Singapore, May 12, 2015 -- Moody's Investors Service has affirmed Standard Chartered Bank Malaysia
Berhad's (SCBM) A3/P-2 long-term and short-term
foreign currency deposit ratings. The outlook on the A3 deposit
rating is positive, and is driven by the respective outlook on Malaysia's
A3 rating.
At the same time, the bank's baa2 baseline credit assessment
(BCA) was affirmed, while its adjusted BCA -- which
incorporates parental support -- was lowered to a3 from a2.
Moody's also assigned to SCBM Counterparty Risk (CR) Assessments of A2(cr)
and P-1(cr). The CR Assessment is an opinion of the counterparty
risk related to a bank's covered bonds, contractual performance
obligations (servicing), derivatives (e.g.,
swaps), letters of credit, guarantees and liquidity facilities.
RATINGS RATIONALE
AFFIRMATION OF A3/P-2 DEPOSIT RATINGS
The affirmation of SCBM's A3/P-2 deposit ratings reflects
the bank's stable financial performance in the first nine months
of 2014, and the very high probability of support from its parent,
Standard Chartered Bank (SCB, long-term deposits Aa2/P-1/negative,
BCA a2).
The baa2 BCA is underpinned by the bank's good capital adequacy
and highly liquid balance sheet. The BCA also takes into account
the bank's weaker asset quality compared to Malaysian peers.
SCBM's problem loans increased to 3.3% of gross loans as
of 30 September 2014, from 1.2% in 2012. The
weakening in asset quality was predominantly the result of a few large
corporate loans becoming impaired in 2013.
Moody's believes that the probability of support from SCB is very high,
resulting in a two-notch uplift to SCBM's A3 deposit rating
from its BCA of baa2. Moreover, Moody's considers that
support from the Malaysian government (A3 positive) could be forthcoming
in case of need. However, such public support does not result
in any rating uplift, because SCBM's A3 deposit rating is
already at the same level as Malaysia's sovereign rating.
LOWERING OF THE ADJUSTED BCA
The lowering of SCBM's adjusted BCA to a3 from a2 was driven by
the lowering of SCB's BCA to a2 from a1 on 12 May 2015. For
more information on this rating action on SCB, please see the respective
press-release at http://www.moodys.com/viewresearchdoc.aspx?docid=PR_324541
or visit SCB's issuer page on www.moodys.com.
ASSIGNMENT OF CR ASSESSMENT
The CR assessments of A2(cr)/P-1(cr) reflect Moody's opinion
of how counterparty obligations are likely to be treated if the bank fails,
and are distinct from debt and deposit ratings in that they (1) consider
only the probability of default, rather than the expected loss;
and (2) apply to counterparty obligations and contractual commitments
rather than debt or deposit instruments.
In most cases, the starting point for the CR assessment --
an assessment of the ability to avoid a default on operating obligations
-- is one notch above the bank's adjusted BCA, to
which Moody's then adds the same public support bucket as for deposit
and senior unsecured debt ratings.
As a result, the CR Assessment for SCBM is one notch higher than
its A3 deposit rating, reflecting Moody's view that Malaysian authorities
are likely to honor the operating obligations the CR assessment refers
to in order to preserve the bank's critical functions and reduce potential
for contagion.
WHAT COULD CHANGE THE RATING AND BCA
SCBM's A3 foreign currency deposit rating is likely to be upgraded if
the A3 rating of the Malaysian government is upgraded. The bank's
BCA could be increased if its asset quality improves and the bank maintains
strong profitability and good capitalization and liquidity profiles.
SCBM's baa2 BCA could be lowered in case of a material deterioration in
asset quality that leads to a substantial weakening of the bank's
loss absorption buffer. An erosion of the liquidity profile will
also be negative for the BCA.
The positive outlook on the SCBM's A3 foreign currency deposit rating
could be revised to stable from positive if: (1) the outlook on
the A3 Malaysian sovereign rating is revised to stable from positive,
(2) the bank's BCA is significantly lowered, or (3) the parent's
adjusted BCA of a2 is lowered.
Taking into account today's announcement, the ratings of SCBM are
as follow:
Foreign currency deposits rating affirmed at A3/P-2;
Counterparty Risk Assessment of A2(cr)/P-1(cr); assigned
Baseline credit assessment of baa2; affirmed
Adjusted baseline credit assessment lowered to a3 from a2
The principal methodology used in these ratings was Banks published in
March 2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Eugene Tarzimanov
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
SUBSCRIBERS: (852) 3551-3077
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077
Moody's affirms Standard Chartered Bank Malaysia Berhad ratings, assigns counterparty risk assessments
