RAM reaffirms CIMB’s corporate credit ratings
PETALING JAYA: RAM Ratings has reaffirmed CIMB Group Holdings Bhd’s AA1/ Stable/P1 corporate credit ratings (CCRs) and the issue ratings of its debt instruments.
The one notch difference between CIMB Group’s long-term CCR and the long-term 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.
In a statement, RAM said that CIMB Group’s gross impaired-loan (GIL) ratio had weakened to 3.5% as at end-Sep 2017 (end-Dec 2016: 3.3%), mainly due to its 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 its peak of 77 basis points in fiscal 2015, the group’s credit-cost ratio had eased to 67 bps (annualised) for the nine months fiscal 2017 as impairment charges tapered off in Indonesia.
Nonetheless, this ratio is still the highest among Malaysian banking groups.
RAM said that CIMB Group’s pre-tax profit (excluding disposal gains) surged 30% y-o-y to RM4.6bil for the nine months (9M) of 2017, translating into a satisfactory annualised ROA of 1.2% (9M fiscal 2016: RM3.5bil and 1%).
The improvement was broad-based 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% (excluding one-off items) in fiscal 2014 to 52% in 9M fiscal 2017.
The group aims to bring this ratio down to 50% by 2018, partly aided by the eventual deconsolidation of its stockbroking business, 50% of which will be acquired by China Galaxy Securities Co Ltd to form a stockbroking partnership.
“CIMB Group’s funding profile is sound, with its loans-to-funds and loans-to-deposits ratios standing at a respective 81% and 92% as at end-September 2017. Its liquidity coverage ratio is also healthy and well beyond 100%. In addition, the Group has continued strengthening its capitalisation, thus providing a stronger buffer against asset-quality downside,” said RAM.
Its common-equity tier-1 (CET-1) capital ratio stood at 12% as at end-Sep 2017 (end-Dec 2016: 11.3%; end-December 2015: 10.4%), driven by profit accretion, continued dividend reinvestment and the optimisation of risk-weighted assets.