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

Published on 04 Jan 2023.

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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.

Table 1: Bank Islam’s sukuk ratings



Rating Outlook

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
Wong Yin Ching, CFA
(603) 3385 2555

Chow Kah Mun
(603) 3385 2501


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 2023 by RAM Rating Services Berhad

Rating Rationale

Ratings on Bank Islam Malaysia Berhad