SINGAPORE, May 12 — Moody’s Investors Service has affirmed the A3/P-2 long-term and short-term foreign currency deposit ratings of Standard Chartered Bank Malaysia Bhd (StanChart Malaysia).

In a statement, it said the outlook on the A3 deposit rating is positive, and is driven by the respective outlook on Malaysia’s A3 rating.

At the same time, the rating agency said the bank’s baa2 baseline credit assessment (BCA) was affirmed, while its adjusted BCA — which incorporates parental support — was lowered to a3 from a2.

Moody’s also assigned to StanChart Malaysia Counterparty Risk (CR) Assessments of A2(cr) and P-1(cr).

The CR Assessment is an opinion of the counterparty risk related to a bank’s covered bonds, contractual performance obligations (servicing), derivatives (for example swaps), letters of credit, guarantees and liquidity facilities.

Moody’s said the affirmation of StanChart Malaysia’s A3/P-2 deposit ratings reflects the bank’s stable financial performance in the first nine months of 2014, and the high probability of support from its parent, Standard Chartered Bank (SCB, long-term deposits Aa2/P-1/negative, BCA a2).

The baa2 BCA is underpinned by the bank’s good capital adequacy and highly liquid balance sheet. The BCA also takes into account the bank’s weaker asset quality compared with Malaysian peers.

StanChart Malaysia’s problem loans increased to 3.3 per cent of gross loans as of September 30, 2014, from 1.2 per cent in 2012. The weakening in asset quality was predominantly the result of a few large corporate loans becoming impaired in 2013.

Moody’s believes that the probability of support from SCB is high, resulting in a two-notch uplift to StanChart Malaysia’s A3 deposit rating from its BCA of baa2.

Moreover, Moody’s considers that support from the Malaysian government (A3 positive) could be forthcoming in case of need.

However, it said such public support does not result in any rating uplift, because StanChart Malaysia’s A3 deposit rating is already at the same level as Malaysia’s sovereign rating. — Bernama