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Outlook on RHB Bank’s ratings reverts to stable

Published on 24 Apr 2020.

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RAM Ratings has revised the outlook on RHB Bank Berhad’s (RHB Banking Group) AA2 long-term financial institution rating (FIR) to stable from positive, while reaffirming its ratings. The revision follows heightened risks in the operating landscape since our last review of RHB Banking Group’s ratings in December 2019. As the ravaging effects of Covid-19 permeate the economy and weigh on borrowers’ debt-servicing ability, the highly challenging operating environment for the banking sector diminishes the prospect of any rating upgrade in the near term.

The stable outlook on RHB Bank’s ratings is underpinned by its strong loss absorption buffer in the form of regulatory reserves and pre-provision earnings, which are expected to sufficiently cushion potentially heftier credit impairments. Moreover, the Group’s capitalisation stayed sturdy with a common equity tier-1 capital ratio of 16.3% as at end-December 2019. RHB Bank continued to be among the best-capitalised in the industry. 

Given Bank Negara Malaysia’s relief measures, any impact arising from the pandemic on banks’ asset quality indicators would only surface early next year. About 70% of RHB Bank’s domestic loans will be eligible for the six-month automatic moratorium on loan payments. This in itself does not trigger a stage transfer for these loans (under the MFRS 9 impairment model) and thereby would not necessitate provisions. The Group will also have to facilitate requests by corporates to defer or restructure loan payments; the ultimate quantum of such loans remains to be seen at this juncture. 

The revision of the outlook on RHB Bank’s long-term FIR will also be reflected in the ratings of its debt programmes as well as those of RHB Islamic Bank Berhad and RHB Investment Bank Berhad, as listed in the table below.

Table 1: Ratings of entities under RHB Banking Group

 

Ratings

RHB Bank Berhad

 

  1. Financial Institution Ratings

 

  1. RM5 bil Multi-Currency Medium-Term Note Programme (2015/2045)
  • Senior Notes
  • Subordinated Notes

 

  1. RM3 bil Multi-Currency Medium-Term Note Programme (2011/2031)
  • Senior Notes
  • Subordinated Notes

 

  1. RM3 bil Medium-Term Note Programme (2007/2027)
  • Senior Notes
  • Subordinated Notes

 

 

AA2/Stable/P1

 

AA2/Stable

AA3/Stable

 

 

AA2/Stable

AA3/Stable

 

 

AA2/Stable

AA3/Stable

RHB Islamic Bank Berhad

 

i. Financial Institution Ratings

ii. RM5 bil Subordinated Sukuk Murabahah Programme (2014/2034)

 

 

AA2/Stable/P1

AA3/Stable

RHB Investment Bank Berhad

 

  1. Financial Institution Ratings

 

  1. RM1 bil Multi-Currency Medium-Term Note Programme (2015/2045)
  • Senior Notes
  • Subordinated Notes

 

 

AA2/Stable/P1

 

 

AA2/Stable

AA3/Stable

 

Analytical contact
Loh Kit Yoong
(603) 3385 2493
kityoong@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 2020 by RAM Rating Services Berhad



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