Bank Central Asia has the strongest asset quality among Indonesian banks

And BNI has the weakest asset quality.

According to Moody's, among the top four, Bank Central Asia stands out with the strongest asset quality, which is one of the factors for considering Bank Central Asia as having the strongest combination of fundamental factors, although its significant holdings of government securities and its concentration on the Indonesian economy (from where it generates close to 100% of its earnings) makes its credit quality highly correlated to the government’s own rating, which is currently constraining its ratings.

Here's more from Moody's:

Bank Central Asia’s very strong credit quality in the recent five years reflects the bank’s disciplined approach to approving and monitoring loans, and its high quality corporate and mid-to-high income clientele base. 

» In contrast, BNI has the weakest asset quality. Nevertheless, its non-performing loans have fallen sharply from their five-year peak at end-2008.

The key weakness resides in its lending to small- and medium-sized enterprises (SME), which accounted for 28.8% of total loans at endJune 2013 with a 5.0% non-performing loan ratio for the medium segment and 5.5% for the small segment.

» As for Bank Mandiri, it has exhibited significant asset quality improvement in recent years, but there is still room for it to narrow the gap between Bank Central Asia as well as BRI in terms of “adjusted non-performing loans” (adjusted NPL) – which incorporates restructured loans that are classified as performing - and taking into account loan loss reserve ratios.

» Going forward, we are mindful of the strong credit growth of the past few years – a 23% compound annual growth rate since 2006 – which is often a precursor of asset quality challenges.

However, as discussed further below, there are a number of mitigating factors which have led us to conclude that the asset quality of the four banks should remain resilient over the next 18 months, despite a more challenging economic backdrop and recent sharp increase in interest rates:

• the profitability of the banks in Indonesia is among the highest globally and provide a significant buffer of earnings to absorb potential volatility in credit costs: a strength that is further supported by an average provision cover of 117% over NPLs at end-June 2013; and 

• recent loan growth trends were accompanied by strong corporate and household balance sheets characterized by rising net earnings and disposable income, modest leveraging of borrowers, and no signs of a broad-based property bubble.