MARC has affirmed Malayan Banking Berhad’s (Maybank) financial institution (FI) ratings at AAA/MARC-1 and concurrently the rating on the bank’s RM10.0 billion Senior Medium-Term Notes (MTN) programme at AAA. The FI and issue ratings are based on a national rating scale.

MARC has also assigned an intrinsic credit strength rating (ICSR) of A-_ND to the bank. The ICSR is based on an international rating scale and is premised on Maybank’s standalone credit profile without incorporating any external support. Among the key factors the ICSR takes into consideration are banking franchise, capital base, asset quality and profitability. The outlook on all ratings is stable.

The ratings are premised primarily on Maybank group’s well-established banking franchise domestically and in the region, its moderately healthy asset quality metrics despite some weakening in recent years, its sound capital base and resilient profitability. The stable ratings outlook reflects MARC’s expectations that Maybank group will sustain its healthy credit profile as it faces domestic and regional headwinds arising from resurgent economic challenges.

For 1Q2018, Maybank group’s overall loan growth was marginally higher at 5.8% y-o-y (1Q2017: 5.6%) mainly driven by growth in its key markets of Malaysia, Singapore and Indonesia, as well as lower loan contractions in Hong Kong. The moderate loan growth is in line with the group’s approach of not pursuing higher growth at the expense of a reasonable profit margin. Over the near term, overall loan growth is expected to remain muted, driven by lower loan demand from the domestic corporate sector. As at end-1Q2018, the group’s largest exposure is to Malaysia at 59.3% of total consolidated loans of RM493.4 billion, followed by Singapore at 25.0% and Indonesia at 7.2%.

For 1Q2018, the gross impaired loans (GIL) ratio increased marginally to 2.37% (end-2017: 2.34%), largely due to a one-off increase of RM550.8 million following the adoption of MFRS 9. On excluding the impact from MFRS 9, the GIL ratio would be 2.26%. MARC estimates the group’s GIL ratio could potentially increase by about 0.43% over the near term due to the group’s exposure to a troubled water and power company in Singapore. As at end-1Q2018, loan loss coverage increased to 87.8% from 71.5% as at end-2017 due to the MFRS 9 impact.

Maybank group’s capitalisation remains sound, with its consolidated common equity Tier 1 (CET1) capital ratio standing at 14.3% as at end-1Q2018, higher than the domestic banking average of 13.2%. Profitability remains robust with net profit increasing by 12.0% y-o-y to RM7.8 billion in 2017, supported by improved net interest margin of 2.25% and lower impairment charges of RM2.0 billion. For 1Q2018, Maybank group maintained its profitability growth, with net profit increasing 8.8% y-o-y to RM1.9 billion.

Funding and liquidity profile remains strong, underpinned by a substantial retail deposit base and good access to the capital market. As at end-March 2018, Maybank group’s loans-to-customer deposit and loans-to-fund ratios improved slightly to 91.1% and 82.0%. In terms of liquidity position, the group’s liquidity coverage ratio increased to 153.3% in 1Q2018, above BNM’s minimum requirement of 100% by early-2019.

Contacts:
Joan Leong, +603-2717 2934/ joan@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my.