Published on 13 Sep 2021.
RAM Ratings has reaffirmed Deutsche Bank (Malaysia) Berhad’s (Deutsche Malaysia or the Bank) AA1/Stable/P1 financial institution ratings.
The reaffirmation reflects our belief that Deutsche Bank AG will readily extend support in view of the Bank’s strategic importance to its parent. The ratings are also based on the Bank’s entrenched position in Malaysia’s wholesale banking space, particularly in fixed income and currencies. While Deutsche Malaysia’s significant involvement in capital market activities renders it susceptible to market fluctuations, robust capitalisation affords the Bank ample headroom against earnings volatility.
In FY Dec 2020, the Bank recorded a pre-tax profit of RM355.7 mil (+19% y-o-y) on the back of higher trading income amid heightened market volatility. Pre-tax profit was however markedly lower at RM22.6 mil in 1Q FY Dec 2021 (-81% y-o-y). This was because of a sharp drop in trading income after yields on Malaysian Government Securities (MGS) spiked – mirroring the trend in US Treasury note yields – as prospects of an earlier economic recovery amid swift vaccinations grew during the quarter. As MGS yields have since declined from a peak, we expect the Bank’s earnings to improve in its second quarter.
Deutsche Malaysia’s common equity tier-1 capital ratio stood at 19.0% as at end-March 2021, adequately cushioning earnings volatility which remains an inherent feature as the bulk of the Bank’s gross income is market-driven.
A legal action brought against the Bank in May 2021 is not reflected in the ratings. We will continue to monitor the situation.
Chow Kah Mun
(603) 3385 2501
(603) 3385 2619
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Ratings on Deutsche Bank (Malaysia) Berhad