Friday, December 2, 2011

RAM Ratings reaffirms RHB Islamic Bank's AA2/P1 ratings

KUALA LUMPUR (Dec 2): RAM Ratings has reaffirmed RHB Islamic Bank Bhd's respective long- and short-term financial institution ratings, at AA2 and P1; the long-term rating has a stable outlook.

It said on Friday the reaffirmed ratings mirror those of its parent and the core entity within the RHB CAPITAL BHD [] universal-banking group that is RHB Bank Bhd, which carries AA2/Stable/P1 ratings.

RHB Islamic recorded a robust gross financing growth of 92.2% for the past 18 months up to end-June 2011.

Due to the expanded but still largely unseasoned financing base, the bank's gross impaired-financing (GIF) ratio had eased to 5.3% as at the same date (end-December 2010: 7.0%), albeit still high relative to its rated peers.

RHB Islamic's weak asset quality mainly stems from its working-capital portfolio, which includes sizeable exposures to two troubled Middle-Eastern companies.

As at end-June 2011, the bank's portfolio of impaired financing for residential property - which had a high GIF ratio of 7.1% - represented its second-largest GIF exposure. The strong financing growth had also elevated its financing-to-deposits ratio to 99.7% as at end-June 2011 (end-December 2010: 87.6%).

Underpinned by stable net financing income, coupled with lower financing-loss provisions on the Middle-Eastern exposures, RHB Islamic's pre-tax profit improved slightly in FYE Dec 31, 2010.

The bank's tier-1 and overall risk-weighted capital-adequacy ratios were shored up to approximately a respective 11.6% and 12.9% (end-June 2011: 10.5% and 11.8%) via RM250 million capital injection by its parent on ''Nov 10, 2011.

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