RAM Ratings assigns A3 rating to Bank Islam’s proposed RM5 bil AT-1 Sukuk Programme

Published on 27 Jun 2022.

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RAM Ratings has assigned a long-term rating of A3/Stable to Bank Islam Malaysia Berhad’s (the Bank) proposed RM5 bil Additional Tier-1 Capital Sukuk Wakalah (AT-1 Sukuk), as listed in Table 1.

Since our last review in December 2021, Bank Islam’s credit metrics have stayed intact. Asset quality ratios continue to fare better than the banking system’s despite the impairment of a lumpy corporate exposure late last year. The Bank’s gross impaired financing (GIF) ratio edged up to 1.0% as at end-March 2022 (end-December 2020: 0.7%; banking system: 1.6%) while financing loss coverage was around 181%. 

Meanwhile, financing under relief reduced to 4.6% as at end-March 2022 (end-December 2021: 40%). Defaults will likely crop up as customers wean off financial reprieve measures and resume normal repayments, although GIF formation will be partly mitigated by the Bank’s sizeable portion (above 60%) of consumer financing with non-discretionary salary deduction or salary transfer arrangements. We further believe that Bank Islam’s sturdy provisioning and capital buffers (common equity tier-1 capital ratio of 14.0%) will provide sufficient headroom against potential credit weakening. The ratings also consider ready financial support from the Bank’s ultimate major shareholder, Lembaga Tabung Haji (effective stake of 48.3%), if necessary.

Bank Islam’s earnings for 2021 were affected by higher operating expenditure as well as more subdued investment and trading income. Pre-tax profit fell 3% to RM704.2 mil in fiscal 2021, resulting in a lower return on risk-weighted assets ratio of 1.6% (fiscal 2020: 1.8%). While dampened, the Bank’s profitability is still deemed sound, upheld by a wide net financing margin (NFM). Bank Islam’s NFM was broadly stable, hovering around 2.3% in fiscal 2021 and 1Q fiscal 2022 (annualised), thanks to a high share of lucrative personal financing (~30%) and proactive management of the Bank’s liability profile. We expect the NFM to benefit from the recent 25-bp overnight policy rate hike and the likelihood of another increase in 2H 2022, given that more than 90% of the Bank’s financing are floating rate facilities. Margin expansion however could be partially stifled by keener deposit competition.

Table 1: Bank Islam’s sukuk ratings



Rating Outlook

Proposed RM5 bil Additional Tier-1 Capital Sukuk Wakalah



RM1 bil Subordinated Sukuk Murabahah Programme (2015/2045)



RM10 bil Sukuk Murabahah Programme (2018/-)

  • Senior Sukuk Murabahah
  • Subordinated Sukuk Murabahah






Analytical contacts
Chow Kah Mun
(603) 3385 2501

Wong Yin Ching, CFA
(603) 3385 2555


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.

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Published by RAM Rating Services Berhad
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Rating Rationale

Ratings on Bank Islam Malaysia Berhad