Fitch rates new EON Bank notes BB+

Fitch Ratings said it assigned a BB+ rating to EON Bank's proposed $150 million subordinated debt issue due 2014 and assigned a long-term senior foreign currency rating of BBB- to the bank.

Established in 1963, EON is Malaysia's seventh-largest local bank with MYR32 billion in assets, which account for 4% of the system. In 1991 EON was majority acquired by EON Bhd, Malaysia's largest auto distributor. EON Bhd refers its auto buying customers to EON for finance, and this has enabled the bank to grow a sizeable auto loans business.

Fitch said EON's asset quality is sound. At mid-2003 its NPLs/loans ratio stood at 8.7% and was adequately covered by collateral and reserves. Going forward this should remain the case given Malaysia's low interest rate environment and reasonably good growth outlook.

EON's equity base, however, is only just adequate given its relatively small size as well as its concentration of auto loans for which it relies upon its parent.

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