[RAM] RAM Ratings affirms AAA/Stable/P1 ratings of Standard Chartered Malaysia and Saadiq

RAM Ratings has affirmed the AAA/Stable/P1 financial institution ratings (FIRs) of Standard Chartered Bank Malaysia Berhad (Standard Chartered Malaysia or the Bank) and its Islamic banking arm, Standard Chartered Saadiq Berhad (Saadiq) whose FIRs are equated to the Bank’s.

The ratings reflect the Bank’s strong funding and liquidity profile, healthy capitalisation and sound asset quality. However, high operating costs and the normalisation of impairment charges lowered the Bank’s profitability indicators vis-à-vis peers. A rating uplift is accorded to reflect our expectation that Standard Chartered Malaysia, as a strategic entity, will continue to derive strong financial support from its ultimate parent, Standard Chartered PLC.

The Bank’s gross impaired loan ratio eased further to 3.0% as at end-March 2024 (end-December 2022: 3.6%; end-December 2021: 3.9%), thanks to the resolution of two sizeable business accounts. The ratio was still however higher than the industry’s 1.6%, partly owing to the Bank’s more stringent classification policy under which some performing corporate accounts and rescheduled and restructured retail banking loans were qualitatively classified as impaired. Adjusting for differences from industry practice, i.e., excluding retail banking loans that are less than three months in arrears, the Bank’s adjusted GIL ratio would be a healthier 2.5%. 

We remain cognisant of the Bank’s vulnerability to lumpy exposures given its corporate portfolio focus. Its common equity tier-1 capital ratio of 13.1% and loan loss coverage (with regulatory reserves) of 122% as at end-March 2024 remain robust and should provide sufficient buffer against potential credit deterioration.

Standard Chartered Malaysia’s profitability lags peers’. Pre-tax profit for FY Dec 2023 declined 15% y-o-y to RM629.1 mil, translating into a return on risk-weighted assets (RoRWA) of 2.1% (FY Dec 2022: 2.4%). This was mainly attributable to heftier expenses on technology projects and group recharges, coupled with smaller impairment allowance releases. RoRWA slipped further to an annualised 1.4% in 1Q FY Dec 2024 on the back of softer fee and trading income, margin compression and the normalisation of impairment expenses. 

An entrenched presence in the cash management and transaction banking space support Standard Chartered Malaysia’s solid deposit funding capabilities. Current and savings account balances and retail deposits made up a respective 70% and 38% of customer deposits as at end-March 2024 (industry: 33% and 38%). 


Analytical contacts
Jeremy Noel Paul 
(603) 3385 2556
jeremynp@ram.com.my

Sophia Lee
(603) 3385 2619
sophia@ram.com.my