RAM Ratings reaffirms HSBC Malaysia’s AAA/P1 ratings

Published on 17 June 2011

RAM Ratings has reaffirmed HSBC Bank Malaysia Berhad’s (HSBC Malaysia or the Bank) respective long- and short-term financial institution ratings, at AAA and P1. Concurrently, we have also reaffirmed the AA1 rating of the Bank’s RM1 billion Tier-2 Subordinated Bonds (Sub Bonds). Both the long-term ratings have a stable outlook. The 1-notch rating differential between the Bank’s long-term financial institution rating and that of its Sub Bonds reflects the latter’s subordination to the Bank’s senior unsecured creditors.

Meanwhile, the financial institution ratings are premised on HSBC Malaysia’s strong international franchise and established domestic market position, on top of its healthy asset quality and adequate capitalisation. It is the largest locally incorporated foreign bank in Malaysia by asset size and is wholly owned by HSBC Holdings plc (HSBC Holdings or the Group), a global financial institution. Aside from parental support, the Bank is also able to leverage on the HSBC Holdings’ international network, brand name, expertise and best practices.

In FY Dec 2010, HSBC Malaysia charted a 19% growth in its gross loans; this followed the Bank’s cautious lending strategy amid the uncertain economic environment the year before, which had resulted in a 3.3% contraction. The Bank’s asset quality had also improved, with its gross impaired-loan ratio easing to 2.0% as at end-December 2010 (end-December 2009: 2.3%) on the back of a lower quantum of net newly impaired loans. For the year, the Bank achieved a stronger pre-tax profit of RM1.0 billion (FY Dec 2009: RM882.7 million), supported by generally higher income. Its funding and liquidity positions are viewed to be sturdy, with a loans-to-deposits ratio of 70.5% and a liquid-asset ratio of 48.3% as at end-December 2010. At the same time, the Bank’s overall risk-weighted capital-adequacy ratio came up to 13.7%. Moving forward, HSBC Malaysia’s capitalisation is expected to remain adequate, taking into account its targeted loan growth this year.

In 1Q FY Dec 2011, HSBC Malaysia’s asset quality, funding, liquidity and capitalisation levels remained stable. Nonetheless, its pre-tax profit slipped slightly to RM294.9 million (1Q FY Dec 2010: RM296.7 million), mainly due to a higher collective impairment charge on the back of stronger loan growth. All said, we expect the Bank’s financial performance to improve in fiscal 2011, capitalising on the country’s resilient economic growth.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my