Published on 24 Sep 2019.
RAM Ratings has reaffirmed Deutsche Bank (Malaysia) Berhad’s (Deutsche Malaysia or the Bank) financial institution ratings of AA1/Stable/P1. The ratings reflect the Bank’s established franchise in the domestic wholesale banking arena, particularly in fixed income and currencies (FIC). The Bank is also expected to derive solid parental support, if needed, given its strategic importance to Deutsche Bank AG (the Group).
While the German banking giant is undertaking a transformation exercise, which involves repositioning its business model to increase its share of relatively stable revenue sources (by exiting equity sales and trading operations as well as resizing the FIC business), the restructuring initiative has not affected the Bank. Apart from the focus on its home market in Europe, Asia is also touted as a growth region. Forming part of the Group’s footprint in the ASEAN region, Deutsche Malaysia considers multinational and large local companies as its core customers.
Deutsche Malaysia’s profit performance remains healthy. The Bank posted a pre-tax profit of RM264.1 mil and RM97.7 mil, respectively, in fiscal 2018 and 1Q fiscal 2019 (fiscal 2017 and 1Q fiscal 2018: RM274.1 mil and RM90.1 mil). These translated into corresponding returns on risk-weighted assets of 3.0% and 4.1% (annualised) – among the highest in the banking industry (fiscal 2017 and 1Q fiscal 2018: 3.4% and 4.4% (annualised)). However, the Bank’s earnings profile is susceptible to market fluctuations given that its core businesses – which contribute the bulk of earnings – are largely market driven. Deutsche Malaysia’s capital and liquidity positions have stayed solid, with its common equity tier-1 capital ratio standing at a sturdy 16.8% as at end-March 2019 and its liquidity coverage ratio relatively high at 125.5% in 1Q FY Dec 2019.
Chow Kah Mun
(603) 3385 2501
(603) 3385 2577
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Ratings on Deutsche Bank (Malaysia) Berhad