RAM Ratings reaffirms Standard Chartered Malaysia’s AAA/P1 ratings

Published on 28 September 2012

RAM Ratings has reaffirmed Standard Chartered Bank Malaysia Berhad’s (“Standard Chartered” or “the Bank”) respective long- and short-term financial institution ratings, at AAA and P1. Concurrently, the AA1 rating of the Bank’s RM500 million Subordinated Bonds has also been reaffirmed. Both long-term ratings have a stable outlook. The 1-notch differential between the rating of the Subordinated Bonds and the Bank’s long-term financial institution rating reflects the subordinated nature of the former, as their payment obligations rank junior to the claims of Standard Chartered’s senior unsecured creditors.

The ratings reflect Standard Chartered’s healthy credit fundamentals and strong presence in the consumer- and corporate-banking space. As a wholly owned subsidiary of global banking group Standard Chartered PLC (“the Group”) and given its integral role in advancing the Group’s growth strategy in the Asia-Pacific region, the Bank is viewed to be strategically important to the Group. Standard Chartered has benefited from sizeable non-interest income and robust loan growth, particularly in personal lending, via its Islamic banking operations. The former has accounted for more than a third of the Bank’s gross income over the past 3 years, i.e. higher than generally observed within its peer group. Moreover, the Bank’s profitability compares favourably against that of its similarly rated peers.

Although Standard Chartered’s asset quality is currently healthy, its rapidly expanding unsecured loan portfolio is not fully seasoned. The Bank’s significant growth in this segment is viewed with some caution. Moving forward, we envisage the Bank’s credit-cost ratio to stabilise at around its current level (its annualised credit-cost ratio stood at 0.71% as at end-March 2012), which is slightly higher than its AAA-rated peers’. Nonetheless, we note that this is partly due to the Bank’s prudent provisioning policies. Its capitalisation levels were sturdy as at end-March 2012, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 11.9% and 13.9%.

Media contact

Chan Yin Huei

(603) 7628 1180

yinhuei@ram.com.my