RAM reaffirms BNP Paribas Malaysia’s AA2 rating
KUCHING: Local ratings firm RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of BNP Paribas Malaysia Bhd (BNP Paribas).
The ratings incorporate RAM’s expectation that the bank will continue enjoying ready parental support from BNP Paribas SA, if needed, while also leveraging on its parent’s global franchise, international network and technical expertise.
To note, BNP Paribas SA is one of the world’s largest financial institutions and among the globally systemically important banks identified by the Financial Stability Board.
“The bank’s track record is relatively short as it was only incorporated in 2011,” RAM highlighted in its review of the bank’s ratings.
“Its small capital base also constrains its ability to participate in large deals, although it has clinched some notable advisory, financing and capital- market mandates.”
RAM noted that BNP Paribas Malaysia forms part of the group’s footprint in the Asia-Pacific region – an area which the latter has identified for future growth and investments.
“The group’s operations in Malaysia are vital to its wholesalebanking strategy, for which an international presence is important,”RAMadded.“Malaysia has also been designated as the Group’s Islamic finance centre for the Asia-Pacific region.
“Given its focus on wholesale banking, BNP Paribas Malaysia’s earnings are inherently volatile and susceptible to market fluctuations.
“However, the bank’s profit performance has been improving in recent years; it’s pre-tax profit clocked in at RM18.3 million in FY Dec 2016, before ascending further to RM36.8 million in 1H FY Dec 2017 amid increased client flows.”
In addition, the bank’s capitalisation remained sturdy, with a common- equity tier- 1 capital ratio of 23.8 per cent as at end-June 2017, it said.
Parental support is evident from BNP Paribas SA’s conversion of RM160 million of subordinated debts into the bank’s equity in 2013, and a RM48 million capital injection in 1Q16.