Monday, December 18, 2017

FW: MARC ASSIGNS PRELIMINARY RATING OF AAAIS/STABLE TO CIMB ISLAMIC'S PROPOSED RM10.0 BILLION SUKUK WAKALAH PROGRAMME; AFFIRMS FI RATINGS AND EXISTING ISSUE RATINGS

 

 

 

P R E S S    A N N O U N C E M E N T

                       

FOR IMMEDIATE RELEASE

 

MARC ASSIGNS PRELIMINARY RATING OF AAAIS/STABLE TO CIMB ISLAMIC’S PROPOSED RM10.0 BILLION SUKUK WAKALAH PROGRAMME; AFFIRMS FI RATINGS AND EXISTING ISSUE RATINGS

 

MARC has assigned a preliminary rating of AAAIS to CIMB Islamic Bank Berhad’s (CIMB Islamic) proposed RM10.0 billion senior Sukuk Wakalah Programme (Sukuk Wakalah). The rating outlook is stable. The rating on the Sukuk Wakalah reflects its seniority and is equalised to CIMB Islamic’s financial institution (FI) ratings which MARC has recently affirmed at AAA/MARC-1/Stable. The Sukuk Wakalah will provide an additional platform to raise liquidity for the bank should it need to strengthen its funding base.

 

Wholly -owned by CIMB Bank Berhad (CIMB Bank), CIMB Islamic is the Islamic banking arm of its parent bank with which it has close operational integration. Accordingly, the FI ratings on CIMB Islamic have been equalised to its parent CIMB Bank (AAA/Stable). As at end-September 2017, CIMB Islamic accounted for 20.2% of its parent’s consolidated loans and contributed 15.1% to CIMB Bank’s consolidated pre-tax profit. With total assets of RM77.2 billion, CIMB Islamic accounted for 12.3% of Malaysia’s Islamic banking system assets as at end-September 2017.

 

For 9M2017, the bank registered a financing growth of 13.6%, outpacing the industry average of 7.6%. Financing growth during the period was largely driven by the retail and SME segments which was in line with the group’s strategic direction. Gross impaired financing (GIF) ratio declined to 0.70% as at end-September 2017 from 0.98% as at end-2016, largely owing to write-offs and write-backs. The decline in GIF led to an improved financing loss allowance coverage ratio of 75.9% from 62.4% at end-2016.

 

CIMB Islamic’s Common Equity Tier 1 capital ratio declined to 13.0% as at end-September 2017 (end-2016: 14.7%), mainly due to higher risk-weighted assets (RWA) on financing expansion. Nonetheless, MARC expects CIMB Islamic’s capital position to remain sound, supported by internal capital generation and its restricted profit sharing investment account (RPSIA) as it has been in the past. As at end-September 2017, total RWA for credit risk absorbed by the parent increased to RM4.7 billion (2016: RM3.2 billion). Additionally, the bank would be able to utilise its existing Basel III Tier-2 Junior Sukuk Programme to support its capital position when required.

 

For 9M2017, net financial margin (NFM) declined to 1.73% largely due to stiff competition for financings and deposits. MARC views the prevailing intense competition among Islamic banks would continue to weigh on the bank’s NFM going forward. CIMB Islamic’s funding and liquidity profile remained sound, with a financing-to-fund ratio of 79.2% as at end-September 2017 (2016: 81.4%). 

 

The ratings on CIMB Islamic and its programmes reflect the credit strength of its parent CIMB Bank given the strength of the parent-subsidiary relationship. Any revision in MARC’s assessment of this relationship and/or change in CIMB Bank’s ratings could lead to a change in the Islamic bank’s ratings.

 

CIMB Islamic’s existing sukuk issuances, rated and affirmed by MARC with a stable outlook are as follows:

·       RM5.0 billion Tier 2 Junior Sukuk programme at AA+IS

·       RM2.0 billion Tier 2 Junior Sukuk programme at AA+IS

 

 

Contacts: Afeeq Amiri, +603-2717 2956/ afeeqamiri@marc.com.my; Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my

 

December 18, 2017

 

 

[This announcement is available in the MARC corporate homepage at http://www.marc.com.my]

----   DISCLAIMER    ----

This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.

