MARC Ratings has affirmed its long-term and short-term financial institution (FI) ratings of A+/MARC-1 on Kenanga Investment Bank Berhad (Kenanga). Concurrently, the long-term rating outlook has been revised to stable from positive.
The ratings affirmation reflects Kenanga’s strong market position in the domestic stockbroking industry. The outlook revision reflects the bank’s overall performance which has moderated from earlier expectations. While Kenanga has made progress in diversifying its income base through investments and wealth management activities, earnings continue to be anchored by its stockbroking business. Lower trading volumes in the first half of the year have weighed on brokerage income, a trend likely to continue in the near term. Kenanga’s performance continues to face headwinds from market uncertainty, trade tensions, and geopolitical risks, along with slower-than-expected recovery on impairments, pressure on asset quality, and moderated capital levels. The rating outlook could improve if the bank demonstrates resilience in managing these challenges and delivers sustained improvement in overall performance.
In 2024, Kenanga posted higher pre-tax profit of RM117.2 million (2023: RM88.1 million), driven by higher brokerage fees and unrealised securities revaluation gains, alongside growth in assets under administration and increased management fee income. In 1H2025, the bank recorded lower pre-tax profit of RM22.6 million (1H2024: 40.5 million), as dampened market trading volumes weighed on stockbroking performance.
Gross impaired loans ratio rose to 6.5% as of 1H2025 (2024: 5.4%; 2023: 3.6%) due to loan book contraction and new impairments. Asset quality has been pressured following periods of market sell-off in 2024, which led to impairments on some larger margin financing exposures that are nonetheless backed by pledged assets.
Common Equity Tier 1 and total capital ratios stood at 14.4% and 18.8% as of 1H2025; significantly lower than the domestic investment banking industry average, but still adequate to support the bank’s small advisory and capital markets businesses. Kenanga’s funding profile, characterised by its reliance on short-term wholesale customer deposits, exhibits an adequate liquidity coverage ratio of 132%.