Published on 28 Sep 2022.
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.
Lee Yee Von
(603) 3385 2503
(603) 3385 2619
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Published by RAM Rating Services Berhad
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Ratings on Deutsche Bank (Malaysia) Berhad