MARC Ratings has affirmed its AA+/MARC-1 financial institution ratings on China Construction Bank (Malaysia) Berhad (CCBM) with a stable outlook.
CCBM’s long-term rating is one notch below the AAA rating of its parent, China Construction Bank Corporation (CCB), accorded based on publicly available information. The notching reflects CCBM’s strategic importance to CCB, which has expressed explicit intent to support CCBM and retain its 100% stake.
CCB’s rating considers the majority ownership and control of the bank by the Chinese government, and its designation as a global systemically important bank. As at end-2024, CCB was the world’s third-largest bank by assets, totalling USD5.4 trillion. While China currently faces economic headwinds, particularly due to challenges in its real estate sector, the rating agency believes the Chinese government has both the willingness and capacity to extend support to CCB, if needed, given CCB’s systemic importance to the country’s banking system.
CCBM’s ratings reflect MARC Ratings’ expectation of strong shareholder support from CCB, given the parent’s full ownership and oversight of the bank, including key management appointments. CCBM’s strategic direction aligns closely with CCB’s mandate to support cross-border trade under the Belt and Road Initiative and Chinese businesses operating in Malaysia. CCBM also benefits from CCB’s backing in terms of capitalisation, funding, and liquidity. As at end-2024, CCBM had an outstanding subordinated intragroup loan of RM878.7 million.
In 2024, CCBM’s loan book contracted by 13.3% to RM2.7 billion, primarily due to a large year-end repayment. While economic headwinds in China and the overall challenging economic environment may weigh on near- to medium-term loan growth, the rating agency believes CCBM’s strong capital position (total capital ratio of 47.8% as at end-2024) provides ample headroom to expand. However, capital strength is tempered by loan concentration, with the top five borrowers accounting for 69% of total loans as of end-March 2025.
CCBM’s pre-tax profit rose 14.3% to RM45.5 million in 2024, driven by gains in foreign exchange and derivatives, and greater use of short-term credit facilities. Despite a narrower net interest margin (NIM) at 0.39% due to higher funding costs, refinancing its USD subordinated loan with yuan funding has aided NIM recovery in early 2025. Return on assets in 2024 remained stable at 0.55% (2023: 0.57%), reflecting a loan portfolio weighted towards lower-margin products. As of end-2024, Basel III liquidity coverage ratio and net stable funding ratio stood at 193.7% and 154.2%, well above regulatory minimums.