RAM Ratings reaffirms UOB Malaysia's AAA rating

Published on 29 June 2015

RAM Ratings has reaffirmed United Overseas Bank (Malaysia) Berhad’s (UOBM or the Bank) AAA/Stable/P1 financial institution ratings (FIRs), as well as the AA1/Stable rating of the Bank’s RM1 billion tier-2 subordinated bonds. The 1-notch difference between UOBM’s long-term FIR and the issue rating reflects the subordination of the debt facility to the Bank’s senior unsecured obligations.
The ratings consider UOBM’s robust capitalisation, healthy asset quality and earnings profile, favourable liquidity position and established franchise in SME financing as well as residential property mortgages. The ratings also incorporate our expectation that the Bank will remain highly strategic to parent United Overseas Bank Limited (UOBL or the Group), and that extraordinary support from UOBL will be forthcoming, if needed. Notably, UOBM - wholly owned by UOBL - is the Group’s largest asset and profit contributor outside Singapore.
UOBM’s exposure to property-related financing has stayed significant (63% of its loan book as at end-December 2014); this exposure is the largest among those of the rated banks in RAM’s universe. Notably, UOBM aggressively expanded its mortgage lending portfolio in fiscal 2010 and 2011, although such growth has since tapered off. Nevertheless, the Bank’s asset quality remains sound, reflecting its prudent underwriting standards. Its gross impaired-loan (GIL) ratio stood at 1.6% as at end-March 2015 while its credit-cost ratio had eased to 0.3%. Despite its highly collateralised portfolio, UOBM has a strong loan-loss buffer, with a GIL coverage ratio of 106.3% as at the same date (end-December 2014: 104.1%). Meanwhile, the Bank’s robust capitalisation is backed by high-quality capital, mainly comprising common-equity tier-1 (CET-1) capital; its CET-1 and total capital ratios came up to a respective 14.7% and 16.5% as at end-March 2015.

Media contact
Siew Shwu Ying
(603) 7628 1071
shwuying@ram.com.my