RAM Ratings reaffirms HSBC Bank Malaysia’s AAA/P1 financial institution ratings

Published on 05 July 2013

RAM Ratings has reaffirmed HSBC Bank Malaysia Berhad’s (“HSBC Malaysia” or “the Bank”) long- and short-term financial institution ratings at AAA and P1, respectively. Concurrently, we have also reaffirmed the AA1 rating of the Bank’s RM1 billion Tier-2 Subordinated Bonds (“Sub Bonds”). Both the long-term ratings have a stable outlook. The 1-notch differential between the Bank’s long-term financial institution rating and that of its Sub Bonds reflects the subordinated nature of the latter to the Bank’s senior unsecured obligations.

The financial institution ratings are premised on HSBC Malaysia’s strong domestic franchise, long-established market presence, robust asset quality and healthy capitalisation. The Bank is wholly owned by HSBC Holdings Plc (“HSBC Holdings Group”), and is one of the largest locally incorporated foreign banks in Malaysia by asset size. Being part of the larger HSBC Holdings Group, the Bank is able to leverage on its parent’s international network, brand name, expertise and best practices.

HSBC Malaysia’s loan expansion moderated in FY Dec 2012 as the management had sought to consolidate its robust growth while streamlining its internal processes and structures. The Bank’s loan book expanded 6.6% y-o-y (FY Dec 2011: 14.7%) to RM43.0 billion in fiscal 2012. Its asset-quality indicators remained robust with a gross impaired loan ratio of 1.8%, supported by conservative underwriting standards. The Bank’s healthy funding profile continued to be supported by customer deposits. As at end-December 2012, the Bank remained well capitalised with overall and tier-1 risk-weighted capital-adequacy ratios (“RWCARs”) of 13.5% and 10.6%, respectively.

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Chan Yin Huei

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yinhuei@ram.com.my