Published on 22 Aug 2023.
RAM Ratings has affirmed the AAA/Stable/P1 financial institution ratings (FIRs) of Standard Chartered Bank Malaysia Berhad (Standard Chartered Malaysia or the Bank) and Standard Chartered Saadiq Berhad (Saadiq). As Standard Chartered Malaysia’s Islamic banking subsidiary, Saadiq is deemed highly strategic to the Bank. As such, its FIRs are equated to the Bank’s.
The affirmations are premised on our belief that the Bank will continue to derive strong financial support from its ultimate parent, Standard Chartered PLC (the Group), given its strategic importance to the latter. Standard Chartered Malaysia’s ratings also reflect its strong funding and liquidity profile, healthy capitalisation and sound asset quality. Credit headwinds are anticipated to subside with improving economic conditions but we do not rule out lumpy delinquencies as the Bank serves large corporate customers and multinationals. The Bank’s common equity tier-1 capital ratio of 14.3% and loan loss coverage (with regulatory reserves) of 114% as at end-March 2023 should enable it to withstand unexpected credit losses.
Standard Chartered Malaysia’s gross impaired loan (GIL) ratio remained stable at 3.8% as at end-March 2023 (end-December 2021: 3.9%), continuing to trend above the industry’s 1.7%, partly due to a stricter classification policy in line with the Group’s. The Bank prudently classified some performing corporate accounts as impaired and tagged rescheduled and restructured retail banking loans (mostly under relief) as Stage 3 although not required to by Bank Negara Malaysia. Excluding retail banking loans that are less than three months in arrears, the Bank’s adjusted GIL ratio would stand at a better 3.3%.
In FY Dec 2022, pre-tax profit grew substantially to RM743.4 mil (FY Dec 2021: RM155.5 mil), thanks to sizeable releases of overlay provisions. The Bank’s net interest margin (NIM) also expanded to 2.2% (FY Dec 2021: 2.0%) amid rate hikes, which in turn lifted its top line. Consequently, the return on risk-weighted assets jumped to 2.4% (FY Dec 2021: 0.5%). The ratio stayed strong in 1Q FY Dec 2023 at an annualised 2.6% on the back of higher trading income and fee income. We expect lighter provisions and a broader NIM to uphold profitability this year.
Standard Chartered Malaysia’s strong funding profile is underpinned by its entrenched presence in the cash management and transaction banking space. Current and savings account balances and retail deposits constituted a respective 70% and 38% of total customer deposits as at end-March 2023 (industry: 31% and 38%).
Jeremy Noel Paul
(603) 3385 2556
(603) 3385 2619
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Rating Rationale: Standard Chartered Bank Malaysia Berhad
Rating Rationale: Standard Chartered Saadiq Berhad
Ratings on Standard Chartered Bank Malaysia Berhad