KUALA LUMPUR, Feb 21 — RAM Ratings has reaffirmed Kenanga Investment Bank Berhad's (Kenanga IB or the Bank) long- and short-term financial institution ratings at A3 and P1, respectively. The ratings reflect the Bank's established retail stockbroking presence, profit performance that is subject to the vagaries of the capital market and relatively smaller underwriting capacity as a stand-alone investment bank.

Meanwhile, the Bank's long-term rating outlook has been revised to stable from negative, driven by its improved business performance with the entry of a new leadership and the strengthening of its management line-up.

Following the appointment of a new senior management team in mid-2011, a turnaround agenda has been put in place, with improvements evident in Kenanga IB's key business areas. Under the new leadership, Kenanga IB has gradually built up its investment-banking presence, an area where the Bank has historically been weak. In the debt and equity capital markets as well as mergers and acquisitions, Kenanga IB has managed to secure a decent stream of high-profile mandates, which were previously uncommon for the Bank, in recent months.

In the stockbroking arena, Kenanga IB's market shares have started charting encouraging trends in the second half of 2011 after slipping in recent years. The Bank ended 2011 with 6.1 per cent and 5.2 per cent, respectively, of the industry's trading volume and value, hence retaining its position as a mid-tier stockbroker. Moving ahead, we expect Kenanga IB's franchise as an investment bank to be further enhanced.

On the financial front, Kenanga IB has returned to the black in the first 9 months of FYE Dec 2011, although its profitability was affected by lower net interest income and heftier operating expenses. Meanwhile, the Bank has kept its sound liquidity profile and strong capital position. The Bank's tier-1 risk-weighted capital-adequacy ratio stood at a high 43.8 per cent as at end-September 2011. — Reuters