KUALA LUMUR (April 2): Moody's Investors Service has upgraded AmBank (M) Bhd’s foreign-currency deposit and senior unsecured debt ratings to A3 from Baa1, with a stable outlook.

The bank's baseline credit assessment (BCA) has also been adjusted to baa2 from baa3.

Moody's said the outlook on the bank’s ratings is stable, reflecting its expectation that AmBank's credit fundamentals will remain robust over the next 12 to 18 months.

In a report yesterday, the foreign rating agency said the A3 ratings incorporate a two-notch uplift from the bank's baa2 BCA, reflecting its assumption of a very high probability of government support based on the bank's sizable market share and relative importance to the banking system.

"The upgrade of AmBank's BCA reflects its successful de-risking of the balance sheet since 2015, that has resulted in slower impaired loan formation. The de-risking has resulted in improved asset quality and stable capitalisation amid challenging operating conditions in Malaysia," said Moody's.

"The BCA also reflects the bank's moderate liquidity and funding, a result of its relatively smaller deposit franchise than that of the larger Malaysian banks that we rate, despite the bank's active efforts over the past several years to grow its customer deposit base," it added.

Moody's expects the bank's core profit to remain stable in 2019 and 2020, driven by its continued tight cost controls and steady revenue growth, offset by normalising net credit costs.

It also noted that AmBank’s deposit and senior unsecured debt ratings could be upgraded if Malaysia’s A3 sovereign rating is upgraded.

At the same time, the BCA could be upgraded if the bank improves its capital adequacy and funding while maintaining stable asset-quality metrics, said Moody's.