Published on 21 April 2015
RAM Ratings views RHB Capital Berhad’s
recently announced proposed corporate restructuring as a proactive move
in light of the impending changes in Bank Negara Malaysia’s (BNM)
regulations. The BNM discussion paper, Capital Adequacy Framework for Financial Holding Companies (Banking Groups)
- issued last October - requires financial holding companies (FHCs) to
have minimum capital-adequacy requirements, similar to banks. The
proposed BNM framework aims to ensure that FHCs are adequately
capitalised to support their group-wide risks, address the multiple
gearing of capital and excessive leverage within the respective
financial groups, and achieve greater consistency in the disclosed
capital ratios among financial groups headed by banks and FHCs.
“While there is no regulatory arbitrage on capital
recognition under FHCs or banks under the proposed regulation, capital
securities issued by FHCs are, nevertheless, typically rated lower than
those issued by banks. This is due to structural subordination from a
rating perspective, which may increase the cost of capital,” explains
Sophia Lee, RAM’s Co-Head of Financial Institution Ratings.
The recent announcement by RHB Capital, which would
lead to RHB Bank Berhad (rated AA2/Stable/P1) rising to the apex of the
banking group instead of RHB Capital, will be more capital-efficient and
eliminate double leverage. Additionally, the RM2.5 billion of fresh
capital that will be infused into the new RHB banking group is expected
to raise its common-equity tier-1 ratio to above 11%, putting it at par
with those of its peers, which range from 11% to 12%. The operations and
business profile of the entire group are expected to remain unchanged
after the exercise.
As part of its corporate manoeuvre, RHB Capital will
be repaying all of its outstanding debts including the RM600 million
under its RM1.1 billion CP/MTN Programme (2009/2016) (rated
A1/Positive/P1). It will also be cancelling its RM150 million CP/MTN
Programme (2008/2015) (rated A1/Positive/P1) which has no outstanding
amount owed in June 2015. The completion of the proposed corporate
restructuring, subject to relevant regulatory approvals, is targeted to
be completed by end-2015.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.