RAM Ratings has reaffirmed AFFIN Hwang Investment Bank Berhad’s (the Bank, formerly known as HwangDBS Investment Bank Berhad) AA3/Stable/P1 financial institution ratings. The ratings of AFFIN Hwang are closely linked to AFFIN Holdings Berhad’s (the Group) credit fundamentals, which are in turn largely anchored by its core subsidiary, AFFIN Bank Berhad (rated AA3/Stable/P1 by RAM).
As the investment-banking arm of AFFIN Holdings, we believe that AFFIN Hwang will receive extraordinary support from the Group if required. The latter is in turn backed by its major shareholder, Lembaga Tabung Angkatan Tentera, a government statutory body that had been established to provide retirement and welfare benefits to the Malaysian armed forces.
Following the merger last year, AFFIN Hwang now enjoys a more diversified business profile and a more balanced client mix between retail and institutional. Besides being among the top stockbrokers in Malaysia, the Bank is also the country’s fifth-largest fund manager. As at end-September 2015, it managed RM31.9 billion of assets. Operating under a universal-banking model, AFFIN Hwang also has the ability to leverage on AFFIN Bank’s balance sheet to secure more sizeable capital-market deals, albeit the latter’s own underwriting capacity lags its larger peers’.
While the inclusion of AFFIN Hwang Asset Management Berhad has diversified and strengthened the Bank’s income base, its stockbroking and investment-banking earnings are still sizeable but subject to the vagaries of the capital markets. As such, AFFIN Hwang’s profit performance is expected to remain volatile. Having said that, the Bank’s sturdy capitalisation, as reflected by its common-equity tier-1 capital ratio of 29% as at end-June 2015, serves as a buffer against such volatility.