Published on 15 April 2015
RAM Ratings has assigned an AA1/Stable rating
to United Overseas Bank (Malaysia) Bhd’s (UOBM or the Bank) Proposed up
to RM1.0 billion Subordinated Bonds. Concurrently, we have also
reaffirmed UOBM’s AAA/Stable/P1 financial institution ratings. The
1-notch difference between UOBM’s long-term financial institution rating
and issue rating reflects the subordination of the debt facility to the
Bank’s senior unsecured obligations.
UOBM is viewed to be a highly strategic subsidiary of
United Overseas Bank Limited (UOBL) – ASEAN’s third-largest bank. The
Bank represents UOBL’s largest presence ex-Singapore in terms of assets
and pre-tax profit contribution. As part of the larger group, UOBM is
able to leverage on its parent’s solid franchise, network and expertise.
Emulating UOBL’s strategies, the Bank has carved a niche among SMEs and
established its presence in the Malaysian retail mortgage market.
UOBM’s gross impaired-loan ratio had continued to
ease, coming in at 1.6% as at end-September 2014, comparing well among
its peers. Its credit-cost ratio came in at a benign 0.3% (annualised)
for 9M FY Dec 2014. Meanwhile, the Bank’s concentration on property
lending has stayed significant, forming around 60% of its loans. Its
expansion in this space has, nonetheless, become more conservative in
the last couple of years. While there may still be some seasoning of
loans following the earlier periods of high growth, the asset quality of
UOBM’s residential and non-residential mortgages is envisaged to hold
up. The Bank’s buffer against asset-quality slippage has remained
strong; its common-equity tier-1 capital ratio came in at 13.8% as at
end-September 2014. Meanwhile, for 9M FY Dec 2014, the Bank delivered a
pre-tax profit of RM1.1 billion, translating into a ROA of 1.6%
(annualised).
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