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RAM Ratings reaffirms BNP Paribas Malaysia Berhad’s AA2 rating

Published on 01 Oct 2020.

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RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of BNP Paribas Malaysia Berhad (the Bank). The ratings factor in our expectation of continued ready parental support from BNP Paribas SA (the Group), one of the world’s largest financial institutions and among the globally systemically important banks. Past parental support is evident from the conversion of RM160 mil of the Bank’s subordinated debts into equity by the Group in 2013 and a RM48 mil capital injection in 1Q FY Dec 2016. Additionally, the Group has allowed the Bank to retain the entire RM60 mil of funds earmarked for 2019 dividends, to be ploughed back for growth and capital conservation amid an unprecedented economic environment. The ratings also consider the Bank’s still-small capital base that restricts its ability to participate in large deals. 

BNP Paribas Malaysia Berhad forms part of the Group’s footprint in Asia Pacific, a region which while contributing less than 5% of its aggregate revenue, is identified as an area for further growth and investment. In this regard, the Bank is able to leverage on the Group’s global franchise, international network and technical expertise in the domain of wholesale banking. 

Given its focus on wholesale banking that involves among others, global markets activity, BNP Paribas Malaysia Berhad’s earnings are intrinsically volatile and subject to market fluctuations. However, off the back of heightened market-making activity and an increased client flow, the Bank recorded healthy pre-tax profits of RM81 mil and RM58 mil, respectively, in fiscal 2019 and 1Q fiscal 2020 (fiscal 2018 and 1Q fiscal 2019: RM83 mil and RM29 mil). 

Although the Bank’s common equity tier-1 capital ratio had edged lower to 17.7% as at end-March 2020 (end-December 2018: 20.0%) due to business expansion, capitalisation remains solid.

 

Analytical contact
Lynette Lee
(603) 3385 2621
lynette@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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