Published on 28 April 2015
RAM Ratings has assigned a preliminary P1
rating to CIMB Group Holdings Berhad’s (the Group) proposed RM6.0
billion Conventional and Islamic CP Programme. Concurrently, we have
reaffirmed the Group’s AA1/Stable/P1 corporate credit ratings, which
reflect the sound credit metrics of its core banking subsidiaries and
its structural subordination as their shareholder. Its banking
subsidiaries in Malaysia, i.e. CIMB Bank Berhad, CIMB Islamic Bank
Berhad and CIMB Investment Bank Berhad, operate on a universal-banking
platform and carry AAA/Stable/P1 ratings from RAM. RAM has also
reaffirmed the respective AA1/Stable/P1 and AA3/Stable/- ratings of CIMB
Group’s RM6.0 billion Conventional and Islamic CP/MTN Programme
(2008/2038) and RM3.0 billion Subordinated Notes Programme (2009/2074).
The reaffirmation of CIMB Group’s ratings is premised
on our expectation that its core subsidiaries will retain their
dominance in consumer banking, Islamic banking and investment banking.
While we envisage the Group’s provisioning needs will remain high
through the next 1-2 quarters given the challenging operating
environments in Indonesia and Thailand, we also believe that the
pressure on asset quality and earnings will be manageable and that
conditions will gradually improve in 2H 2015. Notably, the Group’s
stronger capitalisation now provides a better cushion against further
slippage in asset quality. As at end-December 2014, CIMB Group’s
common-equity tier-1 capital ratio had improved to 10.1%, from 8.0% a
year earlier.
The Group’s exit from the Australian market is
somewhat unexpected and underlines the challenges of integration and
value extraction from its acquisitions, particularly under a more
testing environment. Its mid-term priority is to reduce costs given CIMB
Group’s relatively high cost-to-income ratio of 59.1% vis-à-vis its
similarly rated peers. CIMB Group is still keen on expanding into the
Philippines and Vietnam to complete its ASEAN footprint, although any
acquisition will likely be small.
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