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RAM Ratings reaffirms Maybank Islamic’s AAA financial institution rating

Published on 23 Jan 2020.

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RAM Ratings has reaffirmed Maybank Islamic Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings (FIRs) as well as the ratings of its sukuk programmes (Table 1 below). The reaffirmation of the FIRs reflects our expectation of ready parental support from Malayan Banking Berhad (Maybank or the Group, rated AAA/Stable/P1) in times of need, in view of the Bank’s strategic importance as the latter’s Islamic banking arm.

With an asset base of RM240 bil as at end-September 2019, Maybank Islamic is the largest Islamic bank in Malaysia, standing among the top five Islamic banks in the world by asset size. It dominates the domestic Islamic banking sector, commanding a 31% share of the industry’s gross financing and 29% of deposits and customer investment accounts (IAs) as at end-September 2019. Maybank Islamic’s financing growth continued to outdo the broader banking system’s – registering a swifter pace of 10% y-o-y in 9M fiscal 2019, against the system’s 4% for the same period.

Maybank Islamic’s gross impaired financing (GIF) ratio had ticked up to 1.45% as at end-September 2019 (end-December 2018: 1.18%), primarily attributable to the impairment of specific corporate exposures. Despite the uptrend in its headline GIF indicator, the Bank reported a net write-back position for its credit cost ratio in 9M fiscal 2019 (fiscal 2018: 22 bps), as the release of allowances following a refinement of the impairment methodology for the retail book fully negated provisioning charges made during the year. The slowing growth environment could pose downside risk to Maybank Islamic’s asset quality in the near term, although potential impairments are expected to be manageable, given the Bank’s ample loss absorption buffers in the form of strong pre-provision earnings and healthy capitalisation. 

The Bank’s post-dividend common equity tier-1 capital ratio eased to 12.7% as at end-September 2019 (end-December 2018: 14.4%) on the back of an interim dividend payment in 3Q 2019 as well as reduced capital savings from the ongoing paring down of costlier IAs. Although lower, Maybank Islamic’s capital position is deemed sound vis-à-vis its risk profile and supportive of the Bank’s growth agenda.

Table 1: Maybank Islamic’s sukuk ratings

 

Ratings

RM10.0 bil Subordinated Sukuk Murabahah Programme (2014/2034)

AA1/Stable

RM10.0 bil Islamic Commercial Papers/Medium-Term Notes Programme (2017/2024)

AAA/Stable/P1

RM10.0 bil Islamic Additional Tier-1 Capital Securities Programme (2017/-)

AA3/Stable

 

Analytical contact
Loh Kit Yoong
(603) 3385 2493
kityoong@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 2020 by RAM Rating Services Berhad



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