Moody’s: Maybank’s solid capital base provides buffer against rising problem assets
SINGAPORE: Malaysna Banking Bhd’s (Maybank) solid and growing capital base provides the bank with a good buffer against rising problem assets, and will enable it to maintain its credit standing in line with its current ratings, says Moody’s Investors Service.
Moody’s said Maybank ( A3 stable, a3), faces rising problem assets in Singapore (Aaa stable) and Hong Kong (Aa1 negative) – two of its key markets.
“The rising problem assets in Singapore and Hong Kong reflect primarily idiosyncratic risk.
“We expect in the longer term that Maybank’s credit profile will benefit from its presence in these otherwise low-risk markets,” said Moody’s vice president and senior credit officer, Eugene Tarzimanov, in a statement yesterday.
Moody’s conclusions are contained in its just- released report “Malayan Banking Bhd: Increased Regional Risks Mitigated by Strong Buffers”.
Moody’s report points out that Maybank’s problem loans in Singapore are mostly related to oil and gas accounts.
Those in Hong Kong stem from a small number of large problem loans.
Singapore is Maybank’s most important foreign operation, accounting for 25 per cent of its gross loans as of September 2016.
While Hong Kong accounted for a less material 2.0 per cent share of its loan book, a jump in delinquencies there has put its problem loans ratio well ahead of other markets, from virtually nil in 2015.
Consequently, the rising problem assets in these markets brought the bank’s problem loans ratio to 2.2 per cent in September 2016, from 1.9 per cent at end-2015.
Although the performance of domestic Malaysian loans also mildly weakened, this was in line with Moody’s expectation and mainly came from the business and corporate banking divisions, including in the commodity sectors.
Despitetheweakeningconditions, Moody’s said the bank’s credit profile benefits from its presence in the two developed markets, given the generally less volatile credit and economic conditions, stable employment and better protection of creditor rights, relative to emerging markets.
This consideration is also reflected in Maybank’s Macro Profile of “Strong”, which is higher than the Strong-Macro Profile for Malaysia, and results from the higher Macro Profiles of both Singapore and Hong Kong.
TheMacroProfile,whichcaptures the risks of a bank’s domestic and regional operations, is a key input that supports Maybank’s a3 baseline credit assessment.
The bank also benefits from its strong and rising capitalisation, adequate problem loan coverage, good profitability, and solid liquidity and funding profiles. — Bernama