RAM Ratings has reaffirmed United Overseas Bank (Malaysia) Bhd’s (UOBM or the Bank) AAA/Stable/P1 financial institution ratings as well as the AA1/Stable rating of the Bank’s RM500 million Subordinated Bonds (2010/2020).

Published on 24 June 2014

RAM Ratings has reaffirmed United Overseas Bank (Malaysia) Bhd’s (UOBM or the Bank) AAA/Stable/P1 financial institution ratings as well as the AA1/Stable rating of the Bank’s RM500 million Subordinated Bonds (2010/2020). The 1-notch differential between UOBM’s AAA long-term financial institution rating and the AA1 rating of its Subordinated Bonds reflects the subordination of the debt facility to the Bank’s senior unsecured obligations.

UOBM is wholly owned by United Overseas Bank Limited (UOBL or the Group), ASEAN’s third-largest bank, and is the Group’s largest subsidiary in terms of asset size and profit contribution. This underscores our view that UOBM is a highly strategic subsidiary to its parent; financial support from the latter is expected to be forthcoming, if required.

Mirroring UOBL’s strategies, the Bank has an established franchise in residential property loans and SME financing. UOBM’s credit fundamentals remained favourable in fiscal 2013. The Bank’s gross impaired-loan ratio stayed healthy at 1.7% as at end-March 2014 (end-December 2012: 1.8%), despite some uptick in its impaired non-residential mortgages. While the asset quality of UOBM’s property-financing segment may slip given its rapid growth in recent years, its credit quality is envisaged to hold up.

In FY Dec 2013, UOBM’s pre-tax profit increased 9.7% to RM1.3 billion (FY Dec 2012: RM1.2 billion), translating into an ROA of 1.6% and ROE of 22.7%. The Bank’s 1Q FY Dec 2014 performance remained healthy with ROA and ROE of 1.6% and 23.1%, respectively. Nonetheless, its net interest margin remained compressed at 1.86% (FY Dec 2012: 2.03%), given the keen competition in residential mortgage lending, to which UOBM has a relatively large exposure. Meanwhile, the Bank’s liquidity position is sound, underscored by a commendable Basel III Liquidity Coverage Ratio. It also enjoyed robust capitalisation, with respective common-equity tier-1 capital and total capital ratios of 13.7% and 16.4% as at end-March 2014 (end-December 2013: 14.1% and 16.9%).

Media contact

Cheryl Yong

(603) 7628 1072

cheryl@ram.com.my