Moody’s Ratings said an upgrade for CIMB IB and CIMB Bank was unlikely because they are already at the same level as Malaysia’s sovereign rating.
PETALING JAYA: Moody’s Ratings has maintained a stable outlook on CIMB Group Holdings Bhd
(CIMB Group), CIMB Bank Bhd (CIMB Bank), CIMB Islamic Bank Bhd (CIMB Islamic) and CIMB Investment Bank Bhd (CIMB IB).
In a report, the credit rating agency said it affirmed CIMB Group’s Baa1 issuer ratings, thus reflecting its strong market position as the second-largest banking group in Malaysia by assets, and its successful de-risking initiatives in recent years.
“We expect CIMB Group’s solvency and liquidity metrics to remain broadly stable over the next 12 to 18 months. The key risk to our expectation stems from the evolving US tariffs on Malaysia and other Asian countries,” Moody’s Ratings said.
It also said it affirmed CIMB Bank’s A3 issuer ratings and its deposit ratings which is a notch higher than the bank’s baa1 baseline credit assessment (BCA).
“Based on our assessment, the probability of support from the government of Malaysia (A3 stable) will be very high in times of need. CIMB Group’s Baa1 issuer ratings are one notch below those of CIMB Bank, reflecting structural subordination risk for holding company debt.
“We assess CIMB Bank’s BCA based on CIMB Group’s overall financial performance, given that the two entities are highly integrated,” the agency said.
Subsequently, Moody’s Ratings had also affirmed CIMB Islamic’s A3 issuer and deposit ratings, baa1 adjusted BCA and baa2 BCA, reflecting its strong asset quality, stable but moderate capital and liquidity, and modest profitability.
“The affirmation also reflects our assumption of a very high probability of support from its parent, CIMB Bank, and the Malaysian government in times of need, given CIMB Islamic’s substantial contribution to CIMB Bank’s domestic franchise,” it noted.
As for CIMB IB, Moody’s Ratings affirmed the A3 issuer, saying it was a highly integrated entity of CIMB Group.
“CIMB IB does not have a meaningful independent business franchise and relies heavily on CIMB Group’s wholesale banking business. The investment bank also transfers risk exposure arising from investment banking to CIMB Bank.
“We therefore equalise CIMB IB’s issuer ratings with those of CIMB Bank,” it said.
Meanwhile, Moody’s Ratings said an upgrade for CIMB IB and CIMB Bank was unlikely because they are already at the same level as Malaysia’s sovereign rating and the formers’ outlook is stable.
“However, we could upgrade CIMB Group’s issuer ratings if CIMB Bank’s BCA is upgraded, if CIMB Group’s problem loans ratio falls below 1.5% and its market funds ratio decreases to below 15%,” the agency said.
It noted it could downgrade CIMB Group, CIMB Bank and CIMB IB’s issuer ratings if CIMB Bank’s BCA is downgraded by more than one notch.
As for CIMB Islamic’s issuer and deposit ratings, Moody’s Ratings said an upgrade was unlikely because they were already at the same level as Malaysia’s sovereign rating and the latter’s outlook is stable.
“We could downgrade CIMB Islamic’s issuer and deposit ratings if CIMB Bank’s BCA is downgraded by more than one notch. We could downgrade CIMB Islamic’s BCA if the bank’s problem financing ratio rises above 3% and its return on tangible assets falls below 0.5%.”
