Monday, Jan 16, 2006
MARC has affirmed Bumiputra-Commerce Bank Berhad’s (BCB or the bank) Financial Institution ratings at AA-/MARC-1 and its detachable coupons of RM667.0 million nominal value Irredeemable Convertible Unsecured Loan Stocks (ICULS) rating at A+. The ratings reflect the bank’s efforts at improving asset quality, its stable liquidity position and wide funding base.
Deemed the second largest commercial bank in the country by virtue of its asset size, BCB’s large branch network affords it the ability to tap into a wide depositors’ base; with customer deposits continuing to grow year-on-year. Constant efforts to improve its market position in the already competitive retail segment are expected to drive loans growth, moving forward.
In terms of asset quality, the reclassification of BCB’s non-performing loans (NPLs) from six to three months led to a deterioration of its net NPL position to 8.1%; as opposed to the industry’s average of 6.8%. The reclassification led to a higher loan loss provision during the year as the bank had to allocate for higher specific provisions in its profit and loss statement.
Liquidity position remains strong with BCB’s liquid asset ratio hovering at the 33.0% level in FY2003 and FY2004.
Earnings performance was pulled down by the sharp increase in loan loss provisions due to the stricter classification of NPLs. For the unaudited half year June 2005 results, earnings stood at RM222.8 million, on par with full year results for FY2004.
In June 2005, BCB’s holding company, Bumiputra-Commerce Holdings Berhad (BCHB) (formerly known as Commerce Asset-Holdings Berhad) and CIMB Bhd (the investment banking arm of BCHB) had announced a restructuring exercise to transform their banking businesses into a ‘universal banking’ group. The BCHB restructuring is expected to lead to an integration of the commercial and investment banking businesses under the universal banking status. Subsequently, BCHB also announced a proposed merger of BCB and its finance company, Bumiputera-Commerce Finance Berhad (BCF). The conditions precedent for the proposed BCB and BCF merger were completed on 29 December 2005 and following the fulfilment of the said conditions precedent, BCB and BCF have agreed that the completion date for the proposed merger shall be 1 January 2006. Moving forward, BCB will continue efforts on enhancement on asset quality and cost containment.
The assigned ratings do not reflect the restructuring of BCHB and CIMB Bhd to form a universal banking group. Notwithstanding, MARC takes the view that BCB’s financial profile may be affected by movement of resources within the entities as well as other factors such as management strategy, execution, corporate culture and not the least, potential gains in franchise. MARC will continue to monitor the developments and update the current ratings of BCB and its ICULS once the rating implications of the restructuring exercise and strategic re-organization become more apparent.
Deemed the second largest commercial bank in the country by virtue of its asset size, BCB’s large branch network affords it the ability to tap into a wide depositors’ base; with customer deposits continuing to grow year-on-year. Constant efforts to improve its market position in the already competitive retail segment are expected to drive loans growth, moving forward.
In terms of asset quality, the reclassification of BCB’s non-performing loans (NPLs) from six to three months led to a deterioration of its net NPL position to 8.1%; as opposed to the industry’s average of 6.8%. The reclassification led to a higher loan loss provision during the year as the bank had to allocate for higher specific provisions in its profit and loss statement.
Liquidity position remains strong with BCB’s liquid asset ratio hovering at the 33.0% level in FY2003 and FY2004.
Earnings performance was pulled down by the sharp increase in loan loss provisions due to the stricter classification of NPLs. For the unaudited half year June 2005 results, earnings stood at RM222.8 million, on par with full year results for FY2004.
In June 2005, BCB’s holding company, Bumiputra-Commerce Holdings Berhad (BCHB) (formerly known as Commerce Asset-Holdings Berhad) and CIMB Bhd (the investment banking arm of BCHB) had announced a restructuring exercise to transform their banking businesses into a ‘universal banking’ group. The BCHB restructuring is expected to lead to an integration of the commercial and investment banking businesses under the universal banking status. Subsequently, BCHB also announced a proposed merger of BCB and its finance company, Bumiputera-Commerce Finance Berhad (BCF). The conditions precedent for the proposed BCB and BCF merger were completed on 29 December 2005 and following the fulfilment of the said conditions precedent, BCB and BCF have agreed that the completion date for the proposed merger shall be 1 January 2006. Moving forward, BCB will continue efforts on enhancement on asset quality and cost containment.
The assigned ratings do not reflect the restructuring of BCHB and CIMB Bhd to form a universal banking group. Notwithstanding, MARC takes the view that BCB’s financial profile may be affected by movement of resources within the entities as well as other factors such as management strategy, execution, corporate culture and not the least, potential gains in franchise. MARC will continue to monitor the developments and update the current ratings of BCB and its ICULS once the rating implications of the restructuring exercise and strategic re-organization become more apparent.