RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of HSBC Amanah Malaysia (the bank), as well as the AAA/Stable rating of the Bank’s RM3 billion Multi-Currency Sukuk Programme (2012/2032).
The ratings reflect the bank’s strategic importance as the Islamic banking arm of HSBC Bank Malaysia (rated AAA/Stable/P1 by RAM), and the rating firm's expectation of ready financial support if needed. HSBC Amanah has an established domestic franchise under the Amanah brand, and remains the largest locally incorporated foreign Islamic bank in Malaysia. The bank is also one of the two global hubs for HSBC Holdings’ Amanah network.
HSBC Amanah’s gross impaired-financing (GIF) ratio had climbed up to 1.9% as at end-December 2015 (end-December 2014: 1.5%), primarily due to the deterioration of its residential property facilities and financing for personal use. Although this may be partially due to the bank’s more conservative financing-classification policies, some deterioration in borrowers’ credit quality can also be observed. Nonetheless, the bank’s exposure to mid-to-higher-income consumers partly alleviates concerns of widespread increase in household delinquencies attributable to the rising cost of living.
As a consequence of the reclassification of its RM1.3 billion wakalah structured products to other liabilities, HSBC Amanah’s financing-to-deposits ratio had surged to 129% as at end-December 2015 (end-December 2014: 99%). However, we derive comfort from the ready funding support it enjoys from its parent and the bank’s strong liquidity profile as evinced by its high liquidity coverage ratio as at the same date. Meanwhile, the bank’s capitalisation remained strong, with a common-equity tier-1 capital ratio of 11.9% and a total capital ratio of 18.1% (end-December 2014: 11.8% and 15.1%). The boost in capitalisation is attributable to a RM250 million injection of tier-2 capital from its parent.