RAM Ratings reaffirms OCBC's AAA/P1 ratings

Published on 24 August 2011
RAM Ratings has reaffirmed OCBC Bank (Malaysia) Berhad’s (“OCBC” or “the Bank”) respective long- and short-term financial institution ratings at AAA and P1. Concurrently, all the long-term ratings of the Bank’s debt issues have been reaffirmed, with a stable outlook. OCBC’s ratings remain supported by its established franchise in mid-sized corporates as well as small and medium-sized enterprises, sound asset quality, and commendable profitability as well as capitalisation. The Bank continues to derive financial flexibility from OCBC Ltd, its parent company that is also Singapore’s second-largest banking group; the latter held SGD229.28 billion of assets as at end-December 2010. In addition, OCBC benefits from its parent’s regional network and adopts its best practices.



In fiscal 2010, OCBC’s gross loans expanded 10.4% year-on-year (“y-o-y”) while its share of the industry’s loans remained at around 4%. The Bank’s asset-quality indicators continued to hold up, supported by an established credit-underwriting framework and effective management of delinquencies. OCBC’s gross impaired-loan ratio stood at 2.6% as at end-March 2011 (end-December 2009: 3.8%). Notably, the Bank’s pre-tax profit surged 17.1% y-o-y in fiscal 2010, buoyed by broad-based income growth and lower provisioning charges.

As at end-March 2011, the Bank’s overall risk-weighted capital-adequacy ratio had strengthened to a healthy 15.3%, following the issuance of RM500 million of subordinated bonds in late 2010. Given the keen competition for customer deposits, OCBC’s loan growth has been outstripping that of its deposits. As a result, its loans-to-deposits ratio climbed up from 76.2% as at end-December 2009 to 82.8% as at end-March 2011, albeit still deemed comfortable.

Note: A 1-notch differential between OCBC’s financial institution rating and issue rating reflects the subordination of the debt facility to the Bank’s senior unsecured obligations. A 2-notch rating differential reflects the deeply subordinated nature and embedded interest-deferral feature of the rated instrument.


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Joanne Kek
(603) 7628 1163
joanne@ram.com.my