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RAM Ratings affirms BNP Paribas Malaysia’s AA1 rating
Published on 15 Sep 2023.
RAM Ratings has affirmed BNP Paribas Malaysia Berhad’s (the Bank) AA1/Stable/P1 financial institution ratings.
The ratings take into account our belief that ready parental support from BNP Paribas SA (the Group) – one of the world’s largest financial institutions and among the globally systemically important banks – will be forthcoming when required. The Group has, on multiple occasions, demonstrated solid funding and capital support.
BNP Paribas Malaysia forms part of the Group’s footprint in Asia Pacific. The region, while contributing only 8% of the Group’s aggregate revenue, is identified as an area for further growth and investment. The Bank can leverage on the Group’s global franchise, international network and technical expertise in wholesale banking.
Given its focus on wholesale banking, which entails derivative transactions and market making activities, BNP Paribas Malaysia’s earnings are inherently volatile. The Bank’s pre-tax profit and return on risk-weighted assets plummeted to RM1.3 mil and 0.03%, respectively, in FY Dec 2021 due to valuation losses but rebounded to RM66.8 mil and 1.65% last year as Covid-19 restrictions were relaxed and greater volatility in the market boosted trading volumes. Strong trading activity continued into 1Q fiscal 2023, with pre-tax profit coming in at a notable RM23.8 mil (1Q fiscal 2022: RM6.4 mil pre-tax loss).
The Bank’s volatile trading income stream is partially mitigated by the transaction banking business, a more stable income source. Earnings from this segment have been increasing in recent years due to BNP Paribas Malaysia’s emphasis on growing new-to-bank multinational companies operating within the region. Its robust common equity tier-1 capital ratio of 20.5% as at end-March 2023 provides the Bank an ample loss absorption buffer to support volatile trading activities. A highly liquid balance sheet also backs the ratings.
Analytical contacts
Jeremy Noel Paul
(603) 3385 2556
jeremynp@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 2023 by RAM Rating Services Berhad
