RAM Ratings places RHB Capital’s issue ratings on positive outlook

Published on 28 November 2013

RAM Ratings has reaffirmed the A1/P1 ratings of RHB Capital Berhad’s (RHB Capital or the Company) debt issues, with a positive outlook. The positive outlook is premised on RHB Capital’s improved gearing, underpinned by an enlarged equity base following the issuance of shares to OSK Holdings Berhad for the acquisition of OSK Investment Bank Berhad (OSK Investment Bank). The ratings of RHB Capital’s debt instruments reflect the credit strength of its key banking subsidiaries, the structural subordination of its debts to its subsidiaries’ financial obligations, and its level of unconsolidated financial leverage. As at end-June 2013, the Company’s gearing and double-leverage ratios had eased to 0.38 and 1.33 times, respectively (end-December 2011: 0.54 and 1.49 times). We expect the ratios to improve further given the Company’s track record of healthy dividend payments from its key subsidiaries.

Concurrently, we have also reaffirmed the AA2/Stable/P1 financial institution ratings of RHB Bank Berhad, RHB Islamic Bank Berhad and RHB Investment Bank Berhad, which are RHB Capital’s banking subsidiaries. The issue ratings of RHB Bank and RHB Investment Bank have also been reaffirmed (refer to Table 1 below). RHB Capital and its subsidiaries are known as “the Group”.

RHB Bank
RHB Bank is the core banking entity within the RHB Capital Group. The bank ranks fourth in terms of assets among the domestic banks in Malaysia. As at end-June 2013, RHB Bank’s gross impaired loans ratio stood higher at 3% against the Malaysian banking industry’s average of 1.9%. Nonetheless, the bank’s funding and liquidity position remained sound. Meanwhile, RHB Bank’s capitalisation levels are also deemed healthy, with a CET-1 capital ratio of 10.1% as at end-June 2013. Elsewhere, the Group’s proposed acquisition of a 40%-stake in Indonesia’s PT Bank Mestika Dharma Tbk is still pending approval from Bank Indonesia.

RHB Islamic
As the Islamic banking arm of the Group, RHB Islamic is deemed strategically important to RHB Capital. We believe that RHB Bank will readily extend its support to RHB Islamic should the need arise. In the longer run, the Group expects 20% of its pre-tax profit to be derived from its Islamic banking operations (1H FY June 2013: 9%). 

RHB Investment Bank
Following its merger with OSK Investment Bank, RHB Investment Bank has become the top domestic stockbroking firm in terms of traded volume. The merger has also enabled RHB Investment Bank to gain access to OSK Investment Bank’s regional markets in Thailand, Singapore, Indonesia, Hong Kong, China and Cambodia. Over the near term, the Group’s regional ambitions are expected to be driven by RHB Investment Bank.

Table 1: Ratings of RHB Capital and its subsidiaries

	Rating(s)	Outlook
RHB Capital
RM1.1 billion CP/MTN Programme (2009/2016)	A1/P1	Positive
RM150 million CP/MTN Programme (2008/2015)	A1/P1	Positive
RHB Bank
Financial institution ratings	AA2/P1	Stable
RM3 billion MTN Programme (2007/2027)  -     Senior Notes  -     Subordinated Notes	AA2 AA3	Stable Stable
RM3 billion Multi-Currency MTN Programme (2011/2031)  -     Senior Notes  -     Subordinated Notes	AA2 AA3	Stable Stable
RM600 million Hybrid Tier-1 Securities Programme (2009/2069)	A1	Stable
RHB Islamic
Financial institution ratings	AA2/P1	Stable
RHB Investment Bank
Financial institution ratings	AA2/P1	Stable
RM245 million Subordinated Notes (2012/2022)	AA3	Stable
RM400 million MTN Programme (2008/2022)	AA3	Stable

Media contact
Chew Wei Li
(603) 7628 1025
weili@ram.com.my

Kwan Ji-Ling
(603) 7628 1115
jiling@ram.com.my