Published on 26 November 2012
RAM Ratings has assigned a
preliminary AA3/Stable/- rating to RHB Investment Bank Berhad’s (“RHB
Investment” or “the Bank”) Proposed Subordinated Notes of up to RM245 million.
Concurrently, we have reaffirmed the Bank’s AA2/Stable/P1 financial institution
ratings and also the AA3/Stable/- rating of the debt securities issued under
its existing RM245 million Subordinated Notes Programme. The Bank’s financial
institution ratings mirror those of RHB Bank Berhad (“RHB Bank”) – the core
entity of RHB Capital Berhad. Given RHB Investment’s integral role within the
larger universal-banking group, support from RHB Capital Group is expected to
be forthcoming, if needed.
RHB Investment is a prominent
player within the Malaysian investment-banking arena with an established
franchise in both the domestic debt and equity capital markets. On this note,
the proposed merger between the Bank and OSK Investment Bank Berhad (“OSK Investment”,
rated A1/Stable/P1 by RAM Ratings) will create the largest domestic stockbroker
in the country. Besides leveraging on OSK Investment’s niche in arranging
small- to mid-market deals, RHB Investment will also gain instant access to the
former’s regional markets in Thailand, Singapore, Indonesia, Hong Kong, China
and Cambodia for cross-border transactions. While recognising the benefits of a
regional investment-banking franchise and income diversity, we note that
integration challenges may arise, particularly in terms of human-capital
retention and cultural differences.
The Bank’s earnings profile is
inherently volatile given its substantial involvement in capital markets and
stockbroking, which are closely correlated to market conditions and sentiment.
In FYE 31 December 2011 (“FY Dec 2011”), RHB Investment recorded a pre-tax
profit of only RM37.9 million (FY Dec 2010: RM89.5 million), mainly due to
weaker net interest income and RM35.8 million of impairment losses on
investments. Nonetheless, the Bank’s pre-tax profit improved to RM48.6 million
in 1H FY Dec 2012, following a pick-up in its investment-banking activities. As
at end-June 2012, its tier-1 and overall risk-weighted capital-adequacy ratios
stood at a robust 24.3% and 34.8%, respectively.
Media contact
Kwan Ji-Ling
(603) 7628 1115
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