Thursday 28 Mar 2024
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KUALA LUMPUR (Apr 21): RAM Rating Services Bhd views RHB Capital Bhd’s proposed restructuring as “proactive” as the latter prepares for impending changes in Bank Negara Malaysia’s regulations.

In a note today, RAM co-Head of financial institution ratings Sophia Lee said under Bank Negara's proposed regulations, financial holding companies (FHCs) would need to have minimum capital-adequacy requirements, similar to banks.

Bank Negara's proposed framework aimed to ensure FHCs were adequately capitalised to support their group-wide risks and address debt levels.

“While there is no regulatory arbitrage on capital recognition under FHCs or banks under the proposed regulation, capital securities issued by FHCs are, nevertheless, typically rated lower than those issued by banks. This is due to structural subordination from a rating perspective, which may increase the cost of capital,” said Lee.

RHB Capital’s (fundamental: 1.5; valuation: 2.1) restructuring would lead to RHB Bank Bhd rising to the apex of the banking group instead of RHB Capital.

The new structure will be more capital efficient and eliminate double leverage, Lee said.

“Additionally the RM2.5 billion of fresh capital that will be infused into the new RHB banking group is expected to raise its common-equity tier-1 ratio to above 11%, putting it at par with those of its peers, which range from 11% to 12%.

"The operations of the entire group are expected to remain unchanged after the exercise,” Lee said.

At 12.30pm, RHB Capital shares settled flat at RM7.90 for a market capitalisation of RM20.3 billion.

A total of 152,200 shares changed hands.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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