Fitch upgrades AmMerchant Bank

Fitch Ratings said it upgraded Malaysian-based AmMerchant Bank Bhd.'s long-term foreign currency issuer default rating to BB+ from BB-, individual rating to C/D from D and deposit rating to BBB- from BB. The agency also affirmed the bank's B short-term foreign currency rating and 3 support rating. The outlook is stable.

Fitch said the upgrades are in response to AmMerchant's improved credit profile as reflected in its significantly reduced non-performing loan levels, supported by management efforts to improve the bank's risk management practices, and AmMerchant's generally adequate capitalization and stronger profitability in the past two years.

At the same time, Fitch noted the bank's inherent volatility due to its dependence on trading income. The bank's legacy and corporate non-performing loans were halved between March 2004 and September 2005 on increased loan recoveries and lower new non-performing loan accretion, but the non-performing loan ratio - at 10.9% of gross loans - is still considered high by international standards and above Malaysian bank system average of 9.4%.

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