RAM Ratings has placed all the rated entities and their debt securities under CIMB Group Holdings Berhad, RHB Capital Berhad and Malaysia Building Society Berhad on Rating Watch, with a developing outlook. The Rating Watch has been triggered by the 10 July 2014 announcement that CIMB, RHB and MBSB have obtained Bank Negara Malaysia's approval to commence negotiations for a merger of their businesses and the creation of an enlarged Islamic-banking franchise.
The potential CIMB-RHB-MBSB merger will create Malaysia's largest banking group in terms of assets with a broader systemic importance and that may change the competitive dynamics of the banking industry. With stronger financial muscle, the merged entity would have greater capacity to pursue regionalisation strategies. The merger could also result in the formation of a mega Islamic bank, which is in line with Malaysia's aspirations to up the ante for the internationalisation of Islamic Finance.
While we view this potential corporate exercise in a positive light, the ratings are placed on Rating Watch developing as details of the funding plan, capitalisation levels, integration time-line and approach as well as the final group structure have not been made public. RAM will assess the impact on each entity's ratings when more information becomes available.
Following the rating action on RHB Bank Berhad, RAM has also placed the ratings of Tropicana Corporation Berhad's RHB Bank-guaranteed Tranche 1 CP/MTN of up to RM300.0 million (2012/2019) on Rating Watch, with a developing outlook.
RAM's Rating Watch highlights a possible change in an issuer's ratings. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM. In a broader sense, it covers any event that may result in changes in the risk factors relating to the repayment of principal and interest.
Issues will appear on RAM's Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM's Rating Watch, however, does not inevitably mean that the rating will be changed. It only means that a rating is under evaluation by RAM and a final rating decision will be announced in due course. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates that a rating may be lowered. A "developing" outlook refers to those unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.
Table 1: Affected ratings
Media contact
Peter Kong
(603) 7628 1029
peterkong@ram.com.my
© Press Release 2014
