RAM Ratings reaffirms OSK Investment Bank's A1/P1 ratings, with stable outlook

Published on 16 August 2011
RAM Ratings has reaffirmed OSK Investment Bank Berhad’s (OSK Investment Bank or the Bank) long- and short-term financial institution ratings at A1 and P1, respectively. Concurrently, the A2 rating of the Bank’s RM400 million Medium-Term Notes Programme (MTNs) has also been reaffirmed. Both the long-term ratings have a stable outlook. The 1-notch rating differential between the A1 financial institution rating and the A2 rating of the MTNs reflects the subordination of the debt facility to the Bank’s senior unsecured obligations. The ratings reflect OSK Investment Bank’s established position in the stockbroking arena and earnings diversification from its geographical expansion.



Besides building on its existing operations, OSK Investment Bank has also continued expanding abroad. The Bank purchased a 51.1%-stake in BFIT Securities Public Company Limited, a Thai stockbroking firm, in July 2011 and is making a mandatory tender offer for the remaining shares not already held by them. The mandatory tender offer is expected to be completed in the third quarter of this year; this acquisition will enhance the Bank’s cross-border capabilities within ASEAN. The previous month, OSK Investment Bank had injected RM33 million into its Indonesian subsidiary, PT OSK Nusadana Securities Indonesia, to support its business growth. We believe that the Bank’s overseas expansion will further diversify its earnings base; profit contributions from its foreign and local operations are expected to be evenly split within the next 3-5 years.

Despite stronger brokerage income amid a more buoyant stock market last year, OSK Investment Bank’s pre-tax profit declined to RM133.2 million (FY Dec 2009: RM179.9 million), mainly due to heftier operating expenses and RM46.5 million of impairment losses on securities. Nonetheless, the Bank remained well capitalised, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 25.1% and 31.8% as at end-March 2011.

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Amy Lo
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