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RAM Ratings affirms MUFG Malaysia’s AA1/P1 financial institution ratings and AAA(bg) issue rating
Published on 21 Nov 2023.
RAM Ratings has affirmed MUFG Bank (Malaysia) Berhad’s (MUFG Malaysia or the Bank) AA1/Stable/P1 financial institution ratings as well as the AAA(bg)/Stable rating of its USD500 million Multi-Currency Sukuk Wakalah Bi Al-Istithmar Programme.
The issue rating reflects an irrevocable and unconditional guarantee on the sukuk extended by the Bank’s parent, MUFG Bank Ltd (rated AAA/Stable/P1 by RAM). MUFG Bank Ltd is the commercial banking arm of Mitsubishi UFJ Financial Group, one of the world’s largest financial groups and Japan’s leading banking group.
MUFG Malaysia’s ratings incorporate our view that the Bank will continue to enjoy parental support should the need arise, given its strategic importance to and close relationship with its parent, MUFG Bank Ltd. The Bank’s robust capitalisation and superior asset quality are also credit positive but its small presence, high borrower and depositor concentration, and relatively volatile profitability continue to moderate the ratings.
The Bank reported a higher pre-tax profit and return on risk-weighted assets of RM489.9 mil and 4.2%, respectively, in FY Mar 2023 (FY Mar 2022: RM346.8 mil and 2.9%) amid interest rate hikes and better trading income. MUFG Malaysia’s profitability is subject to market fluctuations due to its large forex trading and derivative business – trading income contributed an average of 38% of gross income over the last five years.
As MUFG Malaysia’s lending strategy focuses on locally incorporated subsidiaries of established Japanese multinational companies and highly rated domestic corporates, the Bank’s impaired loans are negligible although exposing it to borrower and depositor concentration risk. Strong capitalisation (end-June 2023 common equity tier-1 capital ratio: 30.9%) and healthy earnings accretion afford the Bank an ample loss absorption buffer if required.
Analytical contacts
Lee Jo Yee
(603) 3385 2583
joyee@ram.com.my
Sophia Lee
(603) 3385 2619
sophia@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, in as much 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
