Maybank ... Sept09

MOODY'S Investors Service has revised the outlook to stable from negative on Malayan Banking Bhd's (Maybank) C Bank Financial Strength Rating (BFSR), A1 long-term global local currency deposit (GLC) rating, and A3 foreign currency Tier 1 capital securities.

Maybank's P-1 local and foreign currency short-term deposit ratings, A3 foreign currency long-term deposit rating, and A3 foreign currency subordinated debt rating remain unaffected with stable outlook.

The outlook change on Maybank's BFSR reflects the replenished state of its capital level, its improved NPL provision coverage and its dominant local franchise.

On March 27, 2008, Moody's had changed the bank's BFSR outlook from stable to negative over concerns that its series of offshore investments -- of which its controlling interest in PT Bank Internasional Indonesia (BII) was the largest -- could erode the level and quality of its capital. Other investments included minority stakes in Pakistan's MCB Bank and Vietnam's An Binh Bank.

At the same time, the revised stable outlook for Maybank's C BFSR implies its Baseline Credit Assessment (BCA) of A3 is stable. This outcome underpins the stable outlook for the bank's A1 GLC. The two-notch lift above the BCA reflects the high likelihood of strong systemic support for Maybank, should the need arise, it said.

The outlook for Maybank's A3 foreign currency Tier 1 capital securities -- at Malaysia's A3 foreign currency sovereign ceiling -- was also revised to stable.

Moody's affirmation of Maybank's C BFSR with a revised stable outlook is based upon its replenished level of equity capital, derived in turn from its recent rights offering and healthy non-performing loans (NPL) reserve coverage.

Maybank's loan loss reserves covered 112.9 per cent of gross NPLs, higher than 101.1 per cent a year ago. Gross NPL ratio was also slightly lower at 3.5 per cent compared to 3.8 per cent over the same period.

Maybank's capital and loan loss reserves are sufficient to protect creditors under Moody's anticipated stress scenario. But higher-than-expected loan losses could add pressure to capital and earnings.