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Rating Action:

Moody's affirms the ratings of Hong Leong Bank, Public Bank, RHB Bank and Standard Chartered Bank Malaysia; outlooks stable

07 Jul 2021

Singapore, July 07, 2021 -- Moody's Investors Service has affirmed the long-term foreign currency deposit ratings of Hong Leong Bank Berhad, Public Bank Berhad and RHB Bank Berhad at A3 and Standard Chartered Bank Malaysia Berhad at Baa1.

At the same time, Moody's has affirmed the Baseline Credit Assessment (BCA) and Adjusted BCA of Hong Leong Bank and Public Bank at a3, Standard Chartered Bank Malaysia at baa1 and RHB Bank at baa2.

The rating outlooks of the four banks remain stable, reflecting Moody's expectation that their strong loss-absorbing buffers will mitigate the asset-quality strain due to economic disruption caused by the pandemic.

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

RATINGS RATIONALE

The rating affirmations reflect Moody's expectation that the banks' loan-loss reserves and profitability will be sufficient to absorb the increase in asset risk. The affirmations also consider the banks' strong capital and stable liquidity, which will help maintain their overall credit profiles despite the strain on asset quality.

The four banks have built strong loan-loss reserves against loans under repayment assistance, which are not impaired because of regulatory forbearance but are increasingly at risk amid a prolonged lockdown caused by the resurgence in coronavirus infections in Malaysia. The loan-loss reserves will prevent a sharp increase in credit costs after the forbearance measure expires.

Loan-loss coverage ratios, including regulatory reserves, of Hong Leong Bank, Public Bank and RHB Bank increased to 275.0%, 337.7% and 120.6% as of 31 March 2021, from 159.7%, 261.7% and 107.6%, respectively, a year ago. The same ratio for Standard Chartered Bank Malaysia decreased to 91.2% from 153.7% over the same period because the bank impaired certain corporate borrowers that were hard hit by the pandemic.

The four banks are well-capitalized. As of 31 March 2021, the Common Equity Tier 1 ratios of Hong Leong Bank, Public Bank, RHB Bank and Standard Chartered Bank Malaysia were 13.0%, 13.8%, 15.6% and 13.4%, respectively, well above the respective minimum regulatory requirements.

Hong Leong Bank and Public Bank

The A3 ratings and a3 BCAs of Hong Leong Bank and Public Bank reflect the banks' superior asset quality and profitability, supported by their entrenched retail and small business franchises. Although Moody's expects the two banks to receive extraordinary support from the Government of Malaysia (A3 stable) in times of need, their ratings do not benefit from any further uplift because their a3 BCAs are already at the same level as the sovereign rating.

RHB Bank

RHB Bank's A3 ratings are two notches higher than the bank's baa2 BCA, based on Moody's expectation that the Government of Malaysia will provide extraordinary support in times of need. The baa2 BCA reflects the bank's strong capital and stable liquidity, as well as the risks to its asset quality and profitability caused by the pandemic.

Standard Chartered Bank Malaysia

Standard Chartered Bank Malaysia's Baa1 long-term foreign currency deposit rating reflects the bank's leading trade and transaction banking franchise. The rating also incorporates Moody's expectation that the bank will return to profitability - albeit below pre-pandemic levels - after reporting a loss in the fiscal year ending 31 December 2020. The rating does not receive an uplift from either affiliate or government support because the bank's baa1 BCA is already at the same level as the notional BCA of its ultimate parent, Standard Chartered PLC (A2 stable, baa1), and Moody's expects the likelihood of support from the Malaysian government to be moderate in times of need.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could upgrade the ratings of Hong Leong Bank, Public Bank and RHB Bank if Malaysia's sovereign rating is upgraded.

Moody's could upgrade RHB Bank's BCA if the bank's asset quality continues to improve.

Moody's could upgrade Standard Chartered Bank Malaysia's ratings if the bank's asset quality improves materially, or if Standard Chartered PLC's notional BCA is upgraded.

Conversely, Moody's will downgrade the ratings of Hong Leong Bank, Public Bank and RHB Bank if Malaysia's sovereign rating is downgraded. A material decline in the government's willingness to provide support could also lead to a downgrade of RHB Bank's ratings.

