Moody's cuts short-term ratings of 8 Malaysian banks

Moody's Investors Service has affirmed the long-term deposit and issuer ratings of the eight banks rated A3 in Malaysia, while at the same time downgrading to Prime-2 (P-2) from Prime-1 (P-1) their corresponding short-term ratings.

The eight banks are CIMB Bank Bhd, CIMB Investment Bank, Hong Leong Bank Bhd, HSBC Bank Malaysia Bhd, Malayan Banking Bhd, Public Bank Bhd, RHB Bank Bhd and Standard Chartered Bank Malaysia Bhd.

All of their other ratings have also been affirmed.

Below is the statement issued by Moody's on Thursday:

Today's affirmation of the deposit and issuer ratings reflects Moody's view that these banks continue to feature the credit characteristics of firms rated A3, whereas the downgrade of their short-term ratings in turn reflects Moody's observations of the transition risks of short-term ratings that A3-rated banks represent over time.

RATINGS RATIONALE

Key determinant for assigning a short-term rating is an issuer's long-term risk of default.

Moody's believes that, other things being broadly equal, lower long-term ratings imply not only increased default risk for long-term obligations but also increased default risk for short-term obligations.

This view is based on Moody's assessment of current credit conditions and experience of multi-notches rating transition across an array of issuers rated A3 or lower during the global financial crisis.

Issuers with long-term ratings between A3 and Baa2 almost always map to P-2 under Moody's standard mapping for long-term global ratings to short-term global ratings.

Deviations from this standard are intended to be exceptional; for instance when the combination A3 / P-1 is meant to signal an unusually high expectation that the issuer's long-term rating will migrate upwards.

In the case of the eight Malaysian banks, Moody's believes that conditions that would warrant any of these banks retaining a P-1 rating while its long-term rating remains at the A3 level are not present.

Taking into account today's announcement, the ratings of the eight affected banks are as follow:

CIMB Bank Berhad

Bank Financial Strength Rating (BFSR) of C-, which maps to baa2 on the long-term scale

Foreign currency deposits rated A3/P-2

Foreign currency issuer rated A3/P-2

Foreign currency senior unsecured debt rated A3

Foreign currency senior unsecured MTN rated (P)A3

CIMB Investment Bank

Local and foreign currency issuer rated A3/P-2

Hong Leong Bank Berhad

BFSR of C-, which maps to baa1 on the long-term scale
Local currency deposits rated A2/P-1

Foreign currency deposits rated A3/P-2

Foreign currency senior unsecured debt rated A3

Foreign currency senior unsecured MTN rated (P)A3

HSBC Bank Malaysia Berhad

BFSR of C-, which maps to baa1 on the long-term scale

Local currency deposits rated A1/P-1

Foreign currency deposits rated A3/P-2

Malayan Banking Berhad

BFSR of C, which maps to a3 on the long-term scale

Local currency deposits rated A1/P-1

Foreign currency deposits rated A3/P-2

Foreign currency junior subordinated debt rated Baa2 (hyb)

Public Bank Berhad

BFSR of C, which maps to a3 on the long-term scale

Local currency deposits rated A1/P-1

Foreign currency deposits rated A3/P-2

Foreign currency preference stock rated Baa2 (hyb)

RHB Bank Berhad

BFSR of D, which maps to ba2 on the long-term scale

Foreign currency deposits rated A3/P-2

Foreign currency senior unsecured debt rated A3

Foreign currency senior unsecured MTN rated (P)A3

Foreign currency other short term rated (P)P-2

Standard Chartered Bank Malaysia Berhad

BFSR of C-, which maps to baa1 on the long-term scale

Foreign currency deposits rated A3/P-2

CIMB Bank Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 251.7 billion as of 30 September 2012.

CIMB Investment Bank, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 4.4 billion as of 30 September 2012.

Hong Leong Bank Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 155.6 billion as of 30 September 2012.

HSBC Bank Malaysia Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 77.6 billion as of 30 September 2012.

Malayan Banking Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 476.9 billion as of 30 September 2012.

Public Bank Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 270.1 billion as of 30 September 2012.

RHB Bank Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 161.4 billion as of 30 September 2012.

Standard Chartered Bank Malaysia Berhad, headquartered in Kuala Lumpur, Malaysia, reported consolidated total assets of MYR 49.4 billion as of 30 September 2012.

The principal methodology used in these ratings was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Additionally, the guidance in the Rating Implementation Guidance document "Moody's Global Short-Term Ratings" published on 24 October 2012 informed these rating actions.
(The Star Online)