Research: Rating Action: Moody’s Affirms Ambank Ratings, Changes Outlook from Negative to Stable

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Singapore, June 27, 2022 — Moody’s Investors Service has affirmed AmBank’s (M) Berhad (AmBank) long-term foreign currency deposit rating of A3 and baa2 Baseline Credit Assessment (BCA).

At the same time, Moody’s changed the rating outlook from negative to stable.

The change in outlook to stable reflects the bank’s improved capitalization, as well as structural changes to its loan portfolio that have reduced downside risks to its credit profile.

The full list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The rating affirmation reflects greater certainty that AmBank’s Common Equity Tier 1 (CET1) ratio will improve over the next 12 to 18 months to a similar level as before the rating. decrease in capitalization due to 1MDB settlement.

AmBank’s CET1 ratio will increase due to earnings retention, a capital injection from parent company AMMB Holdings Berhad following the latter’s partial divestiture of an insurance subsidiary and the migration of ‘AmBank towards the FIRB (Foundation Internal Ratings-Based) approach.

AmBank’s CET1 ratio fell from 10.5% as of March 31, 2021 to 11.6% as of December 31, 2021 as AMMB Holdings Berhad raised capital through a private placement and eliminated its interim dividends. Nevertheless, the CET1 ratio is still below 12.7% at the end of December 2020.

The rating action also takes into account AmBank’s lower-risk loan portfolio, driven by management’s efforts to de-risk its corporate loans and focus on affluent segments. The bank’s asset quality will likely remain stable as repayment assistance programs for borrowers during the pandemic expire.

Moody’s is building a very high probability of government support into AmBank’s A3 long-term foreign currency deposit rating, which results in a two-notch increase in the bank’s baa2 BCA. The support assumption takes into account the systemic importance of AMMB Holdings Berhad to the Malaysian financial system, given its considerable 5.6% share in the deposit market as of March 31, 2022.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

AmBank’s A3 deposit rating is already on par with Malaysia’s A3 sovereign rating. Given Malaysia’s stable sovereign rating outlook, Moody’s is unlikely to upgrade the bank’s deposit rating. However, Moody’s could raise AmBank’s BCA if the bank’s asset quality, capitalization and profitability improve significantly.

Moody’s could downgrade AmBank’s ratings if the bank’s asset quality and profitability deteriorate. A fall in its capitalization will also be negative for ratings.

The main methodology used in these ratings is the Methodology for Banks published in July 2021 and available on https://ratings.moodys.com/api/rmc-documents/71997. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

AmBank (M) Berhad is headquartered in Kuala Lumpur and reported assets of MYR 122.0 billion ($29.2 billion) as of December 31, 2021.

LIST OF AFFECTED RATINGS

Outlook Actions:

..Issuer: AmBank (M) Berhad

….Outlook, changed to stable from negative

Statement:

..Issuer: AmBank (M) Berhad

…. Adjusted Baseline Credit Rating, Confirmed Baa2

…. Basic credit rating, Baa2 confirmed

…. Assessment of long-term counterparty risk, confirmed A3(cr)

…. Assessment of short-term counterparty risk, confirmed P-2(cr)

…. Long-term counterparty risk rating (foreign and local currency), confirmed A3

…. Short-term counterparty risk rating (foreign and local currency), confirmed P-2

…. Long-term deposit rating (foreign currencies), affirmed A3, outlook changed from negative to stable

…. Short-term deposit rating (foreign currencies), confirmed P-2

…. Senior Unsecured Medium Term Note Program (Foreign Currencies), Confirmed (P)A3

…. Subordinated medium-term note program (foreign currencies), confirmed (P)Ba1

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These ratings are unsolicited.

has. With the participation of a rated entity or a related third party: YES

b.With access to internal documents: YES

c.With management access: YES

For more information, please see Moody’s policy on the designation and assignment of unsolicited credit ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Teng Fu Li
Assistant Vice President – Analyst
Financial Institutions Group
Moody’s Investors Service Singapore Pte. ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Graeme known
MD – Bank
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

Release Office:
Moody’s Investors Service Singapore Pte. ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Customer Service: 852 3551 3077

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