RAM Ratings reaffirms UOB Malaysia's AAA/Stable/P1 ratings

Published on 26 July 2013

RAM Ratings has reaffirmed United Overseas Bank (Malaysia) Berhad’s (“UOBM” or “the Bank”) respective long- and short-term financial institution ratings, at AAA and P1. Concurrently, RAM has also reaffirmed the AA1 long-term rating of the Bank’s RM500 million Subordinated Bonds (2010/2020). Both the long-term ratings have a stable outlook. The 1-notch differential between UOBM’s AAA long-term financial institution rating and the AA1 rating of its Subordinated Bonds reflects the subordination of the debt facility to the Bank’s senior unsecured obligations.
UOBM is the largest subsidiary of United Overseas Bank Limited (“UOBL” or “the Group”) – a leading bank in Singapore - in terms of asset size and profit contribution. This supports our view that the Bank is a highly strategic subsidiary to its parent and substantial financial support from the latter is expected to be forthcoming. As a strategically important entity to the larger UOBL Group, the Bank’s strategies are in line with those of its parent. UOBM also has an established franchise in residential property loans and SME financing.
We note that the Bank has maintained its strong credit fundamentals. As at end-March 2013, UOBM’s gross impaired-loan (“GIL”) ratio remained healthy at 1.7% (end-December 2011: 1.8%), although primarily aided by its loan expansion. Given the recent rapid growth of the Bank’s property-financing portfolio (FY Dec 2012: +21.3%; FY Dec 2011: +43.6%), the GIL ratio of this segment (as at end-March 2013: 1.3%) may increase as the portfolio seasons, although we expect its overall credit quality to stay healthy based on its track record of maintaining the sound credit quality of its property financing portfolio.
In FY Dec 2012, the Bank achieved a healthy pre-tax profit of RM1.2 billion (FY Dec 2011: RM1.1 billion). Notably, UOBM’s liquidity and funding profiles have remained sound, with a large proportion of its securities portfolio comprising highly liquid assets. As at end-March 2013, the Bank’s tier-1 and overall risk-weighted capital-adequacy ratios remained stable at a robust 13.1% and 14.6%, respectively (end-December 2012: 13.1% and 15.0%), thereby providing a sufficient buffer against potential credit deterioration.
Media contact
Cheryl Yong
(603) 7628 1072
cheryl@ram.com.my