KUALA LUMPUR, Oct 13 — Malaysia’s RAM Ratings has lifted the Rating Watch (with a negative outlook) on The Royal Bank of Scotland Berhad.
Concurrently, the Bank’s respective long- and short-term financial institution ratings have been reaffirmed at AA2 and P1; the AA3 rating of its 200 million ringgit Subordinated Negotiable Instruments of Deposit (Sub-NIDs) has also been reaffirmed. Both long-term ratings have a stable outlook.
The ratings reflect the strong operational support from the Bank’s parent, The Royal Bank of Scotland Group plc (RBS Group), complemented by its domestic business fundamentals.
As part of the RBS Group, the Bank closely adheres to its parent’s strategies, risk management and direction within this region; it is also able to leverage on the RBS Group’s global franchise and extensive customer base.
The Rating Watch had been placed on 5 March 2009, premised on concerns over the abrupt change in the RBS Group’s strategy to divest its retail and commercial business in Malaysia. Based on our subsequent interaction with the Bank’s senior management, however, the impending sale will not have a major impact on RBS Berhad’s operating performance.
“The management only intends to dispose of the Bank’s retail and commercial banking operations, which contribute less than 10 per cent of its gross income. RBS Berhad will, however, keep its commercial banking licence,” elaborates Promod Dass, RAM Ratings’ Head of Financial Institution Ratings.
“Effectively, there will be no major change in the Bank’s business strategy or core business; its global market operations will be retained,” adds Dass.
Although RBS Berhad enjoyed an exceptional year in FY Dec 2008, chalking up RM158.21 million of pre-tax profit (FY Dec 2007: RM25.48 million), it is expected to deliver a more modest showing in FY Dec 2009.
The commendable performance last year had been mainly driven by unrealised gains on foreign-exchange dealings and gains arising from its fixed-income and derivatives trading.
For the first half of fiscal 2009, the Bank recorded a pre-tax profit of RM18.81 million.
Overall, the Bank’s capital position remained healthy, with a risk-weighted capital-adequacy ratio of 14.5 percent and a Tier-1 of 10.4 per cent as at end-June 2009. — Reuters
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