The Sun, 16 July 2014 - RAM puts 3 financial groups on rating watch

The Sun, 16 July 2014

PETALING JAYA: RAM Ratings has placed all the rated entities and their debt securities under CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) on rating watch, with a developing outlook.

The rating watch has been triggered by the July 10,2014 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, RAM Ratings said.

With stronger financial muscle, the merged entity would have greater capacity financial 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," said RAM Ratings, adding that it will assess the impact on each entity's ratings when more information becomes available.

Following the rating action on RHB Bank Bhd, RAM Ratings has also placed the ratings of Tropicana Corporation Bhd's RHB Bank-guaranteed Tranche 1 CP/MTN of up to RM300 million (2012/2019) on rating watch, with a developing outlook.

The rating watch highlights a possible change in an issuer's ratings. It focuses on identifiable events such as mergers, watch acquisitions, regulatory changes and operational developments that place a rated debt under special surveillance by RAM Ratings.

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 Ratings rating watch when some of the above events are expected to or have occurred.

Appearance on its rating watch, however, does not inevitably mean that the rating will be changed.

It only means that a rating is under evaluation by RAM Ratings 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..