RAM reaffirms StanChart Saadiq’s AAA/ Stable/P1 ratings

KUCHING: RAM Ratings has reaffirmed Standard Chartered Saadiq Bhd’s (StanChart Saadiq) AAA/Stable/P1 financial institution ratings.

The ratings are premised on StanChart Saadiq’s strategic role as the Islamic banking arm of Standard Chartered Bank Malaysia Berhad ( Standard Chartered Malaysia), with the Bank being able to leverage on its parent’s branch network, technical expertise and risk management systems.

“We expect ready support from Standard Chartered Malaysia, if required,” RAM said in a statement.

StanChart Saadiq remains among the smaller Islamic banks in Malaysia, with less than two per cent of the segment’s assets as at end- June 2018.

Following the Group’s earlier strategy of de-risking its unsecured portfolio, StanChart Saadiq’s financing portfolio has largely tilted towards secured financing in recent years.

As at end- June 2018, residential and non-residential property financing comprised 59 per cent of the Bank’s financing portfolio while personal financing facilities accounted for only three per cent.

With a gross impaired financing (GIF) ratio of 1.1 per cent as at endJune 2018, the Bank’s asset quality was still better than the banking industry’s 1.6 per cent on the same date.

Although said GIF ratio represented a slippage from end- December 2016’s 0.9 per cent primarily attributable to some weaknesses in its property financing portfolio, the deterioration is still deemed manageable.

Additionally, the Bank’s GIF coverage ratio (including regulatory reserves) of 158 per cent as at the same date provides a strong buffer.

Over the course of 1H fiscal 2018, the Bank recorded a net writeback of RM3.3 million owing to an increased level of financing funded by the Group’s profit-sharing investment account ( PSIA) placements, for which the bank is not required to make any allowances.

Due to a diminishing base of financing income from a smaller financing book, Saadiq’s preprovision profit fell to RM47.8 million in fiscal 2017.

The bank’s funding and liquidity profile remains supported by its parent through PSIA placements, which stood at a higher RM3.5 billion as at end- June 2018.

Saadiq’s capitalisation is robust, with respective common equity tier-1 and total capital ratios of 24.1 per cent and 28.4 per cent as at end- June 2018.