RAM Ratings reaffirms Bank Islam’s AA3/Stable/P1 ratings

Published on 18 Dec 2019.

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RAM Ratings has reaffirmed Bank Islam Malaysia Berhad’s (the Bank) AA3/Stable/P1 financial institution ratings as well as the ratings of its debt programmes. The reaffirmations reflect our expectation that financial support from the Bank’s major shareholder, Lembaga Tabung Haji (the Fund), will remain forthcoming in times of need. The Fund’s financial health had improved after the completion of a restructuring exercise under a new management team in December 2018. Bank Negara Malaysia’s oversight of its deposit-taking activities since early 2019 further strengthens the Fund’s risk management and governance structure. Meanwhile, the proposed corporate restructuring exercise of the Bank’s holding company, BIMB Holdings Berhad, will see the Fund becoming a direct shareholder of Bank Islam, although its existing 53.8% effective ownership is expected to reduce slightly to 48.5%. We expect shareholder support to stay intact. 

While Bank Islam has a well-established franchise in the Malaysian Islamic banking sphere, its market position is still limited relative to larger domestic universal banking groups, seen in its less than 3% share of the domestic banking system’s financing and deposits. Residential property financing (39%) and personal financing (30%) form the largest portions of the Bank’s portfolio. Its financing growth was stronger than the broader industry’s at an annualised 7% in 9M fiscal 2019. 

Bank Islam’s gross impaired financing (GIF) ratio stayed below the banking industry’s, albeit having climbed slightly to 1.1% as at end-September 2019 (end-December 2018: 0.9%). The higher GIF ratio was attributable to several restructured and rescheduled business accounts, most of which are expected to be reclassified as non-impaired after being monitored for six months. The Bank’s asset quality is anticipated to remain robust, supported by salary deduction and salary transfer repayment arrangements for over 60% of its consumer financing. The Bank’s credit cost ratio was still benign at an annualised 24 bps in 9M fiscal 2019. Adjusted GIF coverage (inclusive of regulatory reserves) stood at a comfortable 142% as at end-September 2019. 

On the back of a larger trading gain, Bank Islam’s pre-tax profit came in 3% higher y-o-y at RM646 mil in 9M fiscal 2019 (9M fiscal 2018: RM626 mil), with a moderate annualised return on risk weighted assets of 2.2%. Capitalisation was sound, with the Bank’s common equity tier-1 (CET-1) capital ratio clocking in at 13.1% as at end-September 2019, supported by earnings accretion and sizeable investment accounts (IAs). The latter lifted the CET-1 capital ratio by 1.7 percentage points as IAs absorb the credit risks of the assets being funded.

Bank Islam’s issue ratings



Rating Outlook

RM1 bil Subordinated Sukuk Murabahah Programme (2015/2045)



RM10 bil Sukuk Murabahah Programme (2018/-)

  • Senior Sukuk Murabahah
  • Subordinated Sukuk Murabahah









Analytical contact
Tan Shu Xuan
(603) 3385 2497

Media contact
Padthma Subbiah
(603) 3385 2577


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
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Ratings on Bank Islam Malaysia Berhad