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MARC affirms China Construction Bank (Malaysia)’s ratings with stable outlook
6 May 2021
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Posted Date: May 6, 2021 MARC has affirmed its long- and short-term financial institution (FI) ratings of AA+/MARC-1 with a stable outlook on China Construction Bank (Malaysia) Berhad. CCBM continues to be very well supported by parent China Construction Bank Corporation (CCB), which carries a public information rating of AAA/stable from MARC. This rating mainly reflects CCB’s status as a majority-owned financial entity of the Chinese government and as a systemically important bank in China given its position as the world’s second-largest bank by asset size with a key share of the loans and deposits in the Chinese banking system. CCBM’s long-term rating of AA+ is notched down from that of CCB in line with MARC’s rating approach which views the subsidiary as a strategic entity of its parent. The notching approach considers the explicit intent of support extended to the subsidiary by the parent, its 100%-ownership in CCBM and the operational linkages between both entities. CCBM’s total capitalisation stood at a very healthy level of 56.5% as at end-2020 (2019: 49.0%), providing ample headroom to support loan growth as the economy recovers from the impact of the COVID-19 pandemic. CCBM has a policy role to support China-based companies undertaking projects under China’s Belt and Road Initiatives framework. This is evident in the bank’s loan portfolio composition with its top-five borrowers accounting for 37.6% of total loans outstanding as at end-2020 (2019: 36.4%). Gross loans contracted by 10.3% y-o-y to RM2.4 billion as at end-2020 due to the pandemic. Loan growth is expected to resume in 2021 as economic concerns ease and borders between countries reopen. CCBM’s asset quality remains strong without any impairment since beginning operations, although given its large loan exposures, any asset quality weakness could lead to a spike in impairments. Net profit grew by a significant 79.9% y-o-y to RM29.5 million, largely supported by sharp growth in fee income. Its cost-to-income ratio continued to show an improving trend to 49.0% during the period on the back of improved earnings (2019: 63.7%). Basel III liquidity coverage ratio and net stable funding ratio stood at 195.9% and 129.9% as at end-2020 (2019: 245.9%; 155.9%), exceeding the minimum regulatory requirements. Contacts: