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RAM Ratings affirms Citibank Berhad’s AAA ratings
Published on 17 Dec 2024.
RAM Ratings has affirmed Citibank Berhad’s (Citibank or the Bank) AAA/Stable/P1 financial institution ratings.
The affirmation reflects Citibank’s established franchise in the domestic wholesale banking arena, superior funding and liquidity profile, strong profitability and healthy asset quality. The ratings also incorporate an uplift reflecting our expectation of a “high likelihood” of parental support from Citigroup Inc (the Group) in times of need under RAM’s support assessment for Group Support (criteria published on 29 October 2024). The Bank forms part of Citigroup’s footprint in Asia, remaining a strategically important entity of the Group.
In 9M FY Dec 2024, Citibank’s pre-tax profit rose 7% y-o-y to RM878.2, mainly due to lower operating expenses. This was accompanied by higher earnings from the Bank’s markets and treasury and trade solutions segments owing to stronger client flows, the higher interest rate environment and export recovery. Consequently, the return on risk-weighted assets was an annualised 7.4% for the period (FY Dec 2023: 6.1%). We expect Citibank’s profitability to remain strong, backed by its focus on delivering bespoke solutions to top-tier institutional clients, a leaner cost structure and our expectation of lower impairment expenses. That said, its income stream is subject to volatile trading income.
The Bank has a low-risk profile as a significant portion (30%) of its asset base comprises low-risk government securities. Gross loans represented 13% of total assets, mainly constituting revolving credits and short-term trade finance facilities. The Bank’s lending book is healthy, with a gross impaired loan ratio of 0.2% as at end-September 2024. While Citibank is susceptible to lumpy impairments, we envisage its asset quality staying sound as its main corporate clients are top-tier domestic names and multinational companies.
Current and savings account deposits made up a commendable 88% of customer deposits as at end-September 2024. These were largely sourced from the Bank’s cash management and transactional banking businesses, which increases the stickiness of the deposits. Citibank’s common equity tier-1 and total capital ratios stayed robust at a respective 22.4% and 22.8% as at the same date (end-December 2023: 22.4% and 22.9%) and should provide ample headroom against earnings volatility.
Analytical contacts
Jeremy Noel Paul
(603) 3385 2556
jeremynp@ram.com.my
Sophia Lee
(603) 3385 2619
sophia@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@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 2024 by RAM Rating Services Berhad
