RAM Ratings reaffirms AAA ratings of Hong Leong banking entities and AA1 rating of HLFG

Published on 12 Dec 2019.

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RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings (FIRs) of Hong Leong Bank Berhad (the Bank), Hong Leong Islamic Bank Berhad (HLISB) and Hong Leong Investment Bank Berhad (HLIB). Concurrently, we have reaffirmed the AA1/Stable/P1 corporate credit ratings (CCRs) of Hong Leong Financial Group Berhad (HLFG or the Group). The reaffirmations are anchored by the Group’s strong domestic retail and SME banking franchises and its steady performance despite macroeconomic headwinds. 

HLFG’s long-term CCR is rated one notch below Hong Leong Bank’s AAA long-term FIR to reflect the Group’s structural subordination as a non-operating holding company and its moderate company-level double-leverage and gearing ratios of a respective 1.1 times and 0.1 times as at end-September 2019. The reaffirmation of HLISB’s and HLIB’s ratings is premised on their strategic roles as the respective Islamic and investment banking arms of the Group, whose ratings are in turn anchored by Hong Leong Bank’s ratings. As part of the larger group, HLISB leverages on Hong Leong Bank’s (the Group’s commercial banking arm) branch network, distribution channels and risk management systems, while HLIB capitalises on the Bank’s existing network of customers for deal referrals and cross-selling opportunities. 

A prudent lending culture and conservative risk appetite underscore Hong Leong Bank’s track record of excellent asset quality. As at end-September 2019, the Bank’s gross impaired loan (GIL) ratio stood at only half the industry’s 1.6%. Its credit cost ratio was also negligible. Inclusive of regulatory reserves, the Bank’s GIL coverage ratio of 196% is still among the strongest in the banking industry.

The Bank continued to boast healthy profitability, with a pre-tax profit of RM3.2 bil in fiscal 2019, although its margin remained under pressure. The Bank’s narrowing margin and softer non-interest income on the back of a weaker performance in treasury market activities had been compensated by a RM90 mil one-off gain from the divestment of 37% of its shareholding in joint venture Sichuan Jincheng Consumer Finance Limited, leaving a stake of 12%. Profitability was further helped by lower loan impairment charges and stronger contributions from 18%-owned China-based associate, Bank of Chengdu. In 1Q fiscal 2020, the Bank largely sustained its performance with an annualised return on risk-weighted assets of 2.5%.

Owing to a strong retail deposit base and extensive branch network, the Bank has one of the highest proportions of retail deposits in the banking system. Slightly over half of its customer deposits stemmed from individuals, compared to the industry average of about 37%. Its loans-to-deposits ratio remained comfortable, although inching up to 84% as at end-September 2019 (end-June 2018: 81%).  In addition, the Bank’s liquidity position stayed healthy, its liquidity coverage ratio is above the regulatory requirement. The Group’s capitalisation and that of its banking subsidiaries are also sound vis-à-vis their risk profiles, with the Group’s common equity tier-1 capital ratio of 10.5% as at end-September 2019.

Table 1: Ratings of HLFG, Hong Leong Bank, HLISB and HLIB



Hong Leong Financial Group Berhad

Corporate Credit Ratings


RM25 billion Multi-Currency Senior Notes, Tier-2 Subordinated Notes, and Additional Tier-1 Capital Securities Programme (2017/2117)*

i)    Senior Notes
ii)    Tier-2 Subordinated Notes
iii)    Additional Tier-1 Capital Securities




RM3 billion Commercial Papers Programme (2017/2025)*


RM1.8 billion Commercial Papers/Medium-Term Notes Programme (2011/2031)


*Combined limit of RM25.0 billion

Hong Leong Bank Berhad

Financial Institution Ratings


RM10 billion Multi-Currency Subordinated Notes Programme (2014/2044)


RM10 billion Multi-Currency Additional Tier-1 Capital Securities Programme (2017/2117)


^This Programme has a loss absorption feature linked to a non-viability event of the Bank only.


Hong Leong Islamic Bank Berhad

Financial Institution Ratings


RM2 billion Multi-Currency Tier-2 Subordinated Sukuk Murabahah and Additional Tier-1 Sukuk Wakalah (2017/2117)

i)    Tier-2 Subordinated Sukuk Murabahah
ii)    Additional Tier-1 Sukuk Wakalah




Hong Leong Investment Bank Berhad

Financial Institution Ratings




Analytical contact
Chew Wei Li 
(603) 3385 2499

Media contact
Padthma Subbiah
(603) 3385 2577


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

Rating Rationale: Hong Leong Financial Group Berhad

Rating Rationale: Hong Leong Bank Berhad

Rating Rationale: Hong Leong Islamic Bank Berhad

Rating Rationale: Hong Leong Investment Bank Berhad

Ratings on Hong Leong Financial Group Berhad