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RAM Ratings assigns AA3 rating to Maybank’s Additional Tier-1 Sukuk Mudharabah

Published on 27 Aug 2019.

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RAM Ratings has assigned an AA3/Stable rating to Malayan Banking Berhad’s (Maybank or the Group) Additional Tier-1 Sukuk Mudharabah (AT-1 Sukuk) to be issued under its existing RM10.0 bil Sukuk Programme (2017/-). We have also reaffirmed Maybank’s national and ASEAN-scale AAA/Stable/P1 financial institution ratings (FIRs) as well as the ratings of the Group’s other debt facilities, listed below.

Instrument

Rating/
Outlook

RM20.0 bil Subordinated Note Programme (2012/-)

AA1/Stable

RM10.0 bil Additional Tier-1 Capital Securities Programme (2014/-)

AA3/Stable

RM10.0 bil Commercial Papers/Medium-Term Notes Programme (2016/2023)

AAA/Stable/P1

RM10.0 bil Senior Medium-Term Notes Programme (2015/-)

AAA/Stable

RM10.0 bil Sukuk Programme (2017/-)

- Senior Sukuk Murabahah
- Subordinated Sukuk Murabahah
- Additional Tier-1 Sukuk Mudharabah

 

AAA/Stable
AA1/Stable
AA3/Stable

 

The AA3 rating of the AT-1 Sukuk is three notches lower than Maybank’s long-term FIR in view of the subordinated nature of the instrument, fully discretionary distribution payments and our assessment that Maybank possesses a high capital buffer. Our methodology for rating bank securities defines the capital buffer as headroom of at least 300 bps above the numerical trigger of 5.125% for a bank’s consolidated and entity-level common equity tier-1 (CET-1) capital ratios. As Maybank’s post-dividend consolidated and entity-level CET-1 capital ratios came in at 14.5% and 13.4%, respectively, as at end-March 2019, the Group’s capital buffer is assessed to be high. The ratings of Maybank’s AT-1 capital securities could come under pressure if the capital buffer dips below 300 bps on a sustained basis – a prospect we deem unlikely given the Group’s sound capital management practices.

Maybank recorded a flat pre-provision profit of RM3.1 bil in 1Q fiscal 2019, although its bottom line was affected by additional impairment taken on its exposure to Hyflux Ltd. The Group has, however, reiterated its expectation of a 40-bp credit cost ratio for fiscal 2019 (1Q fiscal 2019: 47 bps on an annualised basis). The uptick in gross impaired loan ratio to 2.5% as at end-March 2019 (end-December 2017: 2.3%) largely relates to Hyflux – the effects of which were partly moderated by write-offs in 2018.

Maybank’s funding and liquidity profile stayed superior, with current and savings account deposits constituting 37.5% of the Group’s total deposits in Malaysia as at end-March 2019, and its liquidity coverage ratio standing at a healthy 134%. The Group retained its expectation of a 3-bp to 5-bp net interest margin (NIM) compression for fiscal 2019, which has factored in Bank Negara Malaysia’s overnight policy rate cut in May.

 

Analytical contact
Chan Yin Huei
(603) 3385 2498
yinhuei@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad



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