KUALA LUMPUR: Moody's Ratings has affirmed Hong Leong Bank Bhd
's A3/P-2 long- and short-term foreign and local currency deposit ratings, while maintaining a stable outlook.
In a statement, Moody's said that it also affirmed the bank's A3 foreign currency senior unsecured rating, its (P)A3 foreign currency senior unsecured medium-term note programme rating, a3 Baseline Credit Assessment (BCA) and Adjusted BCA, as well as its counterparty risk ratings and assessments.
“The affirmation of HLB's A3 ratings reflects the bank's strong asset quality, underpinned by its low credit costs through multiple credit cycles.
“The bank remains well-capitalised, supported by its strong profitability. The BCA also considers the bank's robust funding and moderate liquidity buffer,” Moody’s said.
The rating agency expects Hong Leong Bank's problem loan ratio to remain below 1% over the next 12 to 18 months, supported by stable operating conditions in Malaysia and the bank's robust underwriting standards.
It noted that key risks to the bank's asset quality stem from strong growth in lending to small and medium-sized enterprises, although its loan-loss coverage ratio of 81% as at March 31, 2026 provides an adequate buffer.
“We expect HLB's standalone profitability to remain stable, supported by its good net interest margin and low credit costs,” Moody’s said.
However, it said the bank remains highly reliant on earnings from its associate, Bank of Chengdu Co Ltd in China, although any divestment of the stake would reduce this reliance and strengthen its other revenue streams.
Moody's also expects the bank's tangible common equity-to-risk-weighted assets ratio, after deducting capital in associates, to remain around 15% over the next 12 to 18 months.
The bank's funding profile will remain a key credit strength, underpinned by its large retail deposit franchise and low reliance on short-term wholesale funding, it added.
Moody's said an upgrade is unlikely as Hong Leong Bank's ratings are already aligned with Malaysia's sovereign rating.
It said the ratings could be downgraded if the bank's problem loan ratio rises above 1.5% and its return on tangible assets falls below 1%.
