Published on 21 Nov 2023.
RAM Ratings has affirmed 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 affirmed (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 its robust capitalisation, provides the Group with sufficient financial headroom to withstand asset quality pressures. Considering Maybank’s systemic importance to Malaysia, we believe extraordinary support will come through if needed.
Credit conditions have become more challenging with slower global economic growth amid a higher interest rate environment. Still, the Group has ample financial buffers to weather credit headwinds from heightened inflationary pressures and residual pandemic-related stresses. As at end-June 2023, Maybank retained RM1.7 bil of management overlays, with 44% allocated for its retail and retail SME portfolios. The Group’s loan loss coverage (including regulatory reserves) stayed robust at 152% while gross impaired loan ratio was a healthy 1.5% as at end-June 2023 helped by recoveries, write-offs and low formation of newly impaired loans. Recently, the Group revised downwards its guidance for credit cost ratio to 30-35 bps for fiscal 2023 (previously, 35-40 bps).
Maybank’s financial performance is expected to stay resilient. The Group enjoys a diversified earnings profile thanks to its commendable franchise in investment banking, stockbroking and insurance which contributes a steady stream of fee-based income. Maybank is also well-equipped to fend off challenger banks in the digital space with its established mobile banking solution and offerings, supported by robust digital infrastructure and platforms as well as continued investments to enhance IT capabilities.
In FY Dec 2022, Maybank registered a higher profit before tax of RM12.2 bil (+11.6% y-o-y), thanks to a substantial reduction in net impairment charges and broader margins. Given higher cost of funds, margins narrowed in 1H fiscal 2023 although profitability remained relatively sound with an annualised return on risk-weighted assets and return on assets of 3.1% and 1.3%, respectively.
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 the latter as Maybank operates a leveraged model. 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
Chan Yin Huei
(603) 3385 2498
(603) 3385 2486
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Rating Rationale: Malayan Banking Berhad
Rating Rationale: Maybank Islamic Berhad
Rating Rationale: Maybank Investment Bank Berhad
Ratings on Malayan Banking Berhad