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Press Release
21 Dec | Thursday
RAM Ratings reaffirms Maybank’s AAA ratings

RAM Ratings has reaffirmed Malayan Banking Berhad’s (Maybank or the Group) respective ASEAN and Malaysian national-scale financial institution ratings, at seaAAA/Stable/seaP1 and AAA/Stable/P1. In addition, the ratings of all the other debt issues under both Maybank and Cekap Mentari Berhad – the Group’s funding conduit – have been reaffirmed.

Maybank is the fourth-largest bank by assets in ASEAN. The reaffirmation of Maybank’s ratings reflects the Group’s strong ASEAN franchise, solid capitalisation, diversified earnings base and deposit funding strength in Malaysia. As the largest bank in Malaysia, Maybank is systemically important to the country.

Maybank faces elevated credit costs and impaired loans due to the persistent stress on its corporate books, especially with regard to the oil and gas (O&G) and related sectors. The Group remains vulnerable to provisioning risk arising from its O&G portfolio as restructuring and resolution will take time; this could continue weighing on its earnings in the next 12-18 months. In 9M FY Dec 2017, Maybank’s annualised credit-cost ratio stood at an elevated 0.5%, albeit with an easing trend q-o-q, while its gross impaired-loan ratio had edged up to 2.5% (end-December 2016: 2.3%).

Maybank’s pre-provisioning profits expanded a respective 7% and 6% (y-o-y) to RM11.7 billion and RM8.8 billion in fiscal 2016 and 9M fiscal 2017. Lower impairment charges (-25% y-o-y) had contributed to its healthier pre-tax profit of RM7.2 billion in 9M fiscal 2017 (+20% y-o-y). Maybank’s healthy profit performance as well as its higher adjusted loan-loss coverage of 94% (including regulatory reserves) are sufficient to cushion any incremental stress from its corporate lending. The Group made a sizeable RM1.4 billion transfer to regulatory reserves from retained earnings in 1Q fiscal 2017, over and above what is necessary to comply with the minimum required collective assessment rate of 1.2% of total loans. Its fully loaded common-equity tier-1 capital ratio held solid at 13.3% as at the same date. Capital erosion from adjustments to retained earnings due to heftier provisioning requirements on the first day of the adoption of MFRS 9 is expected to be manageable. Meanwhile, Maybank’s funding and liquidity position has stayed strong.

Table 1: Issue ratings of Maybank and Cekap Mentari Berhad

  Rating/
Outlook
Maybank
RM4.0 billion Innovative Tier-1 Capital Securities Programme (2008/2073) AA2/Stable
RM3.5 billion Non-Innovative Tier-1 Capital Securities (2008/2108) AA2/Stable
RM3.0 billion Subordinated Note Programme (2011/2031) AA1/Stable
RM20.0 billion Subordinated Note Programme  (2015/2112) AA1/Stable
RM10.0 billion Additional Tier-1 Capital Securities Programme (2016/2114) AA3/Stable
RM10.0 billion Senior and Subordinated Sukuk Murabahah Programme (2016/2117)
- Senior
- Subordinated
 
AAA/Stable
AA1/Stable
RM10.0 billion Commercial Paper/Medium Term Note Programme (2016/2023) AAA/Stable/P1
Cekap Mentari Berhad  
RM3.5 billion Subordinated Notes (2008/2038) AA2/Stable


Analytical contact
Chan Yin Huei
(603) 7628 1180
yinhuei@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

Date of release: 21 December 2017

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2017 by RAM Rating Services Berhad’s

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