Published on 07 Jan 2021.
RAM Ratings has reaffirmed Citibank Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings, premised on our expectation that the Bank will maintain its sturdy credit fundamentals despite the economic fallout from the coronavirus crisis. We also expect Citibank to receive extraordinary support from Citigroup Inc, if necessary, given the Bank’s strategic importance to the latter.
As part of Citigroup, the Bank is able to tap its parent’s global franchise, connectivity and technical expertise, enabling it to carve a strong foothold in cash management and treasury solutions. Citibank ranks among the dominant credit card issuers domestically, with a notable 15% market share.
Having recorded low levels of impairment in recent years (end-September 2020: 0.6%), the Bank’s loan quality remains benign. While Bank Negara Malaysia’s loan relief measures may momentarily help alleviate asset quality pressures, delinquencies are anticipated to rise albeit at a moderate level. Citibank has pre-emptively ramped up credit charges amid the uncertain operating landscape, which resulted in an annualised credit cost ratio of 118 bps in 9M FY Dec 2020 (FY Dec 2019: 24 bps). Gross impaired loan coverage stood at a robust 417% as at end-September 2020.
On account of heftier impairment costs, Citibank reported a lower pre-tax profit of RM519.3 mil in 9M FY Dec 2020 (-41% y-o-y). Its annualised return on risk-weighted assets declined to 2.6% (three-year average: 3.9%), although still deemed sound relative to other banks. While the Bank’s annualised net interest margin had narrowed to 3.1% (FY Dec 2019: 3.4%) amid reduced rates, it still enjoys among the widest margins in the banking industry. This is upheld by the Bank’s large portions of high-yielding unsecured loans and lower-cost current and savings account (CASA) deposits.
Citibank’s funding and liquidity profile stayed solid. The Bank has extensive shares of CASA and individual deposits, a reflection of its strong cash management franchise. These deposits represented a respective 74% and 38% of total deposits as at end-September 2020. Citibank’s liquidity coverage and net stable funding ratios are comfortably above the respective regulatory minimums. The Bank is well capitalised, with a robust common equity tier-1 capital ratio of 18.4% as at the same date.
Chow Kah Mun
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(603) 3385 2577
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Ratings on Citibank Berhad