James Kon
Baiduri Bank, one of the largest providers of financial products and services in Brunei Darussalam achieved another milestone in the local banking industry after receiving an improved rating of ‘A-/A-2’ from Standard & Poor’s (S&P) Global Ratings thanks to the bank’s enhanced capitalisation and stable outlook.
According to the report, Standard & Poor’s (S&P) Global Ratings believed that Baiduri Bank Sdn Bhd will maintain its enhanced capitalisation and is likely to maintain moderate credit growth, satisfactory profitability, and profit retention over the next 12-18 months.
The stable outlook on the bank reflects the expectation that it will maintain its high systemic importance in Brunei and manage its financial profile.
S&P upgraded Baiduri Bank to reflect the expectation that the bank will maintain its good capital buffers and expect the bank’s pre-diversification risk-adjusted capital (RAC) ratio to remain at 15.5 to 17 per cent over the next 12-18 months, thanks to prudent capital management.
In addition, S&P expects Baiduri Bank to have a moderate credit growth and satisfactory profitability over this period and also believes Baiduri Bank’s profit retention will be more than enough to sustain growth, underpinned by the management’s calibration of dividend payout to maintain strong capital buffers.
The report also highlighted that Baiduri Bank’s credit growth is likely to climb up to three to five per cent for the next 12-18 months. The bulk of the growth is likely to come from wholesale customers as the government looks to boost the economy and support local firms through contracts from government-linked companies, foreign direct investment projects, the oil and gas sector, and infrastructure development.
Meanwhile, S&P also felt that Baiduri Bank’s net interest margins will improve during the next 12-18 months as global interest rates increase to curtail inflation. Forecast Baiduri Bank’s operating costs will rise one to four per cent over the next 12-18 months after a couple of years of belt-tightening due to COVID-related uncertainties and social-distancing measures.
S&P is the world’s leading provider of credit ratings. With more than one million credit ratings on government, corporate, financial sector and structured finance entities and securities, S&P ratings are essential to driving growth, providing transparency and helping to educate market participants so they can make decisions with confidence.
