Published on 31 October 2014
RAM Ratings has reaffirmed Standard Chartered Bank Malaysia Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings, reflecting the Bank has a strong domestic franchise, healthy funding and liquidity profile, and sound capitalisation that provides a cushion against credit losses. Standard Chartered remains strategically important to Standard Chartered PLC (the Group), given the latter’s drive to expand in Asia. Thus, support from the Group is expected to be forthcoming, if required.
With a long operating history in Malaysia, Standard Chartered has an established franchise in retail banking, particularly in mortgages. Meanwhile, in serving large Malaysian corporates and multinationals, the Bank is able to leverage on its ultimate parent’s diverse network.
In 2013, the Bank’s gross impaired-loan ratio rose to 3.1% at year end (end-December 2012: 1.3%), mainly due to a few large corporate accounts. In addition, the Bank’s credit-cost remained elevated as impaired personal loans that had been mostly originated in 2011 continued to surface. As a result, Standard Chartered’s pre-tax profit for 2013 came in at a lower RM726.8 million (FY Dec 2012: RM942.3 million). Nevertheless, the Bank’s credit costs had declined noticeably in 1Q FY Dec 2014 – improving its bottom line – as the risk of further weakening in personal loans eased.
Standard Chartered’s capital buffer to cushion against any further asset quality deterioration remains sound; its common-equity tier-1 and total capital ratios stood at 10.2% and 14.2%, respectively, as at end-March 2014. Meanwhile, with a still-cautious stance on loan expansion, we anticipate the Bank’s loans-to-deposit ratio to remain within a comfortable range.
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