Maybank assigned ASEAN-scale ratings by RAM Ratings

Published on 23 December 2013

RAM Ratings has assigned ASEAN-scale financial institution ratings (FIR) of seaAAA/Stable/seaP1 to Malayan Banking Berhad (Maybank or the Group). Concurrently, we have reaffirmed the AAA/Stable/P1 national-scale FIR of Maybank, Maybank Islamic Berhad and Maybank Investment Bank Berhad (Maybank IB), together with the issue ratings of the Group and Cekap Mentari Berhad - its funding conduit. The ratings of Maybank Islamic and Maybank IB reflect their strategic importance to Maybank and their operational integration with the Group under a universal-banking platform.

As the fourth-largest banking group in ASEAN and the biggest in Malaysia, Maybank has an excellent universal-banking franchise and commands strong positions in its respective business lines. The Group has a strong geographical footprint throughout ASEAN and is present in all 10 countries in this region. Given its 16.5%-share of the domestic market’s deposits, Maybank is systemically important to the Malaysian banking system. Its large share of the market’s deposits also translates into solid funding capability, with a vast pool of low-cost current- and savings-account deposits. Besides its robust earnings and capitalisation levels, the Group also enjoys healthy asset quality, with a gross impaired-loan (GIL) ratio of 1.8% and a GIL coverage ratio of above 100% as at end-September 2013.

Maybank chalked up a pre-tax profit of RM6.6 billion in 9M fiscal 2013, and has consistently maintained its ROA at around 1.7% since fiscal 2009. Reflecting its regional expansion, the Group aims to derive 40% of its pre-tax earnings from international operations by fiscal 2015 (9M fiscal 2013: 30%). While this will support earnings diversification, additional exposure to emerging markets could entail heightened operational and regulatory risks. Looking ahead, there may be some asset-quality pressure given the weaker macro environment in the Group’s third-largest market, Indonesia, although major deterioration is unlikely as this country only accounts for 8% of its lending portfolio. As at end-September 2013, Maybank’s common-equity tier-1 (CET-1) capital ratio stood at 9.9% (without the transitional arrangements), after factoring in the reinvested dividends under the most recent round of its dividend reinvestment plan.

Maybank Islamic Berhad
Maybank Islamic is the leading Islamic bank in Malaysia in terms of assets, and enjoys a solid franchise in consumer and business banking. Maybank Islamic’s overall asset quality remained healthy; its low gross impaired-financing ratio of 0.7% compares favourably with the industry average of 2.0%. While its financing portfolio has expanded rapidly in recent years, we expect Maybank Islamic’s asset quality to stay healthy given the Group’s prudent risk management. In the meantime, Maybank Islamic’s capitalisation levels are deemed sound relative to its risk profile. Its CET-1 capital ratio stood at 9.5% as at end-September 2013.

Maybank Investment Bank Berhad
Following Maybank’s acquisition of Kim Eng Holdings Limited in 2011, the Group’s investment-banking franchise has been rebranded as Maybank Kim Eng, which covers a more regional footprint. Apart from a larger distribution network, Maybank IB has also gained some regional traction by clinching several cross-border investment-banking deals. On the domestic front, Maybank IB remains a leading investment bank, consistently securing high rankings in the domestic debt- and equity-capital-market league tables. Maybank IB has a competitive edge in vying for capital-market-related deals, leveraging on its parent’s robust balance sheet.

Maybank IB recorded a pre-tax profit of RM122 million in 9M fiscal 2013, albeit lower than the previous corresponding period of RM265 million, which had been boosted by sizeable capital-market deals. Its CET-1 capital ratio came in at a robust 28.3% as at end-September 2013.

Table 1: Issue ratings of Maybank and Cekap Mentari Berhad

	Rating	Outlook
Maybank
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 billion Tier-2 Capital Subordinated Note Programme (2011/2031)	AA1	Stable
Up to RM7 billion Subordinated Note Programme (2012/2032)	AA1	Stable
Cekap Mentari Berhad
Up to RM3.5 billion Subordinated Notes (2008/2038)	AA2	Stable

Media contacts
Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my

Athirah Amer
(603) 7628 1172
athirah@ram.com.my

Peter Kong
(603) 7628 1029
peterkong@ram.com.my