Tuesday July 31, 2012
RAM upgrades UOB’s ratings
PETALING JAYA: RAM Ratings is upgrading United Overseas Bank (M) Bhd’s long-term financial institution rating to AAA from AA1 while reaffirming the short-term rating at P1.
The rating agency is also upgrading the bank’s RM500mil subordinated bonds (2010/2020) to AA1 from AA2 with the outlook on both long-term ratings revised to stable from positive.
“The 1-notch differential between UOB Malaysia’s AAA long-term financial institution rating and the AA1 rating of its subordinated bonds reflects the subordination of the debt facility to the bank’s senior unsecured obligations,” it said.
It said the rating upgrade took note of UOB Malaysia’s loan-quality indicators that had been consistently well placed among AAA-rated banks, as well as the sustained improvement in the bank’s profit performance.
“Notably, UOB Malaysia’s gross impaired-loan ratio of 1.8% as at end-March 2012 is better than the banking system’s average of 2.5%. In addition, its credit-cost ratio had improved to 0.4% as at end-December 2011 (end-December 2010: 0.7%),” it said.
“The bank’s credit fundamentals are envisaged to hold up even though the default rates for its property loans are expected to inch up as its portfolios season, following the rapid growth in the last two years,” it added.
It said in tandem with stronger loan growth, the bank’s pre-tax profit jumped from RM800mil in fiscal 2010 to RM1bil in fiscal 2011 resulting in a healthy return on assets of 1.7% and a return on equity of 23.5%.For the first quarter of fiscal 2012, the bank registered a pre-tax profit of RM258.8mil.
Meanwhile, UOB Malaysia possesses a stable funding profile.
Its tier-1 and overall risk-weighted capital-adequacy ratios of a respective 11.6% and 13.8% as at end-March 2012 underline its healthy capitalisation levels, which act as a buffer against potential credit losses,” it said.