Published on 20 Aug 2018.
RAM Ratings has reaffirmed United Overseas Bank (Malaysia) Bhd's (UOB Malaysia or the Bank) AAA/Stable/P1 financial institution ratings (FIRs) as well as the ratings of its debt instruments (Table 1). Apart from its sturdy credit metrics, healthy funding and liquidity profile, and robust capitalisation, the ratings incorporate the Bank's strategic importance to United Overseas Bank Limited.
Table 1: UOB Malaysia's issue ratings
RM1 billion Tier-2 Subordinated Bonds (2015/2025)
RM8 billion Medium Term Notes Programme:
UOB Malaysia's risk management practices are underpinned by the Group's prudent and conservative stance. The Bank's asset quality is still deemed sound, although its gross impaired-loan (GIL) ratio crept up to 1.8% as at end-March 2018 (end-December 2017: 1.7%) on the back of some weakening that was largely confined to a handful of borrowers which had already been monitored closely. The credit quality of UOB Malaysia's household financing segments remained steady. We continue to derive comfort from UOB Malaysia's highly collaterised portfolio and comfortable GIL coverage ratio, which stood at 100% as at end-March 2018.
Despite larger impairment charges in fiscal 2017, UOB Malaysia recorded a higher pre-tax profit of RM1.52 billion (fiscal 2016: RM1.47 billion) on the back of its strong financing growth in the previous year. In tandem, its return on risk-weighted assets edged up to 2.8% (fiscal 2016: 2.7%) while its net interest margin remained stable at 2.1% (fiscal 2016: 2.1%). The Bank's funding and liquidity profile stayed healthy, with liquidity coverage and net stable funding ratios of above 100%. UOB Malaysia's capitalisation is among the highest in the industry, its respective common equity tier-1 and total capital ratios coming in at 15.3% and 18.6% as at end-March 2018.
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