MARC Affirms Its AA+/MARC-1 Corporate Credit Ratings On CIMB Group Holdings Berhad
MARC Affirms Its AA+/MARC-1 Corporate Credit Ratings On CIMB Group Holdings Berhad
Ard, Islam, Mal
Ard, Islam, Mal
Transcription
- 11 /15/2016 Latest Announcement - (News ID : 2016111500015) Latest Announcement News ID : 2016111500015 Subject : CIMB GROUP HOLDINGS BERHAD CIMB GROUP HOLDINGS BERHAD Organisation Name: MALAYSIAN RATING CORPORATION News Type: RATING ANNOUNCEMENT Reference Site: None Embargo Date: 15/11/2016 Embargo Time: 02:15 PM Expiry Date: 29/11/2016 Priority: Medium Summary: MARC AFFIRMS ITS AA+/MARC1 CORPORATE CREDIT RATINGS ON CIMB GROUP HOLDINGS BERHAD; CONCURRENTLY AFFIRMS ITS AA RATING ON THE ISSUER'S RM10 BILLION SUBORDINATED DEBT PROGRAMME Attachments: No attachment available. Disclaimer: The user, including a user who is also a FAST Participant, expressly agrees that the use of this website which is accessible at https://fast.bnm.gov.my/ is at the user's sole risk. The information contained in this FAST website is compiled by MyClear Sdn. Bhd. (MyClear) and is provided on an "as is" basis without any representations or warranties of any kind, either expressed or implied. While MyClear makes every effort to ensure that information contained in the FAST website are accurate and disseminated in a timely and efficient manner, the user acknowledges that delays, errors, omissions or inaccuracies may occur. MyClear disclaims any liability pertaining to the consequences of any delays, errors, omissions or inaccuracies arising out of or relating to the FAST website or information, including but not limited to, any decision made or action taken by a user in reliance upon such information, or for damages suffered, whether direct, consequential, special, punitive, indirect or otherwise, notwithstanding having been advised of the possibility of such damages. In the event of any dispute, the official records of MyClear shall prevail. MyClear, Bank Negara Malaysia or any of its affiliates, officers, directors, agents or any other party involved in creating, producing or delivering the FAST website, shall not be liable for any direct, consequential, special, punitive, indirect, incidental or other damages arising out of or in any way connected with the use or inability to use the FAST website or information, whether based on contract, tort, liability or otherwise, even if advised on the possibility of any such damages. Content MARC has affirmed its longterm and shortterm corporate credit ratings of AA+/MARC1 on CIMB Group Holdings Berhad (CIMB Group) and accordingly affirmed its issue rating of AA on the group's RM10.0 billion Basel IIIcompliant Tier 2 Subordinated Debt Programme (subdebt programme). The outlook on the ratings is stable. The onenotch rating differential between CIMB Group's long term corporate credit rating and its subdebt programme reflects the subordination of the latter to the senior obligations of CIMB Group in line with MARC's methodology. CIMB Group is a nonoperating financial holding company whose key indirect banking subsidiaries are CIMB Bank Bhd (CIMB Bank), CIMB Investment Bank Bhd (CIMB Investment) and Indonesiabased PT Bank CIMB Niaga Tbk (CIMB Niaga). CIMB Group's longterm rating reflects its subordination to its banking subsidiaries. Of these, CIMB Bank remains the group's core operating entity, accounting for 82.0% of the group's consolidated assets as at endJune 2016 (end2015: 81.5%) and more than 90.0% of dividend income historically. As a bank holding company, CIMB Bank's two main subsidiaries are CIMB Islamic Bank Berhad (CIMB Islamic) and Thailandbased CIMB Thai Bank PLC (CIMB Thai). CIMB Bank has a rating of AAA/MARC1/stable from MARC. CIMB Group is Malaysia's secondlargest and ASEAN's fifthlargest banking group in terms of assets. For 1H2016, its Malaysian operations contributed 75.0% of its pretax profit, followed by Indonesia (13.0%) and Thailand (4.0%). Following a period of rapid expansion, the group has recently undertaken a rationalisation exercise under which it downsized its Malaysian, Indonesian and Australian operations to reduce operating costs. While CIMB Group has also taken borrowings to strengthen its investments in its banking subsidiaries in the past, the extension of Basel III capital requirements to financial holding companies in 4Q2015 has led the group to put in place Tier 2 subordinated debt and Additional Tier 1 (AT1) capital securities programmes with limits of RM10.0 billion each. The proceeds from issuances under the programmes are being invested in similar capital instruments of its banking subsidiaries. During 1H2016, the group subscribed to CIMB Bank's AT1 issuance of RM1.0 billion. CIMB Group's continued investments in the capital instruments of its subsidiary has meant that the double leverage ratio remains high at 140% as at end1H2016 (2015: 141%). This ratio could face further upward pressure as more subdebt issuances are undertaken to invest in its banking subsidiaries. MARC draws some comfort from the group's strong consolidated common equity Tier 1 (CET1) capital ratio of 10.7% as at endJune 2016, which remains higher than the regulatory requirement of 7.0% (including capital conservation buffer of 2.5%) that will take effect in January 2019. MARC expects CIMB Group's capital to continue be supported by the group's dividend reinvestment scheme (DRS); the reinvestment rate under the DRS has been above 70.0% since the scheme's initiation in 2013. For 1H2016, CIMB Group registered consolidated pretax profit of RM2.3 billion, an increase of 35.4% yoy owing to continued loan growth in Malaysia, Singapore and Thailand as well as lower overhead expenses following the completion of a mutual separation scheme (MSS) exercise and a restructuring of the investment banking business in 1H2015. On excluding the MSS and restructuring costs of RM518.4 million incurred in 1H2015, net profit would have declined by 3.1% yoy in 1H2016. The costtoincome ratio declined to 55.4% in 1H2016 from 56.7% in the previous corresponding period (excluding the MSS and restructuring costs). Despite lower operating expenses, MARC views that the weakening domestic and regional economic growth could have an impact on the group's asset quality and consequently its earnings over the near term. The group's impairment charges increased to RM1.17 billion in 1H2016 (1H2015: RM1.07 billion) mainly due to the weaker asset quality of its Thai operations. CIMB Group's subdebt obligations are expected to be met by cash flows from the capital instruments it has subscribed. In addition, MARC observes that dividends from CIMB Bank have been stable and sufficient to support the holding company's debt obligations. For 1H2016, CIMB Group's dividend income increased to RM1.05 billion (1H2015: RM753.0 million). Of its subsidiaries, CIMB Niaga has not distributed any dividends since 2011; the bank has continued to face a tough operating environment that has weighed on its asset quality and financial performance. Going forward, the phasing in of the Basel III capital framework and potential earnings pressure on its key banking subsidiaries could affect dividend flows to the parent. The stable outlook reflects MARC's expectation that the group's overall credit profile will be maintained against a more subdued domestic and regional macroeconomic outlook. The ratings remain driven by the key performance metrics of the group's key subsidiaries, and therefore any change in their credit profile would impact CIMB Group. Contacts: Joan Leong, +6032082 2270/ joan@marc.com.my; Sharidan Salleh, +6032082 2254/ sharidan@marc.com.my. November 15, 2016 https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016111500015&mode=DISPLAY&info=NEWS&screenId=PB010400 1/1
Create FREE account or Login to add your comment