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RAM Ratings assigns ratings to MBSB Bank’s RM10.0 bil Sukuk Programme

Published on 15 Nov 2019.

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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):

Sukuk Programme

Long-term Rating

Outlook

Proposed RM10.0 bil Wakalah Bi Al-Istithmar Sukuk Programme

 

  1. Senior Sukuk Wakalah*
  2. Tier-2 Sukuk Wakalah*
  3. Additional Tier-1 (AT-1) Capital Sukuk Wakalah*

 

* combined limit of RM10.0 bil

  1. A2
  2. A3
  3. BBB2

Stable

 

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.  

 

Analytical contact
Liang Huey Jean, CFA
(603) 3385 2495
jean@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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