MARC af­firms CIMB Bank’s ‘AAA’ rat­ing, sta­ble out­look

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: Malaysian Rat­ing Cor­po­ra­tion Bhd (MARC) has af­firmed its “AAA” rat­ing on CIMB Bank Bhd with a sta­ble out­look.

MARC said in a state­ment last Fri­day that the sta­ble out­look on the rat­ings re­flects its ex­pec­ta­tion that CIMB Bank’s fi­nan­cial pro­file will com­men­su­rate with its rat­ings in the next 12 to 18 months.

The rat­ing agency noted that CIMB Bank’s high sys­temic im­por­tance as a key do­mes­tic bank, its well-es­tab­lished bank­ing fran­chise and its strong do­mes­tic mar­ket po­si­tion re­main key rat­ing driv­ers.

CIMB Bank is the third largest do­mes­tic bank with a to­tal as­set size of RM299.1 bil­lion as at end-June 2016.

As with many of its bank­ing peers, MARC said CIMB Bank’s largest loan ex­po­sure is to the prop­erty sec­tor, mak­ing up about 42.4% of its loan port­fo­lio in the first half (H1) of 2016.

While a sharp slow­down in the prop­erty in­dus­try could lead to an uptick in im­paired loans, MARC noted that CIMB Bank’s ex­po­sure to the prop­erty sec­tor is mit­i­gated by the low aver­age loan-to-value ra­tio of below 50% for the sec­tor.

CIMB Bank’s loan growth slowed to 6.5% year-on-year in H1 2016 against 12.8% in the same pe­riod last year.

Its gross im­paired loans (GIL) ra­tio rose to 1.91% as at end-June 2016 from 1.8% at end-2015, with the in­crease con­trib­uted largely by its Sin­ga­pore branch which recorded a GIL ra­tio of 0.84%, up from 0.33%.

CIMB Bank’s cap­i­tal po­si­tion re­mained ad­e­quate de­spite a mar­ginal de­cline from 2015 lev­els due largely to sched­uled phase-in of reg­u­la­tory de­duc­tions and phase-out of non­qual­i­fy­ing cap­i­tal in­stru­ments. Its com­mon eq­uity Tier 1 (CET1) cap­i­tal ra­tio stood at 11.1% as at end-June 2016, per­sis­tently lower than the do­mes­tic bank­ing in­dus­try aver­age which stood at 13.1% in the same pe­riod.

MARC does not en­vis­age any chal­lenges for CIMB Bank to com­ply with the Basel III re­quire­ment sched­ule and its cap­i­tal po­si­tion has been sup­ported by its par­ent CIMB Group Bhd’s div­i­dend rein­vest­ment scheme which has had a rein­vest­ment rate of above 70% since the ini­ti­a­tion of the scheme in 2013.

How­ever, MARC fore­sees CIMB Bank’s earn­ings in the near term will be weighed down by the im­pact from slower loan growth and higher im­pair­ment charges. In ad­di­tion, stiff com­pe­ti­tion for de­posits will put pres­sure on net in­ter­est mar­gin.

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.