Asahi Bank Ltd , Fuji Bank Ltd and Tokai Bank Ltd under review for possible downgrade. ÿÿÿ In February, the agency lowered its long-term debt rating on Fuji Bank to A3 from A1 and its financial strength rating to D+ from C. Then in March, it cut LTCB's senior debt rating to Baa3 from Baa2 and the financial strength rating to E from E+. ÿÿÿ Moody's is not alone in warning that deflationary pressures in Japan may result in more corporate failures, which would increase bad loans held by banks and thus hurt the fragile economy further. ÿÿÿ Robert Feldman, chief economist for Japan at Morgan Stanley, said, "Until they clean up the banking mess, the economy won't recover... That's precisely why the government is being more aggressive with the clean-up plan." ÿÿÿ The need to deal with massive bad loans held by Japanese banks is one of the top priority issues cited by Prime Minister Ryutaro Hashimoto at the Birmingham summit of the Group of Eight leading industrial nations earlier this month. ÿÿÿ However, analysts said that official efforts to solve the problem have been slow and that time may be running out. ÿÿÿ Ruling politicians see an inevitable reorganisation of the banking sector, but they have not yet determined under which conditions to save banks and under which to let them fail, analysts said. ÿÿÿ Among the worries is that Japan could face another crisis later this year because under a new supervision system, banks may pull the rug out from under troubled construction firms. ÿÿÿ The banks have not set aside reserves for potential losses on loans to troubled builders since the companies are keeping up with their interest payments, analysts said. ÿÿÿ The Asian economic crisis, heightened by the political unrest in Indonesia, is also casting a long shadow over the banks' health, they said. ÿÿÿ Moody's announcement came only days after the nation's top 18 banks reported that they had spent over 10 trillion yen to cover existing and potential loan losses in the business year which ended on March 31. ÿÿÿ Of the 18 banks, 13 reported current losses for 1997/98. ÿÿÿ "We had expected poor results, but the outcome was worse," said an analyst at a foreign firm. "In the past eight years, the top banks have posted nearly 40 trillion yen of loan loss charges, but they still have lots of potential bad loans, including outstanding questionable loans." ÿÿÿ The top 18 banks said recently that they had 21.7 trillion yen of problem loans as of the end of March under their new disclosure rules, based on the U.S. model. The figure represented a jump of nearly 40 percent from the previous disclosure rules. <eom>

To: Thomas Haegin who wrote (3929)	5/28/1998 9:28:00 AM
From: Worswick	Respond to of 9980

Ref. Indonesia. On public radio here I heard a series of interviews with "trhe man in the street" about the crisis. My goodness. Everyone of these "men in the street" had sure put lots of kids onto the street...with each man the father of 9 children. The Malthusian population increments here are really beginning to tell in Asia. That is what this crisis is really about. Populations that have far, far outstripped any productive capacity to feed themselves and to find "gainful" work. You tell me the future of Indonesia with every man the proud father of 9. Poor. Poor people. Wait until the 100 odd million young men in China - without women because of the Chinese practice of aborting female embryo's in a male oriented society - just wait until these 100 million mostly unemployed and unemployable hit the cities from the countryside and want work and relationships. These will be really pissed off people and where do you think they will go? What will happen to them and China? I wonder. The Asian miracle seems to be staggering today.