RAM Ratings reaffirms HSBC Amanah Malaysia’s AAA/P1 ratings

Published on 05 July 2013

RAM Ratings has reaffirmed HSBC Amanah Malaysia Berhad’s (“HSBC Amanah” or “the Bank”) respective long- and short-term financial institution ratings at AAA and P1. Concurrently, the rating of the Bank’s RM3 billion Multi-Currency Sukuk Programme (2012/2032) has been reaffirmed at AAA. Both the long-term ratings have a stable outlook.

The ratings are reflective of the Bank’s strategic importance as HSBC Bank Malaysia Berhad’s (“HSBC Bank”, rated AAA/Stable/P1 by RAM) Islamic banking arm and its operating model which is highly integrated with that of its parent. (The 2 entities will be collectively known as “the Group”). The Bank leverages significantly on HSBC Bank’s risk management, network and infrastructure. HSBC Amanah is the largest locally-incorporated foreign Islamic bank in Malaysia, with an established domestic franchise under the Amanah brand. Notably, Malaysia is an important Islamic banking hub for the larger HSBC Holdings plc group.

While HSBC Amanah’s gross impaired financing ratio stood at only 1.5% as at end-December 2012, the Bank’s credit cost ratio remained elevated at 1.7% (FY Dec 2011: 1.5%), mainly due to its substantial exposure to unsecured household financing; the Group’s entire personal financing portfolio is booked under its Islamic arm. After 2 years of rapid financing expansion, the Bank has sought to grow more selectively in 2012. Most of its financing growth of 9.3% in 2012 had been driven by residential property financing. Growth in deposits had significantly outpaced that of financing in 2012, resulting in an improvement in the Bank’s financing-to-deposit ratio to 100.8% as at end-December 2012, albeit higher than the industry norm. HSBC Amanah’s capitalisation is deemed satisfactory. Our estimate of its common equity tier-1 ratio and the Bank’s overall risk-weighted capital-adequacy ratio stood at a respective 10.8% and 11.8%. All said, we believe that HSBC Bank will extend financial support to its Islamic arm, if required.

Media contact

Lee Sook Wei

(603) 7628 1017

sookwei@ram.com.my