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Press Release
05 Jun | Tuesday
RAM Ratings reaffirms HSBC Amanah’s AAA rating
RAM Ratings has reaffirmed HSBC Amanah Malaysia Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings and the AAA/Stable rating of the Bank’s RM3 billion Multi-Currency Sukuk Programme (2012/2032). The ratings are premised on HSBC Amanah’s strategic role as the Islamic arm of HSBC Bank Malaysia Berhad (rated AAA/Stable/P1 by RAM) as well as being one of the two global hubs for HSBC Holding plc’s Amanah network. The Bank is operationally integrated with HSBC Malaysia and benefits from HSBC Group’s solid global franchise, international network and expertise. We believe that the Bank will continue to enjoy parental support when needed.  
 
Following a slight contraction the previous year, HSBC Amanah’s financing book expanded by a strong 14% in FY Dec 2017, mainly driven by financing extended to large corporates. The Bank’s asset quality remains pressured, with its reported gross impaired-financing (GIF) ratio edging up to 2.8% as at end-December 2017 (end-December 2016: 2.5%) due to weakness in its residential mortgages and personal financing portfolios. Adjusting for its stricter impairment classification policies compared to the industry, the Bank’s GIF ratio would stand at a better 1.8%. We also acknowledge the slight improvement in asset quality in 1Q FY Dec 2018; the Bank’s reported GIF ratio eased to 2.6% as at end-March 2018. Nevertheless, the Bank’s earnings continue to be weighed down by hefty impairment charges, keeping its annualised return on risk-weighted assets low at 1.4% in 1Q FY Dec 2018. 
 
HSBC Amanah benefits from its parent’s ready and consistent funding support. The Bank’s liquidity profile remains strong, as demonstrated by its high liquidity coverage ratio and net stable funding ratio which stand well above the required minimum. The Bank’s common equity tier-1 (CET-1) capital ratio stayed healthy at 13.0% as at end-March 2018. The adoption of Malaysian Financial Reporting Standards 9 had seen a writeback of provisions which translated into some improvement in the Bank’s CET-1 capital ratio. 
 
 
Analytical contact
Liang Huey Jean
(603) 7628 1124
jean@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 5 June 2018
 
 
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
Ó Copyright 2018 by RAM Rating Services Berhad
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