 

© 2017 Malaysian Rating Corporation Berhad

 

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FW: Fixed Income Weekly Pulse - 18th December 2017

 

 

 

Good Morning,

 

Highlights of the week:-

 

·         US Treasury yields fall to reflect low inflation expectations

·         Bund yields lower on tepid inflation outlook

·         Gilts at three-month low on Brexit concerns

·         Singapore yields drop on stronger Singapore dollar while Indian yields higher as inflation sits at 15-month high

·         Ringgit slips against stronger greenback

·         Demand for MGS supported by stable ringgit

 

 

Best regards,

Fixed Income Research & Strategy

AmBank Research, AmBank (M) Berhad

+603 2036 2292 (DL) +03 2031 7218 (Fax)

Level 15, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50200 Kuala Lumpur

 

 

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FW: RHB FIC Credit Markets Weekly - 18/12/17

 

 

 

18 December 2017

Credit Markets Weekly

US Fed December Hike as Expected; 15-year GII 06/33 Printed BTC 1.78x. All Eyes on Nov CPI and Foreign Reserves This Week

SUMMARY:

¨      MYR Credit Market: The MYR was well supported, ended at 4.0795/USD last Friday, gaining +0.2% on WoW versus the USD. Sustained signs of domestic growth as well as positive vibes from recent upward growth revision by World Bank seen infusing renewed sentiments for the local currency. Benchmark 3y MGS seen trading on range bound mode, hovering at 3.40% as per last Friday’s closing, whilst the 5y MGS ended at 3.61%, inching 1-2 bps on a WoW basis. The 10y benchmark meanwhile saw levels closing 1-2 bps higher to end at 3.95% level. In the GII segment, 10-year traded unchanged, hovering at 4.30%.

¨      We opine the better FX outlook for MYR may continue to provide some level of support for MYR govvies although investors may embark on a more defensive stance ahead of looming Fed normalisation cycle going into next year. Vis-à-vis the 10-year benchmark MGS, we opine the 10-year GII remains compelling from a valuation perspective given the wide spread of circa 30 bps. Stronger demand for the 10-year benchmark GII on the back of tactical value hunting may potentially see spreads narrowing back to 12-15 bps from current levels. The Fed raised its benchmark interest rate last week as widely anticipated whilst revising its growth projections more upbeat for both 2017 and 2018 respectively. US policymakers revised the growth forecast for the US economy to 2.5% for both years, 2017 and 2018 versus previous projections of 2.4% and 2.1% previously. On the monetary policy front, latest dot plot showed the US Fed retaining its 3 times increase in key policy rate for 2018.

¨      Corporate News –  RAM assigns AA3/Sta to Maybank Islamic Berhad’s proposed Islamic Additional Tier-1 (AT-1) Capital Securities Programme; RAM affirms AAA/Sta rating of Citibank Berhad; RAM affirms AA3/Sta rating of Bank Islam Malaysia Berhad

¨      APAC USD Credit Market:  USTs ended the week mixed following a series of economic events and data where market participants turned mostly cautious throughout the week. As expected, the Fed hikes its benchmark rate for the final time this year from 1.25% to 1.50%. Both ECB and BoE left rates unchanged though have hinted for possible rate adjustments and may reassess its current policy in the coming year.

¨      Rating Actions - Moody’s has downgraded Yanlord Land (HK) Co. Ltd. to Ba3 from Ba2; Central China Real Estate Ltd to B1 from Ba3; Country Garden Holdings Co. Ltd to Ba2 from Ba1; Modern Land China Co. Ltd to B3 from B2; all carrying a stable outlook; Moody’s has upgraded Anton Oilfield Services Group/HK to Ba3/Sta from Caa1/Pos; Fitch has assigned BBB-/Sta ratings on Asciano Ltd; Fitch has also assigned a BBB+ on Shanghai Commercial Bank (SCB); Fitch has assigned A-/Sta on Wuhan State-Owned Asset Management (WSAM); Fitch has assigned a final rating of BBB/Sta to Inner-Mongolia High-Grade Highway Construction (IMHCD); Moody’s has assigned B1/Sta rating on Guirenniao Co. Ltd.

Table 1: Index Weekly Movements

Indices

15-Dec

08-Dec

Weekly Chg (bps)

iTraxx AxJ 5y IG

70.2

73.0

-3

AxJ IG Spread (bps)

N/A

162

N/A

AxJ HY (%)

N/A

6.72

N/A

SOR 2y (%)

1.51

1.54

-3

SOR 5y (%)

1.81

1.88

-6

Malaysia 5y CDS

60.9

63.4

-2

MGS 3y (%)

3.34

3.41

-7

MGS 5y (%)

3.61

3.65

-4

MGS 7y (%)

3.91

3.94

-3

MGS 10y (%)

3.97

3.96

1

AAA 5y Spread* (bps)

72

70

2

AAA 10y Spread* (bps)

74

74

0

AA 5y Spread* (bps)

101

101

1

AA 10y Spread* (bps)

107

109

-1

Source: Bloomberg, BNM, RHBFIC        *MYR-denominated bonds

 

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FW: RHB FIC Rates & FX Market Weekly - 18/12/17

 

 

 

18 December 2017

 

 

Rates & FX Market Weekly

 

 

Last G3 Central Bank Meeting Before the Holiday Seasons

 

 

Highlights

 

Global Markets

¨   As December FOMC came with no surprise, full attention will now shift to economic releases (core PCE, personal income and spending, durable goods orders and data for the housing sector will be the highlights of the economic calendar) and political developments. With a razor-thin majority in Senate after losing Alabama, Republicans are now facing internal dissensions as at least two Senators opposed the current bill amid further uncertainties. The clock is ticking as the Christmas recess looms, estimates on economic growth generated by tax cuts do not garner unanimity, while an agreement on a spending level for 2018 has not been reached with the deadline pushed further again to January 19th. We are mildly bearish USD and neutral UST.

