KUALA LUMPUR, July 7 — Moody’s Investors Service has affirmed the long-term foreign currency deposit ratings of Hong Leong Bank Bhd, Public Bank Bhd, and RHB Bank Bhd at A3, and Standard Chartered Bank Malaysia Bhd (StanChart Malaysia) at Baa1.
Moody’s has also affirmed the baseline credit assessment (BCA) and adjusted BCA of Hong Leong Bank and Public Bank at a3, StanChart Malaysia at baa1, and RHB Bank at baa2.
“The rating outlooks of the four banks remain stable, reflecting Moody’s expectation that their strong loss-absorbing buffers will mitigate the asset-quality strain due to economic disruption caused by the pandemic.
“The affirmations also consider the banks’ strong capital and stable liquidity, which will help maintain their overall credit profiles despite the strain on asset quality,” the rating agency said in a statement today.
Moody’s said the four banks have built strong loan-loss reserves against loans under repayment assistance, which were not impaired “because of regulatory forbearance but are increasingly at risk amid a prolonged lockdown caused by the resurgence in coronavirus infections in Malaysia.”
“The loan-loss reserves will prevent a sharp increase in credit costs after the forbearance measure expires,” it added.
Loan-loss coverage ratios, including regulatory reserves, of Hong Leong Bank, Public Bank, and RHB Bank increased to 275.0 per cent, 337.7 per cent, and 120.6 per cent as at March 31, 2021, from 159.7 per cent, 261.7 per cent, and 107.6 per cent, respectively, a year ago.
The same ratio for StanChart Malaysia decreased to 91.2 per cent from 153.7 per cent over the same period because the bank impaired certain corporate borrowers that were hard hit by the pandemic, it said.
Moody’s said the Common Equity Tier 1 ratios of Hong Leong Bank, Public Bank, RHB Bank, and StanChart Malaysia were 13.0 per cent, 13.8 per cent, 15.6 per cent, and 13.4 per cent, respectively, well above the respective minimum regulatory requirements, as at March 31, 2021.
The rating agency said it could upgrade the ratings of Hong Leong Bank, Public Bank, and RHB Bank if Malaysia’s sovereign rating is upgraded.
StanChart Malaysia’s ratings could also be upgraded if the bank’s asset quality improves materially, or if Standard Chartered PLC’s notional BCA is upgraded.
“Conversely, Moody’s will downgrade the ratings of Hong Leong Bank, Public Bank, and RHB Bank if Malaysia’s sovereign rating is downgraded.
“A material decline in the government’s willingness to provide support could also lead to a downgrade of RHB Bank’s ratings,” it added. — Bernama
