Published on 02 Jan 2020.
RAM Ratings has reaffirmed Citibank Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings. The ratings incorporate the Bank’s strategic importance to Citigroup Inc, its solid capitalisation and sturdy funding and liquidity profile. As part of the larger Citigroup, the Bank leverages on its parent’s global franchise, connectivity and technical expertise, allowing it to establish a strong foothold in cash management and treasury solutions.
With a 16% share of the domestic banking system’s credit card receivables as at end-June 2019, Citibank stands among the industry’s largest credit card providers. As the credit card business accounted for one-fourth of its total loans and about a third of gross income, the material exposure renders the Bank more susceptible to regulatory reforms in this segment. However, the Bank has been able to defend its profitability in the face of measures such as the progressive reduction of interchange fees. Return on risk-weighted assets (RORWA) was a healthy 3.9% and 4.3% (annualised) in fiscal 2018 and 1H fiscal 2019, respectively.
In fiscal 2018, Citibank revised its loan reclassification policy to be in line with BNM guidelines, whereby loans restructured via Agensi Kaunseling & Pengurusan Kredit are classified as non-impaired as long as they are performing. Previously, these loans were classified as impaired regardless of repayment status. Given the reclassification of these fairly sizeable performing restructured loans, the Bank’s gross impaired loan (GIL) ratio had eased to 0.9% as at end-June 2019 (end-December 2017: 2.3%) and is expected to hover at this level in the immediate future.
Citibank has maintained a sturdy funding and liquidity profile. Low-cost current and savings account deposits made up a commendable 72% of the Bank’s deposit base as at end-June 2019 – among the highest proportions of such deposits in the industry, underscoring the Bank’s strong cash management franchise. Capitalisation remained solid, as the Bank’s common equity tier-1 capital ratio, including unaudited profit for 1H fiscal 2019, stood at 16.2% as at end-June 2019 (end-December 2017: 16.3%).
Goh Kwan Kheen, Timothy
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Ratings on Citibank Berhad