Affin Bank’s RM3b notes plan assigned A3, Stable by RAM

KUALA LUMPUR: Affin Bank Bhd has proposed to raise RM3bil under its additional Tier-1 capital securities (AT1CS) and it has been assigned an A3/Stable rating by RAM Ratings.

The rating agency said on Tuesday it had also reaffirmed Affin Bank’s AA3/Stable/P1 financial institution ratings (FIRs) as well as the respective AA3 and A1 ratings of the senior and subordinated notes under the Bank’s RM6bil medium term notes (MTN) programme. All the ratings have a stable outlook.

“Affin Bank’s FIRs reflect the extraordinary support from its majority shareholder, Lembaga Tabung Angkatan Tentera, as well as its strong capitalisation. Nonetheless, Affin Bank remains among the smaller banks in Malaysia,” it said.

The AT1CS will have a subordinated ranking and coupon payment flexibility. In addition, they possess a loss-absorption feature (through write-offs) linked to the occurrence of a non-viability event or if Affin Bank’s common-equity tier-1 (CET-1) capital ratios, at the consolidated or entity level, fall below 5.125%.

Depending on the issuing bank’s capital buffer, Basel III AT1CS will be rated at least 3 notches below the issuer’s long-term rating under RAM’s rating methodology.

Based on this methodology, Affin Bank’s capital buffer vis-à-vis the pre-specified trigger of 5.125% is defined as “high” (i.e. more than 300 bps), with its consolidated and entity-level CET-1 capital ratios standing at a respective 12.3% and 8.5% as at end-March 2018 after including unaudited profit in the latest quarter.

As such, the AT1CS are rated A3/Stable, that is three notches below Affin Bank’s long-term rating. Based on Affin Bank’s capital management and growth plans, its capital buffer is expected to stay above 300 bps.