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RAM Ratings affirms AAA financial institution ratings of Maybank and its banking entities
Published on 25 Nov 2024.
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 healthy asset quality, 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.
As at end-June 2024, Maybank’s gross impaired loan ratio eased to 1.3%, thanks to steady write-offs, strong recoveries and slower inflow of newly impaired loans. While there are pockets of vulnerabilities, particularly among certain self-employed and borrowers from the B40 income group, as well as retail SMEs, we expect the Group to effectively manage these risks through heightened monitoring, early intervention through loan restructurings and strengthened collection efforts. Loan loss coverage (including regulatory reserves) stayed robust at 156%. The Group expects the credit cost ratio to stay below 30 bps for fiscal 2024 (1H FY Dec 2024: 27 bps).
Maybank delivered solid financial results in 1H FY Dec 2024, registering an improved profit before tax of RM6.9 bil (+7.2% y-o-y). This performance was primarily driven by a notable 28.4% growth in non-interest income, fueled by stronger core fees, improved insurance contributions and gains from treasury and market activities. Continued investments in IT and digital spend kept cost-to-income ratio higher than average levels in the past (48.6% in 1H FY Dec 2024). Net interest margin (NIM) compressed 11 bps to 2.0% in 1H FY Dec 2024 compared to FY Dec 2023 on higher funding costs. Management plans to temper mortgage growth in 2H FY Dec 2024, prioritising higher-yielding commercial lending to bolster NIM, in addition to shedding off costlier deposits.
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. 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
Analytical contacts
Chan Yin Huei
(603) 3385 2498
yinhuei@ram.com.my
Sean Lim, CFA
(603) 3385 2550
sean@ram.com.my
Media contact
Sakinah Ariffin
(603) 3385 2500
sakinah@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 2024 by RAM Rating Services Berhad
Rating Rationale: Malayan Banking Berhad
Rating Rationale: Maybank Islamic Berhad