Moody's could downgrade the BCAs of Hong Leong Bank, Public Bank and RHB Bank if their asset quality deteriorates substantially and leads to a decline in their capitalization.

Moody's could downgrade Standard Chartered Bank Malaysia's ratings if the bank's asset quality weakens materially and Standard Chartered PLC's notional BCA is downgraded.

The principal methodology used in these ratings was Banks Methodology published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Hong Leong Bank Berhad, headquartered in Kuala Lumpur, reported total assets of MYR233.6 billion as of 31 March 2021.

Public Bank Berhad, headquartered in Kuala Lumpur, reported total assets of MYR455.1 billion as of 31 March 2021.

RHB Bank Berhad, headquartered in Kuala Lumpur, reported total assets of MYR280.5 billion as of 31 March 2021.

Standard Chartered Bank Malaysia Berhad, headquartered in Kuala Lumpur, reported total assets of MYR52.3 billion as of 31 March 2021.

..Issuer: Hong Leong Bank Berhad (Lead Analyst: Li Tengfu)

....Adjusted Baseline Credit Assessment, Affirmed a3

....Baseline Credit Assessment, Affirmed a3

....LT Counterparty Risk Assessment, Affirmed A2(cr)

....ST Counterparty Risk Assessment, Affirmed P-1(cr)

....LT Counterparty Risk Rating (Foreign and Local Currency), Affirmed A2

....ST Counterparty Risk Rating (Foreign and Local Currency), Affirmed P-1

....LT Bank Deposit Rating (Foreign and Local Currency), Affirmed A3, outlook remains stable

....ST Bank Deposit Rating (Foreign and Local Currency), Affirmed P-2

....Senior unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)A3

....Outlook, Remains Stable

..Issuer: Public Bank Berhad (Lead Analyst: Alka Anbarasu)

....Adjusted Baseline Credit Assessment, Affirmed a3

....Baseline Credit Assessment, Affirmed a3

....LT Counterparty Risk Assessment, Affirmed A2(cr)

....ST Counterparty Risk Assessment, Affirmed P-1(cr)

....LT Counterparty Risk Rating (Foreign and Local Currency), Affirmed A2

....ST Counterparty Risk Rating (Foreign and Local Currency), Affirmed P-1

....LT Bank Deposit Rating (Foreign and Local Currency), Affirmed A3, outlook remains stable

....ST Bank Deposit Rating (Foreign and Local Currency), Affirmed P-2

....Outlook, Remains Stable

..Issuer: RHB Bank Berhad (Lead Analyst: Li Tengfu)

....Adjusted Baseline Credit Assessment, Affirmed baa2

....Baseline Credit Assessment, Affirmed baa2

....LT Counterparty Risk Assessment, Affirmed A3(cr)

....ST Counterparty Risk Assessment, Affirmed P-2(cr)

....LT Counterparty Risk Rating (Foreign and Local Currency), Affirmed A3

....ST Counterparty Risk Rating (Foreign and Local Currency), Affirmed P-2

....LT Bank Deposit Rating (Foreign Currency), Affirmed A3, outlook remains stable

....ST Bank Deposit Rating (Foreign Currency), Affirmed P-2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)A3

....Other Short term (Foreign Currency), Affirmed (P)P-2

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed A3, outlook remains stable

....Outlook, Remains Stable

..Issuer: Standard Chartered Bank Malaysia Berhad (Lead Analyst: Li Tengfu)

....Adjusted Baseline Credit Assessment, Affirmed baa1

....Baseline Credit Assessment, Affirmed baa1

....LT Counterparty Risk Assessment, Affirmed A3(cr)

....ST Counterparty Risk Assessment, Affirmed P-2(cr)

....LT Counterparty Risk Rating (Foreign and Local Currency), Affirmed A3

....ST Counterparty Risk Rating (Foreign and Local Currency), Affirmed P-2

....LT Bank Deposit Rating (Foreign Currency), Affirmed Baa1, outlook remains stable

....ST Bank Deposit Rating (Foreign Currency), Affirmed P-2

....Outlook, Remains 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

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.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

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.

Tengfu Li
Analyst
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

No Related Data.
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