CIMB Bank’s AAA/Stable/P1 ratings reaffirmed

KUALA LUMPUR: RAM Ratings has reaffirmed CIMB Bank Bhd’s (CIMB Bank) AAA/Stable/P1 financial institution ratings (FIRs) along with the issue ratings of the group’s debt instruments.

According to the group in a statement, the FIRs incorporate CIMB Bank’s systemic importance to the Malaysian banking system and the bank’s strong franchise in wholesale and consumer banking.

“CIMB Bank stands among the three largest domestic banks in Malaysia and is part of CIMB Group Holdings Bhd (CIMB Group) - the fifth-largest banking group in Asean by assets,” it said.

RAM noted that CIMB Bank’s gross impaired-loan ratio had weakened to 2.4 per cent as at end-September 2017, compared to 2.1 per cent at end-December 2016, mainly due to the bank’s exposure to commodities in Thailand as well as oil and gas exposure in Singapore.

“On the other hand, the asset quality of the bank’s domestic operations has stayed stable and is likely to remain so, which will support its overall loan quality.

“CIMB Bank’s credit-cost ratio is relatively high at 40 basis points (bps) (annualised) in the first nine months (9M) fiscal 2017, although still manageable,” the ratings firm said.

RAM highlighted that CIMB Bank’s pre-tax profit surged 19 per cent year on year (y-o-y) to RM3.8 billion in 9M fiscal 2017, translating into a sound annualised return on risk-weighted assets of 2.3 per cent (9M fiscal 2016: RM3.2 billion and 2.0 per cent).

The ratings firm pointed out that the improvement was broad-based and attributable to a slightly broader net interest margin, healthier noninterest income and better cost efficiency, which collectively offset the higher impairment charges.

“Notably, its cost-to-income ratio (excluding one-off items) eased from its peak of 55 per cent in fiscal 2013 to 47 per cent in 9M fiscal 2017.

“CIMB Bank’s funding profile is sound, with its loans-to-funds and loans-to-deposits ratios standing at a respective 79 per cent and 89 per cent as at end-September 2017.

“Its liquidity coverage ratio is also healthy and well beyond 100 per cent,” RAM Ratings said.

The ratings firm added that CIMB Bank has continued strengthening the bank’s capitalisation, thus providing a stronger buffer against asset-quality downside.

“CIMB Bank’s common-equity tier-1 capital ratio stood at 11.7 per cent as at end-September 2017 (end-December 2016:11.6 per cent; end-December 2015: 10.9 per cent), driven by profit accretion and the optimisation of risk-weighted assets.”