MOODY'S Investors Service said it has assigned to EON Bank Bhd first-time ratings of Baa2 and Prime-3 for long-term and short-term foreign currency deposits respectively and a D bank financial strength rating (BFSR).
EON Bank, a unit of public-listed EON Capital Bhd, reported consolidated assets of RM31.7bil as at June 30, 2003.
Moody's said in a statement the ratings reflected the likelihood that EON Bank would receive regulatory support, if the need arose, and its relatively sound financial strength.
However, the ratings are constrained by EON Bank's modest size, more expensive funding profile and an increasingly competitive environment, it said, adding that all ratings carried a stable outlook.
The international rating agency said the Baa2/P-3 deposit ratings incorporated its view that EON Bank should benefit from government assistance, if needed, given the highly supportive regulatory environment and its status as Malaysia's seventh largest among 10 anchor banking groups.
The D BFSR, it added, reflected the bank's good retail franchise, as well as its relatively clean and well-capitalised balance sheet.
EON Bank's established car finance business - a key earnings contributor - is enhanced by its long relationship with EON (Edaran Otomobil Nasional Bhd), its major shareholder as well as a leading distributor of both local- and foreign-manufactured motor vehicles, it said.
Moody's said the BFSR incorporated the challenges EON Bank faced as it continued expanding into the highly contested consumer, middle market and select corporate lending segments.
Firmer interest rates along with improvements in the economy could increase the bank's funding costs, since time deposits which are more costly than demand and savings deposits, constitute about 80% of its non-bank customer funds, it said. AFX-Asia