[RAM] RAM Ratings affirms OCBC Malaysia's AAA rating

RAM Ratings has affirmed OCBC Bank (Malaysia) Berhad’s (OCBC Malaysia or the Bank) AAA/Stable/P1 financial institution ratings.

Our rating action reflects the Bank’s strong domestic franchise, robust capitalisation, sound funding profile and healthy profitability. The ratings also consider the “very high” likelihood of extraordinary support from the Bank’s parent, Oversea-Chinese Banking Corporation Limited (the Group), if needed. However, no rating uplift has been applied, given the Bank’s already strong standalone credit profile. OCBC Malaysia is deemed a core subsidiary of the Group in view of its highly strategic role in driving the Group’s regional growth ambitions and diversification objectives; Malaysia contributed an average of 12% to Group’s pre-tax profit in the last two years.

The Bank’s asset quality improved during the review period on the back of stronger loan recoveries and better borrower repayment trends. OCBC Malaysia’s gross impaired loan ratio declined markedly to 1.7% on an adjusted basis as at end-March 2025 from 2.6% as at end-December 2023. Reflecting reduced provisioning needs, the credit cost ratio similarly eased to 4 bps in 2024 from 25 bps in the year earlier, with a net impairment write-back seen in 3M 2025. However, the Bank remains exposed to downside risks from the second-order effects of US tariff changes. Its more corporate-oriented loan portfolio which made up a sizeable 53% of total loans as at end-March 2025, could also give rise to potential lumpy impairments.

Pre-provision earnings generation stayed healthy, growing 8%-10% y-o-y in recent years, supported by a resilient net interest margin and stable non-lending revenue (25%-30% of gross income). Pre-tax profit was up 17% at RM1.8 bil in FY Dec 2024 (FY Dec 2023: RM1.5 bil), mainly owing to a stronger top line from both lending and non-lending activities, and lower loan impairment charges. This momentum continued into 3M fiscal 2025, pushing pre-tax profit up 21% y-o-y to RM514 mil, with a net impairment write-back also contributing to the increase. The pre-tax return on risk-weighted assets was 3.1% in 2024 and an annualised 3.5% in 3M fiscal 2025 – levels we view as sturdy.

With a post-dividend common equity tier-1 capital ratio of 15.2% as at end-March 2025 (end-December 2023: 15.5%), OCBC Malaysia is deemed well-capitalised. The Bank’s sound deposit franchise anchors its funding profile, evinced by a high proportion of current and savings account and retail deposits (end-March 2025: 47% and 48% of customer deposits, respectively). OCBC Malaysia wealth management franchise and transaction banking capabilities support its deposit-gathering strategies, affording it limited reliance on non-deposit funding.


Analytical contacts
Loh Kit Yoong
(603) 2708 8285
kityoong@ram.com.my

Sophia Lee
(603) 2708 8211
sophia@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my