¨   In Europe, inflation prints for the Eurozone and Germany will be under the spotlight following ECB Draghi's cautious optimism during ECB December meeting. Some volatility could arise from a regional election in Catalonia as a stress test for both Catalan nationalists and the government; we remain neutral EUR for now as long as the pair holds below 1.20. Over in the UK, uncertainties surrounding Brexit amid political revolt in the Conservative party will remain under focus. However, an expected weaker US Dollar should keep the GBPUSD pair in the 1.30/1.35 range in the near term.

¨   In Japan, BoJ reconvenes and should leave its monetary policy unchanged. No surprise is also expected to arise from BoJ Kuroda's press conference; we continue to expect the USDJPY pair to remain driven by US developments in the foreseeable future. We continue to eye the 111 support as a near term inflection level. With no key data due in Australia in the week ahead, expect trading sentiment to be dominated by global developments and any surprise in Chinese data.

 

AxJ Markets

¨   Expect a relatively quiet week ahead in China as only November property prices are due, with a weak print likely to stoke concerns among Chinese watchers of another downturn in the Chinese property cycle, which has been quite volatile over the preceding few years. Slowdown in the property markets have far-reaching impact on commodities and related sectors, and likely influence the degree of tightening PBoC is likely to pursue; we stay mild underweight CGBs at this juncture, though we exercise some caution towards various risks within the economy, including the property sector.

¨   Elsewhere, Singapore November NODX growth is expected to moderate from October's print, although overall trade activity remains bolstered by strong external sentiment. With the December FOMC a historical detail now, expect little movements in SGD assets in the week ahead, amid low trading activity typical of year-end periods; stay neutral SGD. Over in Thailand, Bank of Thailand is unlikely to deliver any policy surprise when they reconvene on 20 December, amid conflicting low inflation and brighter growth prospects. November trade data are also expected to come in strong, although unlikely to materially move markets; stay neutral THB.

¨   Over in Malaysia, November CPI is expected to moderate to 3.4% y-o-y (Oct: 3.7%), with higher price pressures remaining a not-so-distant threat to the central bank, which has signaled impending normalization of monetary policies. Foreign reserves are likely to stabilize or tick higher slightly as foreign capital continues to return to Malaysia; we are now mildly optimistic on the currency. With no economic data due in Indonesia, asset movements will be driven by dominant trading sentiment in the week ahead, although we do not expect much surprises give the subdued volume ahead of year-end holidays.

  

Weekly Positioning

 

 

Rates

FX

Overweight

 

 

Mild Overweight

 

 

Neutral

UST, GILT, Core EGBs, ACGB, SGS, CGB, ThaiGB, MGS, IndoGB

USD, GBP, EUR, AUD, JPY, MYR, THB, SGD, IDR, CNY

Mild Underweight

KTB

KRW

Underweight

JGB

 

 

 

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FW: RAM Ratings revises loss assumptions for Tan Chong-sponsored Notes Series; AAA ratings of 2013-A, 2014-A and 2015-A Notes reaffirmed; 2016-A Notes still on negative Rating Watch

 

 

Published on 15 Dec 2017.

 

RAM Ratings has reaffirmed the AAA/stable ratings of Premium Commerce Berhad’s (PCB or the Issuer) Class A and Class B Notes under its Notes Series 2013-A, Notes Series 2014-A and Notes Series 2015-A. Concurrently, we have maintained the negative Rating Watch on Notes Series 2016-A, pending the outcome of the Issuer’s proposed resolution (on 28 November 2017) to extend the maturities for 2 of the 5 series under its Class A Notes (at higher coupon rates). The proposed extension is expected to help alleviate the liquidity pressure faced by the 2016-A Notes. 

The negative Rating Watch that was first placed in September 2017 on the 2016-A Notes, reflects the increased liquidity risk follows the marked deviation in performance of the said notes, in terms of both monthly default rates and prepayment behaviour relative to PCB’s earlier securitised portfolios. RAM’s rating actions consider our revised loss assumptions for the respective Notes Series, which are reflective of the trends exhibited by TC Capital Resources Sdn Bhd’s (TCCR) more recently originated loan portfolios as well as the performance of its securitised portfolios.  

