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RAM Ratings affirms Al Rajhi Malaysia at AA1/P1; outlook stable
Published on 01 Dec 2025.
RAM Ratings has affirmed Al Rajhi Banking & Investment Corporation (Malaysia) Berhad’s (ARBM or the Bank) financial institution ratings of AA1/Stable/P1.
The ratings consider a ‘high’ likelihood of parental support from Al Rajhi Banking and Investment Corporation SJSC (the Group), the world’s largest Islamic bank by total assets. ARBM is considered strategically important as a key overseas operating unit of the Group, integral to the Group’s growth strategy. This is evidenced by substantial parental support, including a RM542 mil equity injection, subscription to SAR810 mil of the Bank’s subordinated sukuk and the provision of a USD580 mil liquidity facility.
The Bank’s standalone credit profile is underpinned by healthy asset quality and sound funding and liquidity position. However, the Bank’s credit strengths are offset by its small domestic franchise, modest capitalisation and profitability metrics that remain below those of its peers. Its modest domestic franchise accounts for less than 1% of the industry’s financing and deposits.
ARBM’s gross impaired financing (GIF) ratio increased slightly to 0.6% as at end-June 2025 (end-December 2023: 0.3%), primarily due to an impaired corporate account. Nevertheless, this remains well below the industry’s 1.4%. The credit cost ratio was lower at an annualised 16 bps in 1H FY Dec 2025 (FY Dec 2024: 24 bps), given reduced fresh impairments in the period. GIF coverage (including regulatory reserves), while down at 260%, remains ample to absorb potential losses.
Traction gained from ARBM’s digital bank – rebranded to MY alrajhi from RIZE – has driven an increase in retail deposits, which rose to 18% of retail deposits as at end-June 2025 compared to 5% as at end-2022. Total deposits continued to grow strongly at 14% to RM13.3 bil in the 18-month period ended-June 2025, primarily driven by retail inflows while total financing expanded by a slower 3%. ARBM’s current and savings account deposits ratio fell further to 37% (end-2023: 40%), as fixed deposits made up the bulk of growth.
Profitability improved, supported by enhanced income generation and cost efficiency. The Bank’s pre-tax profit jumped 73% to RM173 mil in FY Dec 2024 (FY Dec 2023: RM100 mil), continuing the momentum into 1H FY Dec 2025 (+75% y-o-y to RM104 mil), driven by margin expansion, lower impairments and improved investment income. The annualised return on risk-weighted assets stayed stable at 1.6% in 1H fiscal 2025, albeit still below peer averages. ARBM’s common equity tier-1 capital ratio stood at 11.3% as at end-June 2025, at the lower end of the industry range, while the total capital ratio was a strong 22.6%, bolstered by subordinated sukuk issuances subscribed by the Group.
Analytical contacts
Johan Faizul
(603) 2708 8235
johan@ram.com.my
Lee Yee Von
(603) 2708 8217
yeevon@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
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 2025 by RAM Rating Services Berhad
Ratings on Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
