Business

Friday November 6, 2009

Top rating for four banks

By YEOW POOI LING


RAM upgrades 12 financial institutions

KUALA LUMPUR: RAM Ratings has upgraded CIMB Bank, CIMB Investment Bank, OCBC Bank (M) Bhd and Maybank Investment Bank to triple-A/P1 with a stable outlook.

CIMB Bank and CIMB Investment Bank were previously rated double-A2/P1 while OCBC Bank was double-A1/P1 and Maybank Investment Bank was A1/P1.

The rating agency also revised upwards eight other financial institutions and changed the outlook on the long-term ratings of two banks (see table).

Promod Dass says the revision to mortgage rates by banks is within expectation.

The rating actions also identify banks that are expected to improve significantly in the next two to three years.

Chief executive officer Liza Mohd Noor said the improved ratings were on the back of significantly better asset-quality indicators versus the agency’s earlier worst-case expectations.

“Banks have thrived despite the deceleration of the domestic economy, displaying strong capitalisation levels and profitability that are further supported by low interest rates and ample liquidity,” she told a media briefing on RAM’s significant positive rating actions on banks in Malaysia.

CIMB group chief executive Datuk Seri Nazir Razak said: “We are extremely pleased with the outcome of the rating process. CIMB Bank moves two notches up from our current rating. What this rating says to me is that the bank has prudent capital management, strong balance sheet and improved asset quality,” he said.

“Overall we are pleased with the outcome. That puts us in the highest category,” he said after a signing ceremony for Genting Bhd’s RM1.6bil medium-term notes programme.

The rating house has forecast next year’s gross non-performing loans at 3%-4%, compared to 3.8% this year. Loans growth, meanwhile, is estimated at 10% in 2010 versus 7% to 8% this year.

The country’s economy is expected to grow 4.9% next year versus this year’s estimated contraction of 3.3%.

Head of financial institutions ratings Promod Dass said the revision to mortgage rates by banks was within expectation as a similar trend was seen in hire-purchase loans, which were also revised upwards after stiff competition in rates eroded margins.

He said the higher mortgage rates, coupled with the reinstatement of real property government tax, was unlikely to reduce property demand.

The adjustments to deposit rates and mortgage loans were driven by supply and demand but these would not lead to huge changes in interest rates, Promod said, adding that the impact was insignificant in the short term.

RAM expects Bank Negara to keep the overnight policy rate unchanged at 2% until the first half of next year, as the cost of fund at that level is still comfortable to support funding and consumption.

Even if banks were to absorb the RM50 charged on each credit card in circulation, which was tabled under Budget 2010, the impact was likely to be minimal, Promod said.

He said banks in the country were stronger post-Asian financial crisis, with broadly skillful human capital, sufficient products and resources for risk management and firmer capitalisation “to handle any surprises.”

As at end-September, the industry’s average capital-adequacy ratio stood at 14.5%.

“Malaysian banks have regionalised and their product suite is on par with global banks,” he added.

Senior manager of financial institutions ratings Wong Yin Ching said local banks were ready to face new competition after the central bank had liberalised the market further.

“Local banks have the competitive advantage of having better understanding of the domestic landscape compared with relatively newer players in the market,” she said.

Promod said domestic banks, nonetheless, would continue to compete intensively for customers for loans and deposits, of which the quality of their service delivery would be the competitive advantage.

“With the marketplace reaching a different level than the pre-Asian crisis, any consolidation in the market was likely to be driven by competitive needs,” he added.

 
CIMB :  [Stock Watch]  [News]
MAYBANK : [Stock Watch] [News]


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