KUCHING: RAM Ratings services bhd reaffirmed the AAA/Stable/P1 financial institution ratings of CIMB Bank Bhd (CIMB Bank) and CIMB Islamic Bank.
Concurrently, the AA1/Stable rating of CIMB Bank’s RM10 billion Tier-2 Subordinated Debt Programme has been reaffirmed. CIMB Bank is the core banking entity of CIMB Group Holdings Berhad, and a systemically important bank in Malaysia.
The Bank derives most of its operating revenues from Malaysia, with relatively stable foreign contributions from Singapore and Thailand.
“CIMB Bank’s asset-quality indicators have weakened in recent quarters. Final provisions related to a large corporate account in Malaysia and additional reserving needs in Thailand had kept CIMB Bank’s credit-cost ratio at 0.4 per cent in both fiscal 2014 and the first half of 2015,” it said in a statement yesterday.
“However, the credit quality of its domestic lending has held up well, although this may be tested amid the more challenging economic climate. The Bank’s adjusted gross impaired loan coverage ratio of 93.7 per cent as at end-June 2015 is deemed strong and able to withstand further weakening in asset quality.”
RAM said CIMB Bank has a strong retail franchise in Malaysia; this continues to support a large base of low-cost current- and savings-account deposits, which constituted a commendable 33 per cent of its customer deposits as at end-June 2015.
This was complemented by a robust liquidity coverage ratio of 133.5 per cent as at the same date.
“The bank’s capitalisation remains sufficient although its common-equity tier-1 capital ratio of 9.6 per cent as at end-June 2015 is lower than those of its similarly rated peers. We expect the Bank’s good earnings-generating capacity and continued dividend reinvestment to underpin its capitalisation.
Meanwhile, RAM Ratings has also reaffirmed the AAA/Stable/P1 financial institution ratings of CIMB Islamic Bank Bhd.
The bank’s ratings reflect our anticipation of ready financial support from the Group.
“CIMB Islamic’s asset-quality indicators remain sound, with respective gross impaired-financing and credit-cost ratios of 1.1 per cent and 0.3 per cent as at end-June 2015.
“Nonetheless, the quality of the Bank’s financing portfolio may weaken amid the more challenging operating environment, compounded by the seasoning of its portfolio after its rapid growth in the last few years.
“As at end-June 2015, CIMB Islamic’s capitalisation remained strong, with a common-equity tier-1 capital ratio of 11.5 per cent and a total capital ratio of 15.0%. These provide a sufficient capital buffer against potential credit losses.