MARC has assigned ratings of AA-/MARC-1 & AA-ID/MARC-1ID to Bumiputra-Commerce Holdings Berhad’s (BCHB’s) (formerly Commerce Asset-Holding Berhad) proposed Commercial Papers/ Medium-Term Notes programmes, for its conventional and Islamic issuances respectively, for a total combined nominal value up to RM6.0 billion. The notes are rated the same as BCHB’s existing 8.35% RM250.0 Million Redeemable Unsecured Bonds and a notch lower than its commercial bank component, CIMB Bank Berhad’s (CIMB Bank) financial institution rating of AA. The ratings on BCHB reflect the group’s broad scope and scale of businesses as well as the potential for further synergies through the integration of its core banking units. The group has achieved greater scale and diversity through a series of mergers over a relatively short period. The ratings also reflect the strong domestic franchises in retail and commercial banking, investment banking and wealth management of its main operating entities, which impart a high degree of stability to the group’s financial performance. The group’s asset quality is likely to remain sound as it maintains disciplined lending, good monitoring and prudent provisioning practices. Although asset quality measures at CIMB bank remain high relative to higher rated peers, MARC believes that the bank is essentially covered against credit risks of its legacy non-performing loans. Additionally, MARC expects market risk will continue to be closely monitored and prudently limited. Risk-adjusted capitalization of the group is healthy at 13.6% as at end FY2006, and liquidity is good, with declining dependence on wholesale funding. The ratings outlook is currently stable: upward pressure would require evidence of sustained positive trends in group profitability. The ratings will also be affected by developments in the macro-economy.

The higher financial leverage at BCHB needed to support the acquisition of SBB had previously tempered MARC’s view of the financial holding company’s ratings. Nonetheless, BCHB has managed to deleverage its balance sheet ahead of schedule. It is also MARC’s view that BCHB should be able to continue to exhibit financial metrics within the levels required to support its current ratings in the near to intermediate term. The recent sale of its insurance arms for an aggregate RM990 million and the sale of new BCHB shares to Bank of Tokyo-Mitsubishi UFJ (“BTMU”) totaling RM1.33 billion has presented BCHB with an opportunity to pare down its debt. Double leverage, at BCHB, has fallen significantly from 191% as at end Q3 2006 to 145% as at end Q1 2007. However, BCHB has committed itself to reduce its double leverage to a target level of 120%.

BCHB group reported a net profit of RM615.3 million in 1Q07. Compared to 4Q06, net profit rose by 38% while loan loss provisions and overheads fell by 31% and 18% respectively. About 95% of the group’s pre-tax profit was derived from the universal bank, and of 76% of the universal’s bank’s pre-tax profit was contributed by CIMB Bank. At the holding company level, a loss of RM59 million was reported mainly due to interest expenses.