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RAM Ratings reaffirms Deutsche Malaysia’s AA1/Stable/P1 ratings

Published on 24 Sep 2019.

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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.

 

Analytical contact
Chow Kah Mun    
(603) 3385 2501
kahmun@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad



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