Thailand Financial News

Moody’s Investors Service has withdrawn CIMB Investment Bank Berhad’s (CIMBIB) financial strength rating (BFSR) and deposit ratings. Its issuer ratings of A3/P-1 and subordinate debt rating of Baa1 are unchanged. The outlook on all ratings is stable.

The rating action follows the transformation of CIMBIB into an investment bank - due to an extensive group restructuring exercise - and its resultant primary focus on providing advisory, debt and equity underwriting and brokering services.

“CIMBIB today operates more like a securities firm; therefore, Moody’s withdraws its BFSR/deposit ratings, which are more appropriate for commercial banks,” says Christine Kuo, a Moody’s Vice President and Senior Analyst. “The issuer ratings are supported by its leading domestic investment banking franchise, very liquid and well-capitalized balance sheet and its association with its larger and systemically important sister company - CIMB Bank Berhad (A3/P-1/D+),” says Kuo, adding, “On the other hand, the ratings also take into account the volatile nature of its earnings and its reliance on wholesale funding.” CIMBIB is Malaysia’s premier investment bank and a member of its second largest banking group. Over the past decade, its capable management team has enabled it to achieve dominance in the debt and equity markets. In light of on-going disintermediation, and the government’s push for greater capital market development, the bank is in a favorable position to benefit from the opportunities ahead. “Following corporate restructuring in 2006, CIMB group companies have become functionally managed and closely integrated,” says Kuo. “CIMBIB has also transferred its corporate business and treasury operations as well as certain assets and liabilities to CIMB Bank Berhad.” As a result, CIMBIB had no customer deposits at end-2006 and its asset base has shrunk significantly. However, instead of relying on its own small balance sheet, it leverages CIMB Bank Berhad’s much bigger capacity to provide its clients with commercial banking services to complement its own investment banking business. This amalgamation of these businesses suggests that government support for both entities would be equally strong, if needed. Despite becoming smaller, CIMBIB’s balance sheet remains very liquid and strongly capitalized. These strengths help mitigate the concerns over the volatility of its earnings and its reliance on wholesale funding. Headquartered in Kuala Lumpur, CIMBIB reported consolidated assets of RM3,442 million (US$975 million) on December 31, 2006. It is the 100% owned subsidiary and investment banking arm of Bumiputra-Commerce Holdings Berhad, the second largest banking group in Malaysia.

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