RAM Ratings has placed all the rated entities and their debt securities under CIMB Group Holdings Berhad, RHB Capital Berhad and Malaysia Building Society Berhad on Rating Watch, with a developing outlook.

Table 1: Affected ratings

	Ratings
CIMB Group Holdings Berhad
Corporate Credit Ratings	AA1/-/P1/RW_Developing
RM6.0 billion Conventional and Islamic Commercial Papers/Medium-Term Notes Programme (2008/2038)	AA1/-/P1/RW_Developing
RM3.0 billion Subordinated Notes Programme (2009/2074)	AA3/-/RW_Developing
CIMB Bank Berhad
Financial Institution Ratings	AAA/-/P1/RW_Developing
RM10.0 billion Tier-2 Subordinated Debt Programme	AA1/-/RW_Developing
CIMB Islamic Bank Berhad
Financial Institution Ratings	AAA/-/P1/RW_Developing
CIMB Investment Bank Berhad
Financial Institution Ratings	AAA/-/P1/RW_Developing
CIMB Thai Bank Public Company Limited
Financial Institution Ratings	AA2/-/P1/RW_Developing
Up to RM2 billion Subordinated Debt Programme (2014/2044)	AA3/-/RW_Developing
RHB Capital Berhad
RM1.1 billion Commercial Papers/Medium-Term Notes Programme (2009/2016)	A1/-/P1/RW_Developing
RM150 million Commercial Papers/Medium-Term Notes Programme (2008/2015)	A1/-/P1/RW_Developing
RHB Bank Berhad
Financial Institution Ratings	AA2/-/P1/RW_Developing
Proposed Multi-Currency Medium-Term Note Programme of up to RM5 billion - Senior Notes - Subordinated Notes	AA2/-/RW_Developing AA3/-/RW_Developing
RM3 billion Multi-Currency Medium-Term Note Programme (2011/2031) - Senior Notes - Subordinated Notes	AA2/-/RW_Developing AA3/-/RW_Developing
RM600 million Hybrid Tier-1 Securities Programme (2009/2069)	A1/-/RW_Developing
RM3 billion Medium-Term Note Programme (2007/2027) - Senior Notes - Subordinated Notes	AA2/-/RW_Developing AA3/-/RW_Developing
RHB Islamic Bank Berhad
Financial Institution Ratings	AA2/-/P1/RW_Developing
Subordinated Sukuk Murabahah Programme of up to RM1 billion (2014/2034)	AA3/-/RW_Developing
RHB Investment Bank Berhad
Financial Institution Ratings	AA2/-/P1/RW_Developing
Proposed Multi-Currency Medium-Term Note Programme of up to RM1 billion	AA2/-/P1/RW_Developing
RM245 million Subordinated Notes (2012/2022)	AA3/-/RW_Developing
RM400 million Medium-Term Note Programme (2008/2022)	AA3/-/RW_Developing
Malaysia Building Society Berhad
Financial Institution Ratings	A2/-/P1/RW_Developing
Tranche 1 Structured Covered Sukuk Commodity Murabahah	AA1/-/RW_Developing
Tropicana Corporation Berhad
Bank-Guaranteed Commercial Papers/Medium-Term Notes Programme of up to RM500 million (2012/2019) - Tranche 1 – Up to RM300.0 million guaranteed by RHB Bank Berhad	AA2(bg)/-/P1(bg) /RW_Developing

Published on 14 July 2014

RAM Ratings has placed all the rated entities and their debt securities under CIMB Group Holdings Berhad, RHB Capital Berhad and Malaysia Building Society Berhad on Rating Watch, with a developing outlook. The Rating Watch has been triggered by the 10 July 2014 announcement that CIMB, RHB and MBSB have obtained Bank Negara Malaysia’s approval to commence negotiations for a merger of their businesses and the creation of an enlarged Islamic-banking franchise.

The potential CIMB-RHB-MBSB merger will create Malaysia’s largest banking group in terms of assets with a broader systemic importance and that may change the competitive dynamics of the banking industry. With stronger financial muscle, the merged entity would have greater capacity to pursue regionalisation strategies. The merger could also result in the formation of a mega Islamic bank, which is in line with Malaysia’s aspirations to up the ante for the internationalisation of Islamic Finance.

While we view this potential corporate exercise in a positive light, the ratings are placed on Rating Watch developing as details of the funding plan, capitalisation levels, integration time-line and approach as well as the final group structure have not been made public. RAM will assess the impact on each entity’s ratings when more information becomes available.

Following the rating action on RHB Bank Berhad, RAM has also placed the ratings of Tropicana Corporation Berhad’s RHB Bank-guaranteed Tranche 1 CP/MTN of up to RM300.0 million (2012/2019) on Rating Watch, with a developing outlook.

RAM’s Rating Watch highlights a possible change in an issuer's ratings. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.

Issues will appear on RAM's Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM's Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM and a final rating decision will be announced in due course. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.