RAM Ratings has assigned an AA3/Stable rating to the securities to be issued under Malayan Banking Berhad’s (Maybank or the Group) proposed up to RM10 billion Additional Tier-1 Capital Securities Programme (AT1 Programme) – the first Basel III AT1 programme set up in Malaysia.

Published on 28 August 2014

RAM Ratings has assigned an AA3/Stable rating to the securities to be issued under Malayan Banking Berhad’s (Maybank or the Group) proposed up to RM10 billion Additional Tier-1 Capital Securities Programme (AT1 Programme) – the first Basel III AT1 programme set up in Malaysia. At the same time, Maybank’s Malaysian national-scale and ASEAN-scale financial institution ratings have been reaffirmed at AAA/Stable/P1 and seaAAA/Stable/seaP1, respectively. Concurrently, we have also reaffirmed the issue ratings of the Group and Cekap Mentari Berhad, its funding conduit to facilitate the issuance of the RM3.5 billion Non-Innovative Tier-1 Capital Securities (2008/2108).
Maybank is the fourth-largest banking group in ASEAN (by assets) and the biggest in Malaysia. The Group’s financial institution ratings reflect its excellent universal-banking franchise, wide regional footprint and systemic importance to the Malaysian banking system. In addition, the ratings incorporate its healthy asset quality, strong funding capabilities as well as solid profitability and capitalisation.
The AT1 securities issued under Maybank’s AT1 Programme have a subordinated ranking and coupon payment flexibility. In addition to a loss-absorption feature linked to the occurrence of a non-viability event, the AT1 capital instruments must also be written off (in whole or in part) if Maybank’s common-equity tier-1 (CET-1) capital ratio falls below 5.125%. Depending on the issuing bank’s capital buffer, Basel III AT1 securities will be rated at least 3 notches below the bank’s long-term rating under RAM’s rating methodology.
Given that Maybank has a high degree of capital buffer relative to the pre-specified trigger of 5.125%, with reported group- and entity-level CET-1 ratios of 11.0% and 15.6% as at end-March 2014, the AT1 securities are rated AA3/Stable, i.e. 3 notches below Maybank’s long-term rating.

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
Proposed up to RM10.0 billion Additional Tier-1 Capital Securities Programme	AA3	Stable
Cekap Mentari Berhad
Up to RM3.5 billion Subordinated Notes (2008/2038)	AA2	Stable

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