‘Maybank’s capital base provides buffer against asset woes’
SINGAPORE: Malayan Banking Bhd’s (Maybank) solid and growing capital base provides the bank with a good buffer against rising problem assets and will enable it to maintain its credit standing, said Moody’s Investors Service.
Moody’s said Maybank, with an “A3 stable and a3 ratings, faces rising problem assets in Singapore (“Aaa” stable) and Hong Kong (“Aa1” negative) — two of its key markets.
“The rising problem assets in Singapore and Hong Kong reflect mainly idiosyncratic risk.
“We expect in the longer term that Maybank’s credit profile will benefit from its presence in these otherwise low-risk markets,” said Moody’s vice-president and senior credit officer Eugene Tarzimanov in a statement yesterday.
Moody’s conclusions are contained in its just-released report, “Malayan Banking Bhd: Increased Regional Risks Mitigated by Strong Buffers”.
Moody’s report pointed out that Maybank’s problem loans in Singapore were mostly related to oil and gas accounts. Those in Hong Kong came from a small number of large problem loans.
Singapore is Maybank’s most important foreign operations, accounting for 25 per cent of its gross loans as of September.
While Hong Kong accounted for a less material two per cent share of its loan book, a jump in delinquencies there had put its problem loans ratio well ahead of other markets, from virtually nil last year.
Consequently, the rising problem assets in these markets brought the bank’s problem loans ratio to 2.2 per cent in September from 1.9 per cent at end of last year.
Although the performance of local Malaysian loans also mildly weakened, this was in line with Moody’s expectation and mainly came from the business and corporate banking divisions.
Despite the weakening conditions, Moody’s said the bank’s credit profile benefited from its presence in the two markets, given the generally less volatile credit and economic conditions, stable employment and better protection of creditor rights, relative to emerging markets.
This consideration was also reflected in Maybank’s macro profile of “strong”, which was higher than the strong macro profile for Malaysia, and resulted from the higher macro profiles of both Singapore and Hong Kong.
The macro profile, which captures the risks of a bank’s domestic and regional operations, was a key input that supported Maybank’s “a3” baseline credit assessment.
The bank also benefited from its strong and rising capitalisation, adequate problem loan coverage, good profitability, and solid liquidity and funding profiles. Bernama