RAM assigns preliminary P1 rating to CIMB's RM6bil debt notes

KUALA LUMPUR: RAM Ratings has assigned a preliminary P1 rating to CIMB Group’s proposed RM6bil conventional and Islamic CP programme.

It said on Tuesday it had reaffirmed the group’s AA1/Stable/P1 corporate credit ratings, which reflect the sound credit metrics of its core banking subsidiaries and its structural subordination as their shareholder. 

Its banking subsidiaries in Malaysia, that is CIMB Bank Bhd, CIMB Islamic Bank Bhd and CIMB Investment Bank Bhd, operate on a universal-banking platform and carry AAA/Stable/P1 ratings from RAM. 

RAM Ratings also reaffirmed the respective AA1/Stable/P1 and AA3/Stable/- ratings of CIMB Group’s RM6.0bil Conventional and Islamic CP/MTN Programme (2008/2038) and RM3.0bil Subordinated Notes Programme (2009/2074). 

The ratings agency said the ratings are based on its expectation that its subsidiaries would retain their dominance in consumer banking, Islamic banking and investment banking. 

Despite the challenging operating environments in Indonesia and Thailand, RAM Ratings believes that the group’s provisioning needs would remain high in the next one or two quarters. 

On the other hand, RAM Ratings expects that conditions to improve gradually in the second half of this year as well as pressure on asset quality and earnings to be manageable.

“Notably, the group’s stronger capitalisation now provides a better cushion against further slippage in asset quality. As at end-December 2014, CIMB Group’s common-equity tier-1 capital ratio had improved to 10.1%, from 8.0% a year earlier,” it said. 

Meanwhile, it added that it was unexpected that CIMB Group exited from the Australian market, highlighting on the challenges of integration and value extraction from its acquisitions. 

However, RAM Ratings said that the group’s priority in the mid-term is to cut costs due its high cost-to-income ratio of 59.1% compared to its peers. 

Moving forward, CIMB Group intends to expand its operations in the Philippines and Vietnam to complete its Asean footprint, although any acquisition will likely be small.