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RAM Ratings reaffirms Deutsche Malaysia’s AA1/Stable/P1 ratings

Published on 28 Sep 2022.

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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, the Bank’s parent, will readily extend support in view of its strategic importance to the former. The ratings also factor in the Bank’s entrenched position in Malaysia’s wholesale banking space, particularly in fixed income and currencies, and its robust capitalisation which provides ample headroom against earnings volatility. 

In FY Dec 2021, the Bank generated a lower net interest income as a result of the full-year impact of interest rate cuts in 2020. This, combined with lower trading income due to inflationary pressures on bond valuations and market sentiment, caused Deutsche Malaysia’s pre-tax profit to fall 60% to RM143.7 mil. Its return on risk-weighted assets consequently dropped from 4.0% to 1.9%. Pre-tax profit came in at RM29 mil in 1Q 2022 (1Q 2021: RM23 mil; 1Q 2020: RM118 mil).

Given its heavy involvement in trading and market-making activities, Deutsche Malaysia’s profitability is highly sensitive to market sentiment. We expect ongoing market uncertainties and weak client flows to continue to suppress earnings in 2022. The Bank’s strong capital position, with its common equity tier-1 capital ratio at a high 21.7% as at end-March 2022, serves as a sturdy loss absorption buffer against potential fluctuations in earnings.

 

Analytical contacts
Lee Yee Von
(603) 3385 2503
yeevon@ram.com.my

Sophia Lee
(603) 3385 2619
sophia@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 2022 by RAM Rating Services Berhad



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