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Malayan Banking Berhad : Maybank's Senior and Subordinated Sukuk Murabahah Programme rated AAA and AA1

by December 17, 2016 General

RAM Ratings has reaffirmed Malayan Banking Berhad’s respective ASEAN- and Malaysian national-scale financial institution ratings, at seaAAA/Stable/seaP1 and AAA/Stable/P1. Concurrently, the ratings agency has assigned respective AAA and AA1 ratings to the senior and subordinated Sukuk to be issued under the Group’s proposed MYR 10.0 billion Senior and Subordinated Sukuk Murabahah Programme. It has also assigned AAA/Stable/P1 ratings to Maybank’s proposed MYR 10.0 billion Commercial Paper/Medium Term Note Programme. In addition, the ratings of all the other debt issues under both Maybank and Cekap Mentari Berhad – the Group’s funding conduit – have been reaffirmed.Maybank is the fourth-largest bank by assets in ASEAN; the Group counts Malaysia, Singapore and Indonesia as its home markets. The reaffirmation of Maybank’s ratings reflects the Group’s strong ASEAN franchise, solid capitalisation, diversified earnings base and deposit funding strength in Malaysia. As the largest bank in Malaysia, Maybank is systemically important to the country. These credit metrics remain commensurate with its current ratings, notwithstanding the decline in its asset quality in 9M FY Dec 2016.Active restructuring and rescheduling of the accounts of corporate borrowers, primarily in the oil and gas and commodities (including steel) sectors had driven Maybank’s gross impaired-loan ratio up to 2.2 per cent as at end-September 2016 (end-December 2015: 1.9 per cent). Provisions for this portfolio, coupled with lower recoveries, had pushed its annualised credit-cost ratio up to 0.6 per cent in 9M FY Dec 2016 (fiscal 2015: 0.4 per cent). Reassuringly, however, credit trends in Indonesia appear to have stabilised. Nevertheless, RAM expects the Group’s provisioning levels to remain elevated over the next few quarters.On the other hand, Maybank’s loss-absorption buffers are solid and should allow it to absorb further credit pressure. The Group’s fully loaded common-equity tier-1 capital ratio had improved to 13.4 per cent as at end-September 2016 (end-December 2015: 12.0 per cent). Its sound pre-provision earnings and well-received dividend reinvestment plan will continue supporting its capitalisation. Meanwhile, Maybank’s funding and liquidity position is strong. Including investment account deposits, the Group’s net loans-to-deposits ratio had eased slightly to 89 per cent as at the same date (end-December 2015: 91 per cent) as deposit expansion outpaced loan growth. At the same time, Maybank’s liquidity coverage ratio stood at a robust 136 per cent.In 9M FY Dec 2016, Maybank’s pre-tax profit slipped 12 per cent y-o-y to MYR 6.0 billion. While operating profit before impairment charges had improved due to the generally better performance of all its business units and strict cost management, the Group’s bottom line was weighed down by higher impairment charges. As a result, its return on risk-weighted assets declined to an annualised 2.2 per cent, i.e. lower than its historical average of 2.8 per cent (fiscal 2013-2015). On the back of its disciplined pricing of loans and deposits, the Group’s annualised net interest margin (NIM) held steady at 2.3 per cent in 9M FY Dec 2016. Maybank’s full-year guidance for NIM compression is 10 bps on the back of stiffer competition for deposits.(c) 2016 CPI Financial. All rights reserved. Provided by SyndiGate Media Inc. (, source Middle East & North African Newspapers