MARC has placed the long-term financial institution ratings of both CIMB Bank Berhad (CIMB Bank) and CIMB Islamic Bank Berhad (CIMB Islamic) on MARCWatch Positive, reflecting the relatively robust performance on the part of both CIMB Bank and its subsidiary, CIMB Islamic, through a weaker economic environment and expectations of continued improvements in their financial performance over the next 12 months as the domestic economy recovers. 

CIMB Bank’s current long-term and short-term financial institution ratings of AA+/MARC-1 reflect their resilient earning streams, improved asset quality, adequate capitalisation and strong business franchise in Malaysia. Anandakumar Jegarasasingam, MARC’s Head of Financial Institutions Ratings adds that at the CIMB Bank level, its balance sheet remains predominantly Malaysia-centric, where the business and risk profiles have been well managed. He further adds that CIMB Bank remains a highly systemically important financial institution as the third largest commercial bank in Malaysia (by assets), and its leading and defensible competitive position and improved risk management abilities should enable it to sustain a consistently strong financial performance.  

Meanwhile, MARC notes that CIMB Bank has been able to improve its asset quality, with its gross non-performing loans (NPL) ratio expected to decline to approximately 2.8% at end-2009 (2008: 5.8%), below the commercial banking sector average of 3.6% at end-2009. While the management’s efforts to enhance the bank’s credit operations have helped to protect it against credit losses in a tougher operating environment, the improvement in the bank’s gross NPL ratio was also enabled by the disposal of the bank’s legacy non-performing loans of RM928 million (net book value) to Southeast Asia Special Asset Management Berhad (SEASAM), a subsidiary under CIMB Group Holdings Berhad, in December 2009.

CIMB Islamic’s long-term and short-term financial institution ratings of AA+/MARC-1 are equalised with that of its immediate parent, CIMB Bank, and reflects the extremely high probability of support from CIMB Bank should it become necessary. CIMB Islamic benefits from cost efficiencies derived from the high level of operational integration between CIMB Islamic and the other CIMB Group entities in addition to the shared branding. This is reflected by CIMB Islamic’s significant growth in assets, which grew at a compounded annual growth rate of 274% between FY2005 and 3QFY2009.

All in all, MARC remains positive on CIMB Bank’s and CIMB Islamic’s strengthened financial position which is supported by the improving operating environment in Malaysia. MARC will conduct a thorough review of the banks’ audited financials for FY2009 as and when they are available. Should the reported financials be within the agency’s expectations, the long-term ratings of both CIMB Bank and CIMB Islamic are likely to be upgraded.

The full list of the corporate debt ratings placed under MARCWatch Positive (MWP) and their current ratings are as follows:

CIMB Bank Berhad:

CIMB Islamic Bank Berhad:

• RM2 billion Junior Sukuk Programme: AAIS/MWP

Contacts:
Anandakumar Jegarasasingam +603-2090 2250/ kumar@marc.com.my;
Lim Kok Seng +603-2090 2272/ kokseng@marc.com.my;
Taufiq Kamal +603-2090 2251/ taufiq@marc.com.my.