Published on 04 Jan 2023.
RAM Ratings has reaffirmed Bank Islam Malaysia Berhad’s (the Bank) AA3/Stable/P1 financial institution ratings and the ratings of its sukuk programmes (Table 1).
The reaffirmations are underpinned by our expectation that Bank Islam’s healthy credit metrics will be sustained despite credit headwinds. The ratings also consider ready financial support from the Bank’s largest shareholder, Lembaga Tabung Haji, if required.
Bank Islam has a track record of solid asset quality, having kept its gross impaired financing (GIF) ratio consistently among the lowest in the industry. Despite an uptick in impairments due to the crystallisation of some corporate accounts, its GIF ratio as at end-September 2022 remained strong at 1.2% (end-December 2021: 1.0%; end-December 2020: 0.7%; industry:1.8%). The proportion of relief financing was a mere 0.5% (average of eight domestic banks in October 2022: 3.5%) while the number of reapplications was immaterial.
We deem the risk of significant credit deterioration to be low in view of a high share (more than 60%) of household financing facilities repaid by non-discretionary salary deductions and transfers. Bank Islam’s robust GIF coverage (148%) and capitalisation (common equity tier-1 capital ratio of 13.9%) as at end-September 2022 reflect its ample loss absorption capacity against further possible delinquencies.
A wide net financing margin (NFM) continues to lend support to the Bank’s overall profitability, largely attributable to its vast pool of lucrative personal financing. While its NFM and credit cost ratio improved to an annualised 2.4% and 22 bps, respectively, in 9M FY Dec 2022 (FY Dec 2021: 2.3% and 33 bps), pre-tax profit was 11% lower y-o-y at RM559.6 mil, dragged down by weaker investment and trading income. That said, Bank Islam’s earnings profile is still considered sound.
RM5 bil Additional Tier-1 Capital Sukuk Wakalah
RM1 bil Subordinated Sukuk Murabahah Programme (2015/2045)
RM10 bil Sukuk Murabahah Programme (2018/-)
Wong Yin Ching, CFA
(603) 3385 2555
Chow Kah Mun
(603) 3385 2501
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Ratings on Bank Islam Malaysia Berhad