KUALA LUMPUR (Oct 17): S&P Global Ratings has maintained its A- and A-2 short-term issuer credit ratings on CIMB Bank Bhd (CIMB Bank) and CIMB Investment Bank Bhd (CIMB IB) respectively, with a stable outlook for their long-term ratings.

It also revised CIMB Bank’s stand-alone credit profile (SACP) to ‘a-’ from ‘bbb+’ amid the bank’s strengthened capital position. CIMB Bank is the main operating subsidiary of CIMB Group Holdings Bhd (CIMB Group), while CIMB IB is the group's investment banking subsidiary. 

In a statement today, the rating agency said CIMB Bank has established itself as a leading regional bank with a focus on countries in the Association of Southeast Asian Nations (ASEAN), and is more geographically diversified than domestic peers.

“CIMB Bank management has taken a disciplined approach to bolster its capital buffers in anticipation of slower economic growth, both domestically and in other ASEAN economies where it operates. The bank's slower, more careful loan growth and high profit retention also supported its capital enhancement efforts,” it said.

The rating agency also expects CIMB Bank to maintain the S&P Global Ratings risk-adjusted capital (RAC) ratio at 8%-8.5% over the next 18-24 months, on the back of 5% to 7% loan growth and a prudent dividend payout.

However, it expects net interest margins (NIM) to decline 5-10 basis points amid competition, as well as slightly increased credit costs due to a challenging micro environment. “This will be partially offset by tight cost control and efficiency improvements,” S&P said. 

While S&P thinks CIMB Bank’s reported nonperforming loans and credit costs could deteriorate further in 2017 after increasing slightly last year, the agency highlighted the bank’s move to de-risk — by limiting exposure in the depressed oil and gas sector, exiting the unsecured credit card business in Thailand, and trimming its branches by almost half to shift from retail to mid-to-higher-end customer segment.

“We expect the bank to maintain its business position, strong funding capacity, and improved capitalisation over the next 18-24 months.

“The stable outlook on CIMB Bank reflects our view that the bank's SACP will remain resilient over the next two years, despite asset quality pressure in its main markets,” S&P said, adding that any downward or upward rating will be unlikely in this period.

“The ratings and outlook on CIMB Bank will move in tandem with the sovereign credit rating on Malaysia, in line with our assessment of the bank as a highly systemic institution in the country. We do not rate CIMB Bank higher than Malaysia, because the bank primarily operates in that country and we do not expect it to be able to withstand the stress associated with a sovereign default,” S&P added.

As for CIMB IB, the rating was affirmed because S&P continues to view CIMB IB as a core entity of the CIMB Group, while its stable outlook reflects the stable outlook on CIMB Bank. "We expect the rating on CIMB IB to move in tandem with the rating on CIMB Bank," the statement added.