Published on 06 Dec 2019.
RAM Ratings has reaffirmed the AAA(bg)/Stable rating of debt securities issued under MUFG Bank (Malaysia) Berhad’s (the Bank) USD500 million Multi-Currency Sukuk Wakalah Bi Al-Istithmar Programme (the Programme). The enhanced issue rating considers an irrevocable and unconditional guarantee on the sukuk, extended by MUFG Malaysia’s parent, MUFG Bank Ltd (MUFG Bank, rated AAA/Stable/P1 by RAM). Simultaneously, we have reaffirmed the Bank’s AA1/Stable/P1 financial institution ratings.
MUFG Malaysia is a subsidiary of Mitsubishi UFJ Financial Group’s (MUFG or the Group) commercial banking arm – one of the world’s largest financial groups and Japan’s leading banking group. The Bank’s ratings benefit from a strong likelihood of support from its parent. The ratings also take into account the Bank’s robust capitalisation and enviable loan quality.
MUFG Malaysia’s aggregate loans came in at RM21 billion as at end-June 2019 (end-March 2018: RM19 billion), a large portion of which are supported by placements from MUFG Bank under a cash collateral scheme. MUFG Malaysia’s admirable loan quality can be ascribed to its focus on Malaysia-domiciled entities owned by established Japanese conglomerates, MNCs and highly rated domestic names. On the other side of the coin, this focus has resulted in net interest margins that are thinner than that of the industry. Coupled with a lower trading income, the Bank’s pre-tax profit fell to RM285 mil in fiscal 2019 (fiscal 2018: RM390 mil).
Loan and deposit concentration remain prominent in MUFG Malaysia’s business. As at end-June 2019, the Bank’s 10 largest loans accounted for half of its lending while the Bank’s top 10 depositors constituted about a third of total customer deposits. Meanwhile, owing to earnings generation, MUFG Malaysia’s common equity tier-1 capital ratio was reinforced to a strong 23.0% as at end-June 2019 (end-March 2018: 18.3%).
Goh Kwan Kheen, Timothy
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Ratings on MUFG Bank (Malaysia) Berhad