KENANGA INVESTMENT BANK BERHAD INTEGRATED ANNUAL REPORT 2024 WE ARE KENANGA OUR SUSTAINABILITY APPROACH LEADERSHIP STATEMENT HOW WE ARE GOVERNED SHAREHOLDERS’ INFORMATION NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 FINANCIAL STATEMENTS ADDITIONAL INFORMATION OUR VALUE CREATION APPROACH 301 300 51. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) (i) Internal Credit Risk Ratings (cont'd.) The table below provides a mapping of the Group’s and of the Bank’s internal credit risk grades to external ratings: (cont'd.): Notches KIBB Obligor Rating External Rating Classification of Credit Risk Grade Description 11 12 13 BB1 BB2 BB3 BB Non- Investment Grade Weak capacity to meet its financial obligations. The entity is highly vulnerable to adverse changes in circumstances, economic conditions and/or operating environments. 14 15 16 B1 B2 B3 B Very weak capacity to meet its financial obligations. The entity has a limited ability to withstand adverse changes in circumstances, economic conditions and/or operating environments. 17 18 19 C1 C2 C3 C High likelihood of defaulting on its financial obligations. The entity is highly dependent on favourable changes in circumstances, economic conditions and/or operating environments, the lack of which would likely result in it defaulting on its financial obligations. 20 D D Default Currently in default on either all or a substantial portion of its financial obligations, whether or not formally declared. The D rating may also reflect the filing of bankruptcy and/or other actions pertaining to the entity that could jeopardise the payment of financial obligations. 51. FINANCIAL RISK MANAGEMENT (CONT’D.) (a) Credit risk (cont’d.) (ii) Credit quality by class of financial assets The credit quality of financial assets is managed by the Group and the Bank using internal credit ratings. The table below shows the credit quality by class of asset for all financial assets exposed to credit risk, based on the Group's and the Bank's internal credit rating system. Credit quality of financial assets neither past due nor impaired The credit quality of financial assets is managed by the Group and the Bank using internal ratings which aim to reflect the relative ability of counterparties to fulfill, on time, their credit-related obligations, and is based on their current probability of default. Internal rating grade Strong credit profile Customers that have demonstrated superior stability in their operating and financial performance over the long-term, and whose debt servicing capacity is not significantly vulnerable to foreseeable events. This rating broadly corresponds to ratings “AAA” to “AA” of RAM Rating Services Berhad (“RAM”) and Malaysian Rating Corporation Berhad (“MARC”) respectively. Satisfactory risk Customers that have consistently demonstrated sound operational and financial stability over the medium to long term, even though some may be susceptible to cyclical trends or variability in earnings. This rating broadly corresponds to ratings “A” to “BBB” of RAM and MARC respectively. Substandard Customers that have demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly medium term. This rating broadly corresponds to ratings “BB” to “C” of RAM and MARC respectively.
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