Published on 05 Jun 2018.
RAM Ratings has reaffirmed HSBC Amanah Malaysia Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings and the AAA/Stable rating of the Bank’s RM3 billion Multi-Currency Sukuk Programme (2012/2032). The ratings are premised on HSBC Amanah’s strategic role as the Islamic arm of HSBC Bank Malaysia Berhad (rated AAA/Stable/P1 by RAM) as well as being one of the two global hubs for HSBC Holding plc’s Amanah network. The Bank is operationally integrated with HSBC Malaysia and benefits from HSBC Group’s solid global franchise, international network and expertise. We believe that the Bank will continue to enjoy parental support when needed.
Following a slight contraction the previous year, HSBC Amanah’s financing book expanded by a strong 14% in FY Dec 2017, mainly driven by financing extended to large corporates. The Bank’s asset quality remains pressured, with its reported gross impaired-financing (GIF) ratio edging up to 2.8% as at end-December 2017 (end-December 2016: 2.5%) due to weakness in its residential mortgages and personal financing portfolios. Adjusting for its stricter impairment classification policies compared to the industry, the Bank’s GIF ratio would stand at a better 1.8%. We also acknowledge the slight improvement in asset quality in 1Q FY Dec 2018; the Bank’s reported GIF ratio eased to 2.6% as at end-March 2018. Nevertheless, the Bank’s earnings continue to be weighed down by hefty impairment charges, keeping its annualised return on risk-weighted assets low at 1.4% in 1Q FY Dec 2018.
HSBC Amanah benefits from its parent’s ready and consistent funding support. The Bank’s liquidity profile remains strong, as demonstrated by its high liquidity coverage ratio and net stable funding ratio which stand well above the required minimum. The Bank’s common equity tier-1 (CET-1) capital ratio stayed healthy at 13.0% as at end-March 2018. The adoption of Malaysian Financial Reporting Standards 9 had seen a writeback of provisions which translated into some improvement in the Bank’s CET-1 capital ratio.
Analytical contact
Liang Huey Jean
(603) 7628 1124
Media contact
Padthma Subbiah
(603) 7628 1162
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