Published on 11 Oct 2023.
RAM Ratings has affirmed Bank of China (Malaysia) Berhad’s (BOCM or the Bank) AA1/Stable/P1 financial institution ratings.
The ratings incorporate our expectation of strong parental support from Bank of China (Hong Kong) limited – the Bank’s intermediate parent – and Bank of China Limited, its ultimate parent. BOCM’s robust capitalisation also supports the rating, providing an ample loss absorption buffer for potential credit deterioration. While the Bank’s asset quality has weakened in recent quarters, it remains within a manageable level.
Several accounts under relief measures had turned impaired during the year, lifting the Bank’s gross impaired loans (GIL) ratio to 4.0% as at end-June 2023 (end-December 2021: 2.2%). As a result, BOCM’s GIL coverage ratio fell to 62% as at the same date (end-December 2021: 124.5%), given the highly collateralised nature of the newly impaired loans. Nonetheless, downside risks to further asset quality deterioration are expected to be manageable. Given BOCM’s exposure to large corporates and multinational companies, the Bank is inherently exposed to loan and deposit concentration risk.
Benefiting from rising interest rates and a higher proportion of low-cost current and savings account deposits (end-December 2022: 34.2%; end-December 2021: 27.9%), the Bank’s net interest margin widened to 1.8% in FY Dec 2022 (FY Dec 2021: 1.6%). Coupled with lower impairment charges and better trading gains, BOCM’s bottom line increased to RM159.0 mil (FY Dec 2021: RM96.4 mil). This translated into a return on risk-weighted assets (RoRWA) of 1.6% (FY Dec 2021: 1.0%). While BOC’s three-year average RoRWA of 1.2% remained weaker than its peers (ranging from 1.6% to 2.5%), it is on an improving trend, as observed in 1H fiscal 2023, with an annualised RoRWA of 2.2%.
BOCM’s solid capitalisation, with a common equity tier-1 capital ratio of 15.4% as at end-June 2023, affords the Bank sizeable cushion against potential credit deterioration and supports business growth. BOCM remained a small player in the local banking industry with modest market share.
Lee Jo Yee
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(603) 3385 2619
(603) 3385 2500
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Published by RAM Rating Services Berhad
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Ratings on Bank of China (Malaysia) Berhad