[RAM] RAM Ratings affirms AAA ratings of HSBC Malaysia and HSBC Amanah

RAM Ratings has affirmed the AAA/Stable/P1 financial institution ratings of HSBC Bank Malaysia Berhad (HSBC Malaysia or the Bank) and HSBC Amanah Malaysia Berhad (HSBC Amanah). 

The affirmation of the ratings reflects the Bank’s well-established domestic franchise, robust capital buffers, superior funding capabilities and sound profitability. Its asset quality indicators have improved and should stay healthy given the Bank’s prudent underwriting standards. The ratings also consider our expectation of “high” likelihood of extraordinary parental support from the Bank’s ultimate parent, HSBC Holdings plc, if required. Operating in one of the key markets in the Asia Pacific region, the Bank plays an integral role in supporting the Group’s strategic pivot towards Asia and the wealth business.  

Excluding differences with industry norms, HSBC Malaysia’s adjusted gross impaired loan (GIL) ratio eased to below 2.0% as at end-March 2024 (end-December 2022: below 3.0%) on the back of the write-off of impaired loans and slow accretion of new impairments. The Bank registered a benign credit cost ratio of 5 bps in FY Dec 2023 and a net writeback of 14 bps (annualised) in 1Q FY Dec 2024 owing to a healthier loan portfolio and the release of management overlays. The ratio, however, is envisaged to normalise to pre-pandemic levels in the coming quarters.

Pre-tax profit grew to RM1.9 bil in FY Dec 2023 (FY Dec 2022: RM1.5 bil), largely supported by a higher net interest margin (NIM; 2.8% vs 2.2% in FY Dec 2022). Bucking the industry trend, the wider NIM was driven by the full impact of interest rate hikes in prior years, coupled with sizeable low-cost current and savings account deposits (59% of customer deposits). The deployment of excess cash for financial investments had also bolstered the NIM during the period. The first quarter of fiscal 2024 saw HSBC Malaysia’s pre-tax profit improve further, underpinned by stronger fee income and a net writeback of loan impairment charges. 

HSBC Amanah’s ratings are equated to those of HSBC Malaysia, considering its strategic importance to the latter – operations are highly integrated with support expected to be extended if required. HSBC Amanah’s issue rating has also been affirmed (Table 1).

Table 1: Ratings of HSBC Malaysia and HSBC Amanah


 

Analytical contacts
Sean Lim, CFA 
(603) 3385 2550 
sean@ram.com.my

Julian Chan 
(603) 3385 2486
julian@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my