RAM reaffirms Citibank’s ratings for its strong profile
KUALA LUMPUR: RAM Ratings has reaffirmed the AAA/Stable/ P1 financial institution ratings of Citibank Bhd (Citibank).
The ratings incorporate the bank’s strategic importance to Citigroup Inc, its strong capitalisation, and sturdy funding and liquidity profile.
As part of the larger Citigroup, the bank leverages on its parent’s global franchise, connectivity and technical expertise, enabling it to carve a strong foothold in cash management and treasury solutions.
Citibank stands among the industry’s largest credit card providers, with a 16 per cent share of the market’s credit card receivables as at end-June 2018.
“As credit cards account for 29 per cent of Citibank’s total loans and 35 per cent of its gross income, ongoing regulatory reforms in this segment have major implications on the bank’s business strategies and profitability,” it said in a statement.
“While the effectiveness of Citibank’s new strategies to mitigate the impact of these measures remains to be seen, the bank’s experienced management team and solid execution capabilities are key strengths in this regard,” it added.
Following the adoption of MFRS 9 on January 1, 2018, restructured personal loans that are performing have been classified out of Stage 3 loans. This had contributed to a marked improvement in the bank’s gross impaired loan (GIL) ratio, which eased to 1.8 per cent as at end-June 2018 from 2.3 per cent as at end-December 2017.
“Citibank’s GIL ratio is expected to improve further in the next few quarters as the Bank plans to write-off some impaired home loans and conduct a reclassification exercise in respect of its mortgage portfolio.
“Citibank has maintained a sturdy funding and liquidity profile. Low-cost current and savings account deposits made up a commendable 68 per cent of the Bank’s deposit base as at endJune 2018 – among the highest proportions of such deposits in the industry, highlighting the Bank’s strong cash management franchise.”
The bank’s capitalisation also remained strong through healthy profit accretion. Citibank clocked in RM1 billion of pre-tax profit in fiscal 2017, translating into an enviable return on risk-weighted assets of 3.8 per cent.