RAM Ratings assigns AA2 and AA3 ratings to RHB Bank's Proposed RM3 billion multi-currency debt programme

Published on 03 October 2011
RAM Ratings has reaffirmed RHB Bank Berhad’s (RHB Bank or the Bank) respective long- and short-term financial institution ratings at AA2 and P1; the Bank’s issue ratings (refer to Table 1) have also been reaffirmed. At the same time, RAM Ratings has assigned respective AA2 and AA3 ratings to the Bank’s Proposed Senior Notes and Proposed Subordinated Notes under its Proposed RM3 billion Multi-Currency Medium-Term Note (Proposed MCMTN) Programme. The proceeds from the Proposed MCMTN Programme have been earmarked for general working capital, other corporate purposes and any repayment of borrowings. The Proposed Subordinated Notes qualify as the Bank’s Tier-2 capital under Bank Negara Malaysia’s capital-adequacy regulations. All the long-term ratings have a stable outlook.

The 1-notch rating differential between RHB Bank’s AA2 long-term financial institution rating and the AA3 ratings of its Subordinated Notes reflects the subordination of the debt facilities to its senior unsecured obligations. The 2-notch rating differential between RHB Bank’s AA2 long-term financial institution rating and the A1 rating of its Hybrid Tier-1 Securities indicates the deeply subordinated nature and embedded interest-deferral feature of the hybrid instruments.

RHB Bank is the core entity within the RHB Capital Berhad universal-banking group (RHB Capital or the Group). The financial institution ratings reflect RHB Bank’s established market position in Malaysia, along with its healthy profitability and adequate capitalisation levels.

In fiscal 2010, RHB Bank had achieved record results against the backdrop of a conducive domestic economy and synergistic benefits derived from other entities within the Group. The upward trend continued in 1H FY Dec 2011 with an 11% y-o-y pre-tax profit growth to RM1.0 billion (1H FY Dec 2010: RM928.1 million). The Bank’s gross impaired-loan ratio had also improved further to 3.9% at end-June 2011 (end-December 2010: 4.4%) supported by lower net impaired loans formation as well as an enlarged loan base. Its net loans-to-deposits ratio remained sound at 88.3% at end-June 2011 (end-December 2010: 88.2%). At the same time, capitalisation levels remained adequate, with its Tier-1 and overall risk-weighted capital-adequacy ratios (RWCARs) coming in at 10.3% and 14.0%, respectively (end-December 2010: 10.0% and 13.9%).

In respect of RHB Bank’s proposed acquisition of an 80%-stake in an Indonesian Bank, PT Bank Mestika Dharma, we understand that its acquisition plan is currently under review due to the uncertainty arising from potential regulatory change on the single shareholding limit in Indonesian banks.

RAM Ratings notes that the Group had experienced changes in its key management line-up during the year, as well as changes in the composition of its significant shareholders. We do not expect them to materially affect RHB Bank’s direction and focus; however, we will maintain close monitoring of any potential impact on the momentum of strategy implementation within the Group.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my