RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of HSBC Bank Malaysia Berhad (HSBC Malaysia or the Bank) and the AA1/Stable ratings of its RM1 billion tier-2 subordinated bonds.

Published on 30 June 2014

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of HSBC Bank Malaysia Berhad (HSBC Malaysia or the Bank) and the AA1/Stable ratings of its RM1 billion tier-2 subordinated bonds. The 1-notch differential between the Bank’s long-term financial institution rating and that of its subordinated bonds reflects the subordinated nature of the latter to the Bank’s senior unsecured obligations.
The ratings incorporate HSBC Malaysia’s strong domestic franchise and long-established market presence, in addition to its robust funding and liquidity profile, solid profitability and capitalisation as well as healthy asset quality. The Bank, wholly owned by HSBC Holdings plc (the Group), is among the leading locally incorporated foreign banks in Malaysia. Malaysia is among HSBC Holdings plc’s 20 priority markets, on top of being one of the 2 global hubs for HSBC Amanah – the Group’s Islamic banking business.
Reflective of its prudent risk management, HSBC Malaysia enjoys healthy asset quality; its gross impaired-loan ratio stood at 1.7% as at end-December 2013. However, its credit-cost ratio (0.4% in fiscal 2013) has always been relatively higher as it has a slightly larger exposure to unsecured financing than the industry average. After 2 consecutive years of double-digit growth in 2010 and 2011, HSBC Malaysia has adopted a more cautious stance and slowed down its lending since 2012. Last year, the Bank expanded its loan books by 6%; its growth rate is likely to remain modest moving forward.
HSBC Malaysia boasts a high proportion of individual as well as current- and savings-account deposits. Although its loans-to-deposits ratio has been increasing, it remained at a comfortable 75% as at end-December 2013. The Bank also has a very strong liquidity profile, with its Basel III liquidity coverage ratio well in excess of 100%. At the same time, HSBC Malaysia boasts a solid loss-absorption capacity, supported by a return on assets of 1.9% and a common-equity tier-1 ratio of 11.3%.

Media contact
Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my