Published on 22 Nov 2019.
RAM Ratings has reaffirmed Alliance Islamic Bank Berhad’s (the Bank) A1/Stable/P1 financial institution ratings (FIRs) and the ratings of its debt facilities (Table 1). The FIRs reflect our expectation of continued strong support from its parent, Alliance Bank Malaysia Berhad (the Group, rated A1/Stable/P1), given the Bank’s role as the Group’s Islamic banking arm.
Operating under a leverage model, Alliance Islamic is closely integrated with the Group. The Bank significantly leverages on its parent’s franchise, branch network and risk management systems. As such, it is expected to receive ready group support when needed.
Alliance Islamic’s credit cost ratio remained relatively high at 56 bps and 60 bps (annualised) in FY Mar 2019 and 1Q FY Mar 2020, respectively, due to a sizeable proportion of financing for personal use (23% of financing book), which includes personal financing and part of the Alliance One Account (AOA) portfolio. The Bank’s gross impaired financing (GIF) ratio, however, eased to 1.2% as at end-June 2019 (end-March 2018: 1.3%; banking industry average: 1.6%), given an expanding financing base. We anticipate some slippage in asset quality as the AOA portfolio seasons, specifically the vintage before a credit tightening in June 2018. Alliance Islamic’s loss absorption capacity is healthy, with a GIF coverage ratio of 133% (including regulatory reserve) and a common equity tier-1 capital ratio of 11.2% as at end-June 2019.
The Bank’s pre-tax profit improved 35% y-o-y to RM152 mil in FY Mar 2019 (FY Mar 2018: RM113 mil), chiefly attributable to stronger financing growth (+16%) and a broader net financing margin of 2.5% (FY Mar 2018: 2.4%) which more than offset higher expenses. As a result, the Bank’s return on risk-weighted assets (RoRWA) clocked in at a higher 2.0% (FY Mar 2018: 1.7%), although still deemed moderate as non-financing income constituted just 9% of its gross income. Annualised RoRWA came in at 1.9% in 1Q FY Mar 2020.
RM300 mil Islamic CP Programme (2019/2026)
RM2.5 bil Perpetual Sukuk Programme (2019/-):
Senior Sukuk Murabahah
Tier-2 Subordinated Sukuk Murabahah
Additional Tier-1 Sukuk Wakalah
Lim Yu Cheng, CFA, FRM
(603) 3385 2492
(603) 3385 2577
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Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad
Ratings on Alliance Islamic Bank Berhad