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.
Jeremy Noel Paul
(603) 3385 2556
(603) 3385 2619
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Published by RAM Rating Services Berhad
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Ratings on BNP Paribas Malaysia Berhad