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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