Published on 15 Nov 2019.
RAM Ratings has assigned the following ratings to MBSB Bank Berhad’s (the Bank) Proposed RM10.0 bil Wakalah Bi Al-Istithmar Sukuk Programme (Proposed Programme):
Proposed RM10.0 bil Wakalah Bi Al-Istithmar Sukuk Programme
* combined limit of RM10.0 bil
Concurrently, we have reaffirmed the Bank’s A2/Stable/P1 financial institution ratings (FIRs). The ratings incorporate our expectation of support from the Bank’s ultimate shareholder, the Employees Provident Fund (EPF). MBSB Bank is the core subsidiary of Malaysia Building Society Berhad (MBSB or the Group), whose largest shareholder is the EPF, which held a 65% stake as at end-September 2019.
The Tier-2 Sukuk Wakalah issued under the Proposed Programme are rated one notch below MBSB Bank’s long-term FIR to reflect subordination to the Bank’s senior unsecured obligations. The BBB2 rating of the AT-1 Capital Sukuk Wakalah is three notches lower than MBSB Bank’s long-term FIR in view of the subordinated nature of the instrument, fully discretionary profit payments, and our assessment that the Bank 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 MBSB Bank’s consolidated and entity-level CET-1 capital ratios stood at a respective 12.5% and 11.6% as at end-June 2019, the Group’s capital buffer is assessed to be ‘high’.
MBSB Bank’s key credit metrics have stayed largely intact since our last review. Despite some pressure on its asset quality indicators, the Bank’s healthy loss absorption buffers in the form of sturdy capitalisation and pre-provision profit are expected to cushion further losses. The Bank’s funding profile remains weaker than that of peers while its portfolio is mainly concentrated in personal financing.
Liang Huey Jean, CFA
(603) 3385 2495
(603) 3385 2577
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Ratings on MBSB Bank Berhad