KUALA LUMPUR: RAM Ratings has reaffirmed Citibank Bhd’s AAA/Stable/P1 monetary establishment ratings, premised on its expectation that the financial institution will proceed to derive extraordinary help from its mum or dad, Citigroup Inc (the group).
The score company stated Citibank remained a strategically necessary entity to the group regardless of the continued train to eliminate its client banking enterprise in Malaysia.
The Institutional Clients Group (ICG) enterprise can be Citibank’s remaining franchise in Malaysia after the disposal of the patron section. The latter is carefully aligned with Citigroup Inc’s technique to exit the patron banking enterprise in 13 markets.
“We expect Citibank to stay highly integrated with its parent and continue to leverage the group’s global network to serve institutional clients in Malaysia,” RAM stated in an announcement.
“Citibank has a strong business position in the ICG business (which encompasses corporate lending, treasury and trade finance services, cash management, custodian services, derivatives and forex sales) but its revenue base going forward may exhibit higher volatility as certain product segments are more sensitive to market conditions,” it added.
The disposal of the patron banking enterprise is progressing in line with the financial institution’s inside timeline and is anticipated to be concluded in 2022, topic to regulatory approval.
RAM famous that the sale would reduce the mortgage base by an estimated 75% however cut back belongings and deposits by solely 20% and 30%, respectively.
“We expect Citibank’s asset quality indicators to hold up well after the disposal of its consumer banking business. The credit quality of its corporate and commercial portfolios is good. Strains in the past had largely stemmed from the retail segment.
“That said, the bank’s headline gross impaired loan (GIL) ratio increased to 1.3% as at end-September 2021 from 1.0% as at end-December 2020 on account of a corporate exposure in a vulnerable sector,” RAM stated.
This additionally prompted the GIL ratio of the non-retail portfolio to tick as much as 1.0%, having sometimes trended under 0.5% prior to now.
GIL protection ratio stood at 217.2% as at end-September 2021, affording the financial institution ample headroom in opposition to any credit score dangers ought to financial restoration stall.
About 11% of complete loans are at present beneath aid, which is notably under the extent noticed for the business.
“We expect Citibank’s funding and liquidity profile as well as its capital position to remain strong. Non-retail deposits are primarily sourced from its cash management and transactional banking businesses. This increases the stickiness of these deposits.
“The bank’s liquidity coverage ratio and net stable funding ratio were comfortably above the respective regulatory minimums as at end-September 2021,” RAM stated.
It stated regardless of the excessive dividend funds through the years (in fiscal 2020, all earnings had been flowed out to the group as dividends), the financial institution had preserved a gradual degree of high-quality capital.
Common fairness tier-1 capital and complete capital ratios had been a respective 17.5% and 18.5% as at end-September 2021 (end-December 2020: 18.0% and 19.0%).
“The bank is expected to keep capitalisation robust going forward,” RAM stated.