RAM Ratings reaffirms AAA/P1 ratings of Maybank, Maybank Islamic and Maybank Investment Bank

Published on 30 November 2012 RAM Ratings has reaffirmed the respective long- and short-term financial institution ratings of Malayan Banking Berhad (“Maybank” or “the Group”), Maybank Islamic Berhad (“Maybank Islamic”) and Maybank Investment Bank Berhad (“Maybank IB”), at AAA and P1. At the same time, the respective issue ratings of Maybank and Cekap Mentari Berhad (“Cekap Mentari” – a subsidiary set up to issue subordinated notes) (refer to Table 1) have also been reaffirmed. All the long-term ratings have a stable outlook. Table 1: Ratings of Maybank’s and Cekap Mentari’s debt issues Rating Outlook Malayan Banking Berhad RM1.5 billion Islamic Subordinated Bonds (2006/2018) AA1 Stable Up to RM4.0 billion Innovative Tier-1 Capital Securities (2008/2073) AA2 Stable Up to RM3.5 billion Non-Innovative Tier-1 Capital Securities (2008/2108) AA2 Stable Up to RM3.0 billion Tier-2 Capital Subordinated Note Programme (2011/2031) AA1 Stable Up to RM7.0 billion Subordinated Note Programme (2012/2032) AA1 Stable Cekap Mentari Berhad Up to RM3.5 billion Subordinated Notes (2008/2038) AA2 Stable The ratings reflect Maybank’s excellent franchise, sound credit fundamentals and significant systemic importance. With an asset base of RM477 billion as at end-September 2012, Maybank is the largest domestic universal-banking group in Malaysia, and commands the largest share of the loans and deposits in the local banking system. Maybank’s subsidiaries have strong market positions in their respective businesses. Maybank Islamic is the largest domestic Islamic commercial bank in terms of assets. The Group also has regional investment-banking and stockbroking operations through Maybank Kim Eng Holdings Limited (“Maybank Kim Eng”, a Singapore-based regional securities and investment-banking group), besides Maybank IB’s entrenched market position in the Malaysian investment-banking space; its 97%-owned PT Bank Internasional Indonesia Tbk (“BII”) is the ninth-largest commercial bank in Indonesia by asset size. The Group also offers life and general insurance as well as family and general takaful products under the Etiqa brand, which commands an estimated 17.8% market share in the life/family new business and 13% in the general insurance/takaful industry's gross premiums. Maybank continues to reap benefits from its House of Maybank structure, implemented in 2010. In the first 9 months of FYE 31 December 2012 (“9M FY Dec 2012”), Maybank charted a 15.6% year-on-year (“y-o-y”) increase in pre-tax profit to RM5.9 billion (9M 2011: RM5.1 billion) – supported by robust loan growth, higher unrealised gains on the revaluation of derivatives and stronger fee income. Gross loans from its domestic and Indonesian operations had expanded at a strong 12% and 17% (annualised), respectively, compared to a more subdued 2% growth for its Singaporean business. Nonetheless, Maybank’s net interest margin has been narrowing through the years. Given the typically competitive domestic banking landscape, increasing contributions from BII are expected to bolster the Group’s net interest margin. As at end-September 2012, the Group’s asset-quality indicators remained healthy; its gross impaired-loan ratio had improved to 1.9% (end-December 2011: 2.8%) following less net accretion of impaired loans and strong recoveries. At the same time, its credit-cost ratio remained comfortable at 0.2%, although we note higher impairment charges for its business-banking loans. As Malaysia’s flagship financial institution, Maybank’s funding capabilities are unrivalled – the Group has a large base of low-cost current- and savings-account (“CASA”) deposits. Going forward, we expect its loans-to-deposits ratio – which stood at 90% as at end-September 2012 – to stay around this level. On the whole, Maybank’s capitalisation levels are viewed to be healthy, with its respective tier-1 and overall risk-weighted capital-adequacy ratios (“RWCARs”) after proposed dividends coming up to 11.1% and 14.9%. Moving forward, the management aspires towards a 40% contribution from Maybank’s international operations by fiscal 2015. In 9M FY Dec 2012, international operations accounted for 30% of Maybank’s pre-tax profit. While the Group’s overseas expansion strategies support earnings diversification, we also note that emerging markets entail heightened operational and regulatory risks. Maybank Islamic Berhad Maybank Islamic’s AAA/Stable/P1 ratings reflect its strategic importance as the Group’s Islamic banking arm, underscored by their highly integrated operating models. Maybank Islamic is the leading Islamic bank in ASEAN in terms of assets, and has a solid domestic franchise in consumer and business banking. In 9M FY Dec 2012, Maybank Islamic’s financing business expanded at a moderate pace of 16% (annualised). While we note that the Bank’s rapidly growing financing portfolio in recent years has lacked seasoning, we expect its asset quality to remain healthy going forward given the Group’s prudent risk management. Leveraging on its parent’s extensive distribution network and franchise, Maybank Islamic boasts a strong market share in low-cost CASA deposits. Maybank Islamic’s respective tier-1 and overall RWCARs stood at an adequate 11.2% and 13.5% as at end-September 2012. Despite its lower-than-industry capitalisation levels, we acknowledge that capital is managed at group level and believe that Maybank will readily provide capital support if required. Maybank Investment Bank Berhad Maybank IB’s AAA/Stable/P1 ratings mirror those of its parent, Maybank. As an important component within the Group’s Global Wholesale Banking division, support from the parent is expected to be readily extended should the need arise. Since 2010, Maybank IB has made significant strides in enhancing its franchise and business position as a leading investment bank in Malaysia. For 9M FY Dec 2012, Maybank IB’s pre-tax profit grew 70% y-o-y to RM265 million. The Bank’s ability to leverage on Maybank’s robust balance sheet also provides it with an edge when trying to secure sizeable mandates. Its capitalisation remained healthy as at end-September 2012, with an RWCAR of 28.9%. We note that Maybank IB’s capital base is entirely made up of tier-1 capital, which provides the strongest loss-absorption capacity. Media contact Gladys Chua (603) 7628 1049 gladys@ram.com.my