KUALA LUMPUR: MARC Ratings has affirmed its financial institution (FI) ratings of A+/MARC-1 on Kenanga Investment Bank Bhd with a stable outlook.
In a statement, the rating firm said Kenanga's strong market position and lengthy experience in the stockbroking industry remain key rating drivers.
"Apart from stockbroking, the rating also considers the bank's improving position in investment and wealth management and its consistently moderate income from investment banking activities.
"The susceptibility of its income generation counterbalances these strengths to the capital market and economic conditions," it said.
Kenanga is one of the top three stockbrokers in the country by market share, with 30.2 per cent in the retail segment for the first half of 2022 (1H22), aided by a vast branch network, a sizeable remisier base of 759 individuals and a growing online trading activities.
Its online share trading platform Rakuten, co-owned with Rakuten Securities, Inc, has continued to gain traction in the industry.
The total number of accounts on the platform rose to 250,481 at the end of end-1H22, contributing to about 14.5 per cent of Kenanga's trading value.
The company has continued to strengthen its investment and wealth segment.
"We note that its assets under administration increased significantly by 35.8 per cent year-on-year (YoY) to RM18.8 billion as at end-2021, mainly due to increased sales and, to some extent, the acquisition of i-VCAP Management Sdn Bhd in February 2021.
"For 2021, the bank recorded a 10.0 per cent YoY increase in pre-tax profit to RM148.2 million, supported by higher management fees and brokerage from the improvement in stockbroking activities," it said.
However, for the first half (1H) of 2022, the firm noted Kenanga's pre-tax profit declined to RM41.8 million on the back of subdued market sentiment brought on by concerns about interest rate hikes and rising inflation.
Kenanga's consolidated Common Equity Tier 1 and total capital ratios stood at 17.5 per cent and 24.9 per cent as of end-1H22, providing a sufficient buffer against potential erosion in asset quality.
Its gross impaired loans ratio stood at 4.40 per cent, for which full provisions have been made.
Deposits from non-bank FIs and business enterprises collectively accounted for 43.4 per cent of total liabilities as of end-June.
"The high funding concentration poses some liquidity risk to the bank, although this is mitigated by sizable liquid assets of 36.8 per cent of total assets.
"Liquidity coverage ratio stood at 155 per cent in 1H22," added MARC.