RAM Ratings reaffirms Standard Chartered Saadiq’s AAA/Stable/P1 ratings

Published on 24 Dec 2019.

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RAM Ratings has reaffirmed Standard Chartered Saadiq Berhad’s (Saadiq or the Bank) AAA/Stable/P1 financial institution ratings. The ratings reflect our expectation of continued strong support from its parent, Standard Chartered Bank Malaysia Berhad (Standard Chartered Malaysia or the Group, rated AAA/Stable/P1), given the Bank’s strategic role as the Group’s Islamic banking arm. Saadiq’s operations are highly integrated with its parent – the Bank leverages on Standard Chartered Malaysia’s branch network, technical expertise and risk management systems to a large extent.

Saadiq ranks among the smaller Islamic banks in Malaysia, with less than 1% of the segment’s assets as at end-September 2019. The Bank’s financing portfolio has largely tilted towards secured financing in recent years, following the Group’s strategy of de-risking its unsecured portfolio. As at end-September 2019, Saadiq’s property financing and personal financing facilities made up a respective 61% and 2% of its financing portfolio (end-December 2012: 20% and 34%).

Owing to deterioration in its residential property and working capital financing segments as well as a contracting base, Saadiq’s gross impaired financing (GIF) ratio weakened to 1.2% as at end-September 2019 (end-December 2017: 0.8%), albeit remaining below the banking industry’s 1.6% at the same date. The Bank’s loss absorption buffers stayed strong, with its GIF coverage ratio (including regulatory reserves) and common equity tier-1 capital ratio standing at 154% and 19.8%, respectively, as at end-September 2019. 

A substantial increase in customer deposits had improved the Bank’s funding profile. Notably, current and savings account (CASA) deposits jumped 73% in 9M fiscal 2019, constituting a commendable 56% of customer deposits as at end-September 2019 (industry average: 26%; end-December 2018: 41%) – in line with the Group’s strategy of growing CASA deposits at Saadiq. In addition, the Bank can rely on its parent for funding via profit-sharing investment account (PSIA) placements, although these had reduced considerably in 9M fiscal 2019, accounting for only 36% of total profit-bearing funds as at end-September 2019 (end-December 2018: 44%).

Due to its shrinking financing base and lower fee income, Saadiq’s pre-provision profit declined to RM43.1 mil in FY Dec 2018 (FY Dec 2017: RM47.8 mil). Although the Bank’s net financing income continued to decline 4.6% y-o-y in 9M fiscal 2019, its pre-provision profit was propped up by higher fee income. That said, Saadiq’s cost to income ratio remained high at 64%. In addition, the Bank’s net financing margin was still relatively low at 1.72%, partly owing to the 25-bp OPR cut in May 2019.


Analytical contact
Liang Huey Jean, CFA
(603) 3385 2495

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.

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