RAM Ratings reaffirms HSBC Amanah’s AAA rating

KUCHING: RAM Ratings has reaf f irmed HSBC Amanah Malaysia Bhd’s AAA/Stable/P1 financial institution ratings and the AAA/Stable rating of the Bank’s RM3 billion MultiCurrency Sukuk Programme (2012/2032).

The ratings are premised on HSBC Amanah’s strategic role as the Islamic arm of HSBC Bank Malaysia Berhad (rated AAA/ Stable/P1 by RAM) as well as being one of the two global hubs for HSBC Holding plc’s Amanah network.

The bank is operationally integrated with HSBC Malaysia and benef its from HSBC Group’s solid global franchise, international network and expertise. We believe that the Bank will continue to enjoy parental support when needed.

Following a slight contraction the previous year, HSBC Amanah’s financing book expanded by a strong 14 per cent in FY17, mainly driven by financing extended to large corporates.

The bank’s asset quality remains pressured, with its reported gross impairedfinancing (GIF) ratio edging up to 2.8 per cent as at endDecember 2017 due to weakness in its residential mortgages and personal financing portfolios.

Adjusting for its stricter impairment classification policies compared to the industry, the bank’s GIF ratio would stand at a better 1.8 per cent.

“We also acknowledge the slight improvement in asset quality in 1QFY18; the bank’s reported GIF ratio eased to 2.6 per cent as at end-March 2018.

“Nevertheless, the Bank’s earnings continue to be weighed down by hefty impairment charges, keeping its annualised return on risk-weighted assets low at 1.4 per cent in 1QF18.”

HSBC Amanah benefits from its parent’s ready and consistent funding support. The bank’s liquidity profile remains strong, as demonstrated by its high liquidity coverage ratio and net stable funding ratio which stand well above the required minimum.

The bank’s common equity tier-1 (CET-1) capital ratio stayed healthy at 13.0 per cent as at end-March 2018. The adoption of Malaysian Financial Reporting Standards 9 had seen a writeback of provisions which translated into some improvement in the Bank’s CET-1 capital ratio.