PETALING JAYA: AmBank (M) Bhd’s proposed RM500mil Tier-1 capital securities programme has been assigned an A3 long-term rating by RAM Rating Services Bhd.
This reflects the gradual advancement in the bank’s fundamentals after the entry of Australia and New Zealand Banking Group Ltd in May 2007 as a strategic partner and substantial partner of the bank’s parent, AMMB Holdings Bhd.
Concurrently, RAM Ratings has reaffirmed AmBank’s long and short-term financial institution ratings at A1 and P1 respectively, while its RM2bil medium-term notes programme and RM575mil exchangeable bonds are reaffirmed at A2.
The bank’s RM500mil non-cumulative perpetual capital securities and RM1bil negotiable instruments of deposits have been reaffirmed at A3 and P1 respectively.
All the long-term ratings have a stable outlook, RAM said in a statement. “The ratings are underscored by the advancement of the bank’s asset quality, which has progressed according to RAM’s expectations,” said head of financial institution ratings Promod Das.
As at end March (FY09), AmBank’s gross and net non-performing loans (NPLs) ratios had eased to 4.8% and 2.86% versus 6.48% and 3.99% respectively in FY08, which were on par with RAM’s rated peers.
“Nonetheless, we anticipate the generally-challenging macroeconomic environment to weaken the asset quality of the domestic banking sector in the next few quarters,” Das said.
Meanwhile, the two-notch differential between the A1 financial institution rating of the bank and the A3 rating of its proposed securities reflects the subordinated nature of the latter and the embedded interest-deferral feature.
The proceeds from AmBank’s proposed capital securities will be used as working capital and will qualify as Tier-1 capital.
The issuance is anticipated to boost the bank’s pro-forma Tier-1 risk-weighted capital adequacy ratio (RWCAR) and overall RWCAR to 11.37% (end-March 2009: 10.39%) and 15.19% (end-March 2009: 14.2%) respectively.