SWIRE Pacific's strong earnings from a high quality property portfolio has led to it retaining its 'A' grade long-term credit rating, according to a report released by Standard & Poor's (S&P). The high operating profits of subsidiary, Cathay Pacific Airways, and other affiliates such as Hong Kong Dragon Airlines and Hong Kong Aircraft Engineering, were reflected in the rating. The rating also considered its conservative use of debt and strong profitability, with funds from operations amounting to 44 per cent of net debt. S&P continued Swire's 'A' grade rating on long-term debt from last year. S&P said Swire's 'A' rating showed the group had a strong capacity to pay interest and repay principal. 'The outlook reflects Swire's ability to sustain a strong financial profile through its core business amid a slower property market and increasing challenging environment,' it said. The report said Swire's earnings were heavily derived from property investment which represented 31 per cent of the operating profit last year. There was a negative factor of the volatile property market for Swire. S&P forecast that next year the group's property development profit would not be as high as this year. It said although the current property market was affected by softening rentals and prices, the group was 'safeguarded by the often below-market rents embedded in existing leases and the good location of property development projects'. Profit contribution from Cathay Pacific was guaranteed by its dominant position in the industry. Meanwhile, the report said the Malaysian banking industry continued to perform solidly. There was a favourable outlook over the medium term because of the strong performance of the Malaysian economy. But banks were battered by unfavourable factors such as rapid loan growth over the past five years and non-performing loans continued to be high by international standards.