RAM Ratings reaffirms CIMB Group’s ratings
KUCHING: RAM Ratings has reaffirmed CIMB Group Holdings Bhd’s (CIMB Group) AA1/Stable/ P1 corporate credit ratings (CCRs) and the issue ratings of its debt instruments.
According to the agency in a statement, the one-notch difference between CIMB Group’s long-term CCR and the longterm AAA financial institution ratings of its key Malaysian subsidiaries reflects its structural subordination as a non- operating holding company and moderate company-level debt load.
“CIMB Group is the fifth-largest banking group in Asean ( by assets), with an extensive regional footprint and a commendable universal-banking franchise,” it said.
RAM Ratings firm noted that CIMB Group’s gross impaired-loan ( GIL) ratio had weakened to 3.5 per cent as at end- September 2017, compared to 3.3 per cent at endDecember 2016, mainly due to the group’s exposure to commodities in Thailand as well as oil and gas exposure in Singapore.
“Despite having stabilised, its default rate in Indonesia remained high. On the other hand, the asset quality of the group’s Malaysian operations has stayed stable and is likely to remain so, which will support its overall loan quality.”
Compared to CIMB Group’s peak of 77 basis points ( bps) in fiscal 2015, RAM Ratings pointed out that the group’s credit- cost ratio had eased to 67 bps (annualised) in the first nine months ( 9M) fiscal 2017 as impairment charges tapered off in Indonesia.
“Nonetheless, this ratio is still the highest among Malaysian banking groups,” it said.
RAM Ratings went on to note that CIMB Group’s pre-tax profit (excluding disposal gains) surged 30 per cent year on year (y- o-y) to RM4.6 billion in 9M fiscal 2017, translating into a satisfactory annualised return on assets ( ROA) of 1.2 per cent ( 9M fiscal 2016: RM3.5 billion and one per cent).
The ratings firm highlighted that the improvement was broadbased and attributable to a broader net interest margin, healthier non-interest income, better cost efficiency and lower credit- cost ratio.
“Notably, its cost- to-income ratio retreated from its peak of 59 per cent, excluding one- off items, in fiscal 2014 to 52 per cent in 9M fiscal 2017,” the ratings firm said.
“The group aims to bring this ratio down to 50 per cent by 2018, partly aided by the eventual deconsolidation of its stockbroking business, 50 per cent of which will be acquired by China Galaxy Securities Co Ltd to form a stockbroking partnership.”
RAM Ratings noted that CIMB Group’s funding profile is sound, with the group’s loans- to- funds and loans- to- deposits ratios standing at a respective 81 per cent and 92 per cent as at endSeptember 2017.
“Its liquidity coverage ratio is also healthy and well beyond 100 per cent. In addition, the group has continued strengthening its capitalisation, thus providing a stronger buffer against assetquality downside.
“Its common- equity tier-1 (CET1) capital ratio stood at 12.0 per cent as at end- September 2017 ( end- December 2016: 11.3 per cent; end-December 2015: 10.4 per cent), driven by profit accretion, continued dividend reinvestment and the optimisation of riskweighted assets.
“The group aims to achieve a CET-1 capital ratio of 12 per cent by 2018 (on a fully loaded basis), after accounting for the impact arising from the implementation of Malaysian Financial Reporting Standards 9 on January 1, 2018.”