‘AMBANK RATINGS UPGRADE UNLIKELY’
However, firm may revise outlook if lender’s capital recovers to presettlement levels
THERE is uncertainty over AMMB Holdings Bhd’s (AmBank Group) ability to restore its capitalisation over the next 12 to 18 months following its RM2.83 billion settlement with the government late February, said Moody’s Investors Service.
Moody’s said AmBank would absorb the bulk of the large settlement at a time when it was facing a slowdown in its internal capital generation due to rising credit costs.
“The recovery in its capitalisation will depend on AmBank Group’s divestitures, the timing of which is uncertain, and regulatory approval for its plans to implement risk-weighted asset optimisation via the foundation internal rating-based approach in April 2022,” it said yesterday.
On March 12, Moody’s affirmed AmBank’s “A3” long-term foreign-currency deposit rating and changed the outlook to “negative” from “stable”, following the settlement.
The affirmation of AmBank’s “A3” rating incorporates the firm’s assessment of a very high probability of government support in times of need.
“This results in a two-notch uplift from the bank’s “baa2” Baseline Credit Assessment, based on AmBank Group’s systemic importance as the sixth-largest banking group in Malaysia by assets, with AmBank as the group’s main operating entity.”
Moody’s said given the “negative” outlook, an upgrade of AmBank’s ratings was unlikely.
“However, we could revise the outlook to ‘stable’ if the bank’s capital recovers to pre-settlement levels.
“We could downgrade AmBank’s ratings if the bank’s capitalisation does not recover to pre-settlement levels because of an inability to execute capital strengthening initiatives.
“A sharp deterioration in the bank’s asset quality and profitability could also lead to downward rating pressure.”