RAM rates HSBC Amanah's proposed Multi-Currency Sukuk Programme [CPI Financial]Al Bawaba Ltd.
RAM Ratings has assigned an AAA long-term rating to the senior notes under HSBC Amanah Malaysia's proposed Multi-Currency Sukuk Programme of up to MYR 3 billion.
Concurrently, RAM has reaffirmed the bank's respective long- and short-term financial institution ratings, at AAA and P1. Both long-term ratings have a stable outlook. HSBC Amanah is the Islamic banking arm of HSBC Bank Malaysia (HSBC Malaysia) and has an established domestic franchise under the Amanah brand.
The financial institution ratings reflect HSBC Amanah's strategic importance as HSBC Malaysia's Islamic banking arm - a role accentuated by Malaysia's increasing prominence as a major Islamic finance hub for the Bank's ultimate parent, global financial-services group HSBC Holdings. The ratings also consider the bank's strategies that are closely aligned with those of HSBC Malaysia, with highly integrated operations between them as the former leverages on its parent's branch network, risk-management framework and back-room operations.
While HSBC Amanah's gross impaired-financing (GIF) ratio of 1.7 per cent as at end-March 2012 is deemed low relative to the banking industry's average, its GIF ratio has been trending upwards despite an enlarged financing base. The bank recorded a rapid financing expansion of 46 per cent in fiscal 2010, followed by another 62.8 per cent in fiscal 2011, mainly driven by residential mortgages and working-capital financing. The bank's GIF ratio is likely to inch up further along with the seasoning of its financing portfolio. As at end-March 2012, its credit-cost ratio stood at a high 1.3 per cent (annualised), chiefly owing to its sizeable exposure to unsecured financing (which comprised about 26 per cent of its financing portfolio).
HSBC Amanah's tier-1 and overall risk-weighted capital-adequacy ratios of a respective 10 per cent and 11.2 per cent as at end-March 2012 are deemed satisfactory. Notably, the Bank derives funding support from its parent via inter-bank placements, which acted as a moderating factor against its elevated financing-to-deposits ratio of 107.2 per cent as at the same date. All said, we expect financial support to be readily extended by its parent, if required.