The corporate debt rating of Bumiputra-Commerce Holdings Berhad (BCHB), formerly known as Commerce Asset-Holding Berhad, has been affirmed at A+ following the combination of CIMB and Bumiputra-Commerce Bank (BCB). BCHB is the ultimate parent of the combined entity.

Concurrently, MARC has upgraded the Financial Institution Rating of BCB from AA-/MARC-1 to AA/MARC-1. MARC has also upgraded the rating on the detachable coupons of RM667 million nominal value irredeemable convertible unsecured loan stocks (ICULS) from A+ to AA-. The ratings outlook is stable.

The rating actions follow the announcement that the necessary acquisitions to effect the merger of the operations of BCHB’s two main bank operating entities, BCB and CIMB Berhad (CIMBB), had taken place in January 2006. The group’s aim is to integrate BCB and CIMB along the lines of a common brand and ‘one-bank’ structure, while increasing cooperation between the distinct businesses, sharing common functions and building on the group’s strengths, to achieve higher revenue growth and cost savings.

The upgraded ratings of BCB reflect MARC’s view that both the operational performance and the competitive position of BCB have been strengthened by the merger. In addition, BCB’s rating also takes into consideration the scale of the combined entity post- Southern Bank Berhad (SBB)’s acquisition. MARC believes that the universal bank now falls within the "too important to fail" category from a systemic perspective.

MARC views CIMB’s investment banking operations as a cornerstone of the universal bank’s franchise, and its excellent financial fundamentals as a core strength. However, revenue generation may become more of a challenge for the bank in its wholesale operations, going forward, in an increasingly competitive operating environment. Viewed in this context, MARC believes that the recent acquisitions of the stockbroking businesses of GK Goh Holdings and SBB, present a step in the right direction. Also, MARC views positively BCHB’s move to create a more defensible retail and wealth management franchises with the acquisition of SBB. MARC expects the Group will fully leverage SBB’s successful business model for retail banking, its resources and franchises in its pursuit to build a sufficiently strong retail franchise. The universal bank appears well positioned now to develop a balanced business portfolio founded on the three main pillars of investment banking, retail and commercial banking and wealth management.

The integration of SBB is expected to pose some operational challenges as well as efforts to foster greater cooperation among their respective businesses and managers in order to realize anticipated synergies and cross-selling potential.

Meanwhile, factors taken into consideration in affirming the rating of BCHB group include the probability of successful execution of its operating plans, the enhanced market position and