Singapore, August 07, 2020 -- Moody's Investors Service has today affirmed the A3 long-term
foreign currency deposit and A3 long-term foreign currency senior
unsecured debt ratings of Malayan Banking Berhad (Maybank).
Moody's has also affirmed Maybank's Baseline Credit Assessment
(BCA) and Adjusted BCA of a3, and the bank's long-term
foreign currency subordinated debt rating of Baa2 (hyb).
The rating outlook is stable.
For the detailed list of affected rating please refer to the end of this
press release.
RATINGS RATIONALE
The affirmation of Maybank's A3 ratings and a3 BCA reflects Moody's
view that the bank's financial performance will remain resilient,
underpinned by its robust track record over the past decade, strong
capital buffers, favorable funding and ample liquidity. The
rating action also takes into account Moody's expectation of a moderate
strain on bank's asset quality and profitability due to the economic
disruption caused by the coronavirus outbreak.
Maybank's capital is strong, supported by the bank's dividend reinvestment
plan and modest credit growth. The bank's tangible common equity
as a percentage of risk-weighted assets of 19.1%
as of 31 March 2020 exceeded that of its peers in the region and provides
ample buffer against risks.
Funding and liquidity are strengths of Maybank, underpinned by its
position as Malaysia's largest bank by assets. The bank has
a strong deposit base and good market access, while its liquidity
buffer is in line with the regional peers.
In the past few years, the asset quality of Maybank's overseas
loans -- which are mainly in Singapore and Indonesia -- has
deteriorated due to the bank's relatively highly concentrated loan
exposures to sectors such as oil & gas, shipping and structured
trade credit amongst others. The gross impaired loan ratios for
the bank's operations in Singapore and Indonesia registered 4.0%
and 4.9%, respectively, as of 31 March 2020,
compared to 2.0% for Malaysia.
Despite the weakening in asset quality, Maybank has de-risked
its international loan book and reduced its concentration to large borrowers.
As such, Moody's does not expect a further material deterioration
in the quality of the bank's international corporate loans.
In line with the trend for other peers in the region, Moody's
expects the quality of Maybank's retail and small and mediums-sized
enterprise (SME) loans to deteriorate due to the economic disruptions
caused by the coronavirus outbreak in the various countries of its operations.
Based on data as of May 2020, about 60% of the bank's
loans are under repayment moratoriums until October 2020. Moody's
expects impaired loans will increase once the loan deferment period ends.
Credit costs will also increase because of the strain on asset quality
and will hurt profitability.
However, Maybank's strong loss absorbing buffers put the bank
in a comfortable position to weather the economic shock.
Maybank's A3 ratings also take into account Moody's expectation
of a very high level of support from the Government of Malaysia (A3 stable)
based on the bank's dominant and leading market share of 17% of
system deposits as of the end of March 2020, as well as the bank's
importance to the country's banking system. However, this
support assumption does not result in any rating uplift because Maybank's
a3 BCA is already at the same level as Malaysia's sovereign rating of
A3.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD CHANGE THE RATING UP
An upgrade of Malaysia's A3 sovereign rating would likely lead to
an upgrade of Maybank's A3 deposit rating, on account of the
government support uplift incorporated into its rating.
Maybank's a3 BCA is already at the same level as Malaysia's
sovereign rating, and its BCA will not be upgraded without a sovereign
upgrade given the credit linkages between the bank and the government.
WHAT COULD CHANGE THE RATING DOWN
The outlook on Maybank's ratings could be revised to negative if (1) the
sovereign rating outlook is revised to negative; or (2) there is
a significant weakening in the bank's standalone credit profile,
resulting in a multi-notch downgrade of its BCA.
Moody's could downgrade the bank's BCA if there is a material
decline in capital because of a strain on asset quality and profitability.
Moody's could also downgrade Maybank's BCA if the continues to experience
large defaults in its international operations, leading to a weakening
of asset quality and profitability.
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Malayan Banking Berhad, headquartered in Kuala Lumpur, reported
total assets of MYR845 billion ($195 billion) at 31 March 2020.
LIST OF AFFECTED RATINGS
..Issuer: Malayan Banking Berhad
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Baseline Credit Assessment, Affirmed
a3
.... Long-term Counterparty Risk Assessment,
Affirmed A2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed A2
.... Short-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed P-1
.... Long-term Bank Deposit Rating
(Foreign and Local Currency), Affirmed A3; Outlook maintained
at stable
.... Short-term Bank Deposit Rating
(Foreign and Local Currency), Affirmed P-2
....Long-term Senior Unsecured Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)A3
....Long-term Subordinate Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa2
....Long-term Pref. Stock Non-cumulative
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa3
....Long-term Subordinate Debt (Foreign
Currency), Affirmed Baa2 (hyb)
....Short-term Commercial Paper (Foreign
Currency), Affirmed P-2
....Long-term Senior Unsecured Debt
(Foreign Currency), Affirmed A3; Outlook maintained at stable
....Outlook, Maintained at Stable
..Issuer: Malayan Banking Berhad, Hong Kong
Branch
.... Long-term Counterparty Risk Assessment,
Affirmed A2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed A2
.... Short-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed P-1
....Long-term Senior Unsecured Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)A3
....Long-term Subordinate Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa2
....Long-term Pref. Stock Non-cumulative
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa3
....Short-term Commercial Paper (Foreign
Currency), Affirmed P-2
....Outlook, Maintained at Stable
..Issuer: Malayan Banking Berhad, Singapore
Branch
.... Long-term Counterparty Risk Assessment,
Affirmed A2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed A2
.... Short-term Counterparty Risk Rating
(Foreign and Local Currency), Affirmed P-1
....Long-term Senior Unsecured Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)A3
....Long-term Subordinate Multicurrency
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa2
....Long-term Pref. Stock Non-cumulative
Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa3
....Short-term Commercial Paper (Foreign
Currency), Affirmed P-2
....Outlook, Maintained at Stable
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Alka Anbarasu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
