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RAM Ratings reaffirms Affin Hwang’s AA3/Negative/P1 ratings

Published on 27 Nov 2020.

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RAM Ratings has reaffirmed Affin Hwang Investment Bank Berhad’s (the Bank) AA3/Negative/P1 financial institution ratings (FIR). The ratings mirror that of AFFIN Bank Berhad (AFFIN Bank or the Group), given the Bank’s strategic role as the Group’s investment banking and stockbroking arm. The outlook on Affin Hwang’s long-term financial institution rating was revised to negative from stable in August this year pursuant to the revision in outlook on AFFIN Bank’s FIR to negative.

Affin Hwang houses AFFIN Bank’s stockbroking, asset management and investment banking operations. It remains the largest player in the stockbroking arena, holding market shares of 15% by trading value and 21% by trading volume in 9M 2020, supported by proprietary trading activities. The Bank also ranks among the top asset management players in the country, with assets under management of about RM61 bil as at end-June 2020. That said, Affin Hwang’s investment banking franchise is still relatively modest compared to peers in larger banking groups. Its market shares in the Malaysian debt and equity capital markets were only 2% and 5%, respectively, by transaction value, in 1H FY Dec 2020. 

As with other investment banks, Affin Hwang’s earnings are inherently volatile in view of the susceptibility of its business activities to market conditions and investor sentiment. Nevertheless, the Bank’s robust common equity tier-1 capital ratio of 37.4% as at end-June 2020 is anticipated to provide a solid absorption buffer against earnings volatility. The Bank’s asset management business also mitigates such volatility to some extent as it provides a more stable income stream. In 1H FY Dec 2020, the Bank’s pre-tax profit surged to RM211 mil (1H FY Dec 2019: RM98 mil) on the back of significantly stronger stockbroking activities – particularly from retail participation – underpinned by low interest rates as well as the nationwide six-month automatic moratorium on retail loans. The Bank had also recorded more robust investment and trading income as it realised some gains amidst the bond and equities rally.   

 

Analytical contact
Jeremy Noel Paul
(603) 3385 2556
jeremynp@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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Ratings on Affin Hwang Investment Bank Berhad

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