RAM Ratings reaffirms AAA financial institution ratings of Maybank and its banking entities

Published on 09 Dec 2022.

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RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings (FIRs) of Malayan Banking Berhad (Maybank or the Group) and its banking subsidiaries. Concurrently, the ratings of the entities’ sukuk/debt facilities have also been reaffirmed (listed in Table 1). 

The rating action reflects Maybank’s dominant market position as the largest bank in Malaysia, its strong funding capabilities and proven management track record. Maybank’s diverse income sources continue to generate healthy operating income before impairment charges. This, combined with sturdy capitalisation, provides the Group with sufficient financial headroom to withstand asset quality pressures over the next 12-18 months. Considering Maybank’s systemic importance to Malaysia, we believe extraordinary support will come through if needed.

Loans under some form of relief as a proportion of outstanding loan balances declined in all key markets but in Malaysia, the figure is somewhat higher than the domestic industry average. The repayment capacity of certain portfolios remains untested as some of these loans will only commence repayments by end-2022 or are under assistance until at least March 2023 (Indonesian portfolio). Owing to heightened inflationary pressures, we expect some uptick in Maybank’s gross impaired loan (GIL) ratio over the next few quarters, albeit staying manageable. The ratio came in at a controlled 1.8% as at end-June 2022, thanks to recoveries, write-offs and low formation of newly impaired loans which we believe is due to ongoing forbearance for some portfolios including the Indonesian segment. Total management overlay amounted to RM1.7 bil as at the same date. This has strengthened the Group’s loan loss coverage, which stood at 139% (including regulatory reserves) as at end-June 2022 (end-December 2020: 117%). 

Investments to support strategic initiatives under its M25+ Strategy will keep Maybank’s cost to income ratio above current levels of 45%-46% in the near term. This will limit potential upside to the Group’s return on risk-weighted assets (RoRWA) despite gradual net interest margin (NIM) expansion in line with rate rises. In 1H FY Dec 2022, NIM and RoRWA climbed to an annualised 2.4% and 2.8%, respectively. Maybank’s capital position remains a key rating strength, its post-dividend common equity tier-1 capital ratio standing at a sturdy 14.3% as at end-June 2022. 

Maybank Islamic Berhad’s and Maybank Investment Bank Berhad’s FIRs mirror those of the Group, given our view that these core subsidiaries are strategically important to it. Maybank Islamic, the Group’s flagship Islamic banking entity, is the largest Islamic bank in Malaysia and is well regarded in the global Islamic finance industry. The Group’s investment banking and stockbroking arm, Maybank Investment, is a prominent name in the local investment banking scene, consistently ranking among the top three in the domestic equity and debt capital market league tables.
 

Table 1: Ratings of entities and debt issues

	Ratings
Malayan Banking Berhad Financial Institution Ratings ASEAN scale Malaysian scale	seaAAA/Stable/seaP1 AAA/Stable/P1
RM20 billion Subordinated Note Programme (2012/-)	AA1/Stable
RM10 billion Additional Tier-1 Capital Securities Programme (2014/-)	AA3/Stable
RM10 billion Senior Medium-Term Note Programme (2015/-)	AAA/Stable
RM10 billion Commercial Paper/Medium-Term Note Programme (2016/2023) Commercial Papers Medium-Term Notes	P1 AAA/Stable
RM30 billion Sukuk Programme (2017/-) – upsized from RM10 billion previously Senior Sukuk Murabahah Subordinated Sukuk Murabahah Additional Tier-1 Sukuk Mudharabah	AAA/Stable AA1/Stable AA3/Stable
Maybank Islamic Berhad Financial Institution Ratings	AAA/Stable/P1
RM10 billion Subordinated Sukuk Murabahah Programme (2014/2034)	AA1/Stable
RM10 billion Islamic Commercial Paper/Medium-Term Note Programme (2017/2024) Islamic Commercial Papers Islamic Medium-Term Notes	P1 AAA/Stable
RM10 billion Islamic Additional Tier-1 Capital Securities Programme (2017/-) RM20 bil Islamic Commercial Paper Programme RM20 bil Islamic Medium-Term Note Programme	AA3/Stable P1* AAA/Stable*
Maybank Investment Bank Berhad Financial Institution Ratings	AAA/Stable/P1

* Announced on 15 November 2022

 

Analytical contacts
Chan Yin Huei
(603) 3385 2498
yinhuei@ram.com.my

Loh Kit Yoong
(603) 3385 2493
kityoong@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 2022 by RAM Rating Services Berhad

Rating Rationale: Malayan Banking Berhad

Rating Rationale: Maybank Islamic Berhad

Rating Rationale: Maybank Investment Bank Berhad

Ratings on Malayan Banking Berhad