KUALA LUMPUR: Moody's Investors Service affirmed the A3 long-term foreign currency deposit and A3 long-term foreign currency senior unsecured debt ratings of Malayan Banking Bhd (Maybank).
The international rating agency also affirmed the bank’s baseline credit assessment (BCA) and adjusted BCA of a3, and the bank's long-term foreign currency subordinated debt rating of Baa2 (hyb).
“The rating outlook is stable, ” it said in a statement.
Moody’s said the affirmation of Maybank's A3 ratings and a3 BCA reflected its view that “the bank's financial performance will remain resilient, underpinned by its robust track record over the past decade, strong capital buffers, favourable funding and ample liquidity”.
The rating action also took into account Moody's expectation of a moderate strain on bank's asset quality and profitability due to the economic disruption caused by the coronavirus outbreak.
It also pointed out Maybank's capital was strong, supported by the bank's dividend reinvestment plan and modest credit growth.
The bank's tangible common equity as a percentage of risk-weighted assets of 19.1% as of March 31,2020 exceeded that of its peers in the region and provides ample buffer against risks.
“Funding and liquidity are strengths of Maybank, underpinned by its position as Malaysia's largest bank by assets.
“The bank has a strong deposit base and good market access, while its liquidity buffer is in line with the regional peers, ” it said.
Moody’s said in the past few years, the asset quality of Maybank's overseas loans -- which are mainly in Singapore and Indonesia -- has deteriorated due to the bank's relatively highly concentrated loan exposures to sectors such as oil & gas, shipping and structured trade credit amongst others.
The gross impaired loan ratios for the bank's operations in Singapore and Indonesia registered 4.0% and 4.9%, respectively, as of 31 March 2020, compared to 2.0% for Malaysia.
Despite the weakening in asset quality, Maybank has de-risked its international loan book and reduced its concentration to large borrowers.
“As such, Moody's does not expect a further material deterioration in the quality of the bank's international corporate loans.
“In line with the trend for other peers in the region, Moody's expects the quality of Maybank's retail and small and mediums-sized enterprise (SME) loans to deteriorate due to the economic disruptions caused by the coronavirus outbreak in the various countries of its operations.
“Based on data as of May 2020, about 60% of the bank's loans are under repayment moratoriums until October 2020. Moody's expects impaired loans will increase once the loan deferment period ends. Credit costs will also increase because of the strain on asset quality and will hurt profitability.
“However, Maybank's strong loss absorbing buffers put the bank in a comfortable position to weather the economic shock, ” Moody’s said.
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