KUALA LUMPUR: MARC Ratings has affirmed its long-term and short-term corporate credit ratings of AA+/MARC-1 on CIMB Group Holdings Bhd (CIMB Group) and its issue rating of AA on the group’s RM10 billion Basel III-compliant Tier 2 Subordinated Debt Programme.
The outlook on the ratings is stable.
For the first half (1H) of 2018, the group’s key markets registered higher loan growth after a period of subdued performance, particularly in the Singapore and Thailand markets over the last two years.
Overall loan growth increased by seven per cent year-on-year (YoY) on excluding the foreign exchange effect.
The domestic loan portfolio remains the key growth driver for the group with a loan growth of 7.9 per cent YoY in 1H2018.
CIMB Group’s overall asset quality has shown some improvement partly due to enhanced risk management and portfolio rebalancing with a focus on risk-adjusted returns. The gross impaired loans (GIL) ratio declined to 3.17 per cent as at end-June 2018 (as compared to 3.39 percent in 2017) with all key markets registering a lower GIL ratio except Thailand.
As at end-June 2018, the group’s loan loss reserves ratio increased to 90.7 per cent mainly due to higher provisions under MFRS 9.
The ratings agency also affirmed financial institution (FI) ratings on CIMB Bank Bhd (CIMB Bank) at AAA/MARC-1 with a stable outlook.
Concurrently, MARC has also affirmed its corporate debt ratings on CIMB Bank’s existing subordinated debt and hybrid securities, which have been notched down from the bank’s FI ratings based on their relative loss severity risk profiles.
The affirmed ratings incorporate CIMB Bank’s well-established banking franchise and strong domestic market position in loans and deposits.
The ratings also acknowledge CIMB Bank’s high systemic importance in the domestic banking industry.
It is the third-largest bank in Malaysia by asset size, accounting for 12.2 per cent and 16.5 per cent of total loans and deposits of the domestic banking industry as at end-June 2018.
The bank’s consolidated gross loans stood at RM277.3 billion, with domestic loans continuing to make up the bulk of the total (71.5 per cent), followed by Thailand (10.8 per cent) and Singapore (10.1 per cent).
MARC has also affirmed its FI ratings of AAA/MARC-1 on CIMB Islamic Bank Bhd (CIMB Islamic), which are equalised to that of its parent CIMB Bank given the bank’s strategic importance as the latter’s Islamic banking arm, their shared branding and close operational integration.
CIMB Islamic has maintained its position as the second-largest Islamic bank in Malaysia, with total assets of RM91.9 billion that accounted for 13.5 per cent of Malaysia’s Islamic banking system assets as at end-June 2018.
Financing growth was strong at 30.9 per cent YoY in 1H2018 compared to the Islamic banking industry growth of 12 per cent over the same period.
MARC is cognisant that the strong financing growth was due to its parent CIMB Bank’s “Islamic First” strategy that prioritises and delivers Islamic financing services. In contrast, CIMB Bank’s domestic loan portfolio grew by a modest 7.6 per cent year-on-year (YoY) in 1H2018.
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