RAM Ratings reaffirms Kenanga Investment Bank’s A3/Stable/P1 Ratings

KUALA LUMPUR: RAM Rating Services Bhd ( RAM Ratings) has reaffirmed Kenanga Investment Bank Bhd’s A3/ Stable/ P1 financial institution ratings, reflecting the bank’s prominent stockbroking franchi s e , healthy asset quality and sound capitalisation.

“These fa c t o r s a re counterbalanced by the bank’s volatile earnings, constrained balance sheet , depositorconcentration risk and an increasingly more challenging retail stockbroking scene,” the rating agency said in a statement yesterday.

It said Kenanga Investment Bank was ranked as one of the top retail stockbrokers in Malaysia, second in total trading volume and fourth in value from January to October, underpinned by its large base of remisiers.

It said however, the retail stockbroking sector was facing challenges, such as weak retail participation and mounting competition.

“While we acknowledge that Kenanga Investment Bank has been doing noticeably better in investment banking since 2011, its underwriting capacity is still limited compared to investment banks that are part of universal banking groups with large balance sheets,” it said.

It said the investment bank’s profitability also lagged behind those of its peers, while its cost-to-income ratio remained high, partly attributable to its loss-making asset-management and wea l th- management businesses.

Nevertheless, it said Kenanga Investment Bank’s still- sound capitalisation, as reflected by its common- equity tier-1 capital ratio of 30.4 per cent as at endSeptember 2016, provided a good buffer against its volatile profit performance.

“The bank also displays healthy asset quality.

Its gross impaired-loan ratio only came up to 0.1 per cent as at the same date, while the securities portfolio is of high credit quality,” it added. — Bernama