Asian banks’ credit fundamentals stronger than western peers (By IFN)

GLOBAL: CIMB Group and Maybank have been overtaken by HSBC as top global managers of Sukuk in the last year, but the Malaysian banking giants may still remain at an advantage due to relatively better underlying credit fundamentals.

“The ratings gap that had long separated banks in Asia from their western peers has now essentially been closed because the stable credit quality of Asian banks throughout the global financial crisis has resulted in a comparative improvement in their ratings.

“In contrast to western banks that have experienced significant credit quality challenges since the outset of the global financial crisis, Asian banks are only moderately leveraged, largely deposit funded and generally conservative in their lending,” said Jean-Francois Tremblay, a Singapore-based associate managing director at Moody’s.

Dealogic data shows that HSBC has managed 18 Sukuk worth US$8.42 billion as at the 27th June this year; although CIMB and Maybank Investment Bank managed more deals, at 33 Sukuk each, valued at US$7.3 billion and US$6.21 billion, respectively.

A year earlier, the league table for Sukuk arranging was topped by CIMB, followed by Maybank, with US$4.86 billion and US$4.41 billion-worth of deals managed, respectively, while HSBC came in third with US$3.14 billion-worth of deals.

Nonetheless, HSBC still trails its Malaysian peers in Dealogic’s Islamic financing mandated lead arrangers ranking as at the 27th June; with Maybank Investment Bank ranked fourth; arranging US$911 million-worth of Islamic funding and CIMB ranked fifth with US$896 million-worth of financing transactions. HSBC is ranked 18th with US$233 million-worth of Islamic financing deals arranged.

Moody’s, which rates banks in Indonesia, Malaysia, Singapore, Sri Lanka, Thailand and the Philippines, also noted that Southeast Asian banks are taking advantage of opportunities created by the retreat from Asia of European and other foreign banks; although this could emerge as a double-edged sword in some banking systems.

“Rapid growth in both size and geographic scope has contributed to improve asset quality and profitability metrics, but it has also made Southeast Asia’s banks take on sizeable new risks,” said Tremblay, who cautioned that the banks must continuously update stress tests to reflect these changes and assess their resilience in an economic downturn. “The biggest risk to the banks is the contagion from the euro area through trade channels,” he said.


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