PT Bank Negara Indonesia Tbk (BBNI) is preparing to issue a 10-year tenor global bonds with an emission target of up to US$500 million.

The company will issue the global bonds in Basel III-compliant subordinated notes format. The Fitch Ratings reveals BNI's desire to issue global bonds. The rating agency assigned with BB (EXP) for the subordinated debt securities.

BNI will use the issuance emissions for funding sources as well as for general corporate purposes.

"The final rating of debt securities will depend on the final document in accordance with the information received, as well as the determination of the final coupon," said Fitch in Jakarta on Monday (22/3).

Based on Fitch's assessment, the BNI subordinated bond rating is two levels below the support-driven Long-Term Issuer Default Rating (IDR). The rating assessment is based on strong support from the Indonesian government as the company's controlling shareholder.

Meanwhile, the rating for subordinated debt securities, which is two levels lower than IDR, reflects a more vulnerable prospect than senior unsecured bonds. Tier 2 debt instruments also have a write-down feature.

This clause can be triggered when a bank approaches a point of non-viability. Fitch did not provide additional notes on BNI's non-performance risks. This is because the strong support of the government can neutralize the risk of non-performance as a shareholder.

This approach is different for other banks which the government does not control. With commercial banks, Fitch's non-performance risk standards typically consider the risk of business loss resulting from the suspension of coupons or bond principal.

Meanwhile, subordinated bonds have a clause that allows coupons to be deferred and accumulated if the bank's capital position is below the minimum requirement.

Last year, BNI posted a net profit of Rp3.28 trillion or a 78.7% contraction from 2019's net profit of Rp15.38 trillion. An increase in provisions or provisions incorrectly triggered the decrease in profit.

In 2020, the total bank reserves of BNI reached Rp22.59 trillion, an increase of 155.6% from 2019 of Rp8.83 trillion. The pandemic has also slowed down the rate of receiving BNI credit interest.

This was reflected in the total interest income, which fell 4% annually to Rp 56.17 trillion. Nevertheless, BNI's total net interest income was still able to record an increase of 1.5% to Rp37.15 trillion, and revenue before the provision was slightly decreased by 1.8% to Rp27.82 trillion throughout 2020 from Rp28.32 trillion.

BNI managed to record credit growth of 5.3% from Rp556.77 trillion in 2019 to Rp586.21 trillion in 2020. Meanwhile, third-party funds (DPK) grew by 10.6%, from Rp614.31 trillion to Rp679.45 trillion.