Notes Series 2013-A

Rating/

Outlook

Rating Action

Issued Amount

(RM million)

Outstanding Amount^

(RM million)

OC Ratio^

Class A Notes

AAA/Stable

Reaffirmed

176.0

22.0

45.31%

Class B Notes

AAA/Stable

Reaffirmed

5.0

5.0

18.40%

Class C Notes

Not rated

-

13.0

13.0

-

Notes Series 2014-A

Rating / Outlook

Rating Action

Issued Amount

(RM million)

Outstanding Amount^

(RM million)

OC Ratio^

Class A Notes

AAA/Stable

Reaffirmed

182.0

30.0

54.33%

Class B Notes

AAA/Stable

Reaffirmed

4.0

4.0

36.18%

Class C Notes

Not rated

-

12.25

12.25

 

Notes Series 2015-A

Rating / Outlook

Rating Action

Issued Amount

(RM million)

Outstanding Amount^

(RM million)

OC Ratio^

Class A Notes

AAA/Stable

Reaffirmed

166.0

89.0

18.80%

Class B Notes

AAA/Stable

Reaffirmed

5.0

5.0

12.48%

Class C Notes

Not rated

-

10.0

10.0

 

Notes Series 2016-A

Rating / Outlook

Rating Action

Issued Amount

(RM million)

Outstanding Amount^

(RM million)

OC Ratio^

Class A Notes

AAA/RW Negative

204.0

179.0

8.93%

Class B Notes

AA2/RW Negative

4.5

4.5

6.38%

Class C Notes

Not rated

11.25

11.25

 

OC = overcollateralization, including balances in the Collection Account.
^As at 31 August 2017

In this review, RAM has analysed 42 new static pools from January 2014 to June 2017, covering the originator’s entire loan portfolio. Stacked against its earlier historical static pools originated between 2008 and 2009, the more recent pools show defaults accelerating at a faster pace, and peaking at a higher rate than previously observed.

Notably, the loss trend has varied between the newer (i.e. 2015-A and 2016-A) and older (i.e. 2013-A and 2014-A) securitised pools, reflecting the shift in the overall loan portfolio towards a more risky profile. The newer loans have, on average, longer tenures with higher financing margins. While the default rates of the 2013-A and 2014-A pools are still well below our base-case assumptions, the 2015-A and 2016-A pools show steeper and more volatile default rates. We believe that the newer pools reflect this heightened risk as a result of the originator’s strategy of favouring more competitive loan products. The deterioration in default performance may, however, have also been compounded by operational hiccups in executing collections via standing instructions (which we understand have been resolved), as well as a more challenging consumer market after the implementation of the GST in April 2015. 

The 2016-A pool also exhibits a clear divergence in its monthly prepayment trends against the rest of the securitised portfolios. While the performance of the 2013-A, 2014-A and 2015-A pools have remained within RAM’s prepayment assumptions, the 2016-A pool has experienced significantly lower-than-assumed prepayment rates.    

Taking all these factors into consideration, we have maintained the loss assumptions for the 2013-A and 2014-A portfolios, and revised the base default assumptions for the 2015-A and 2016-A Notes Series. Specifically, we have adopted a higher monthly net default rate of 0.07% (from 0.0625%) over a longer ramp-up period of 36 months (from 20 months); our assumed incremental net monthly default rate of 0.02% thereafter remains unchanged. Concurrently, we have also applied a lower prepayment stress on the 2016-A Notes Series, from 0.3% to 0.1% per month. These adjustments are, we believe, more reflective of the recent trends observed and consistent with the risk profiles of the newer securitised pools. 

The rating reaffirmation for the 2013-A, 2014-A and 2015-A Notes Series reflects the available credit enhancement for the rated notes. At the present levels, it continues to provide ample support to their ratings, even after factoring in our revised loss assumptions. The ratings do not, however, address the risk of early redemption associated with these debt facilities. Meanwhile, we expect to lift the Rating Watch on the 2016-A Notes Series within the next month, once and if the bondholders approve the said proposed resolution.  

This transaction involves the securitisation of automobile hire-purchase (HP) receivables originated by TCCR under PCB’s Asset-Backed RM2 billion MTN Programme. TCCR is the HP financing arm of Tan Chong Motor Holdings Berhad, which in turn holds the sole rights for the assembly and distribution of Nissan, Infiniti, Renault and Ultimate Dependability (UD) vehicles in Malaysia.
 

Analytical contact
Tan Han Nee
(603) 7628 1023
hannee@ram.com.my

Media contact 
Padthma Subbiah
(603) 7628 1162 
padthma@ram.com.my

 

 

 

 

 

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