RAM Ratings affirms SMBC Malaysia’s AA1/Stable/P1 ratings

Published on 23 Dec 2025.

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RAM Ratings has affirmed Sumitomo Mitsui Banking Corporation Malaysia Berhad’s (SMBC Malaysia or the Bank) AA1/Stable/P1 financial institution ratings. The affirmation reflects the ‘high’ likelihood of extraordinary support from its ultimate parent, Sumitomo Mitsui Financial Group, Inc. (SMFG or the Group), consistent with the Group’s growth strategy in Asia. This financial support has been evident via capital injections and sizeable funding to facilitate business growth.

On its own, SMBC Malaysia’s ratings are underpinned by sturdy capitalisation, superior asset quality and stable funding and liquidity profiles. However, the Bank’s small franchise, soft profitability relative to domestic peers and high borrower and depositor concentration continue to constrain its credit profile. 

The Bank’s lending focus on locally incorporated subsidiaries of Japanese multinationals and top-tier domestic corporates largely keeps its asset quality pristine. With just one impaired borrower account, the gross impaired loan ratio stayed low at 0.4% as at end-September 2025 (end-March 2024: 0.4%) while loan loss coverage (including regulatory reserves) was a robust 488%. SMBC Malaysia remains well-capitalised, with its common equity tier-1 capital ratio standing at 27.3% on the same date (end-March 2024: 25.9%). 

Earnings resilience is supported by strong treasury income and low credit costs. Nonetheless pre-tax profit declined marginally to RM356 mil in FY Mar 2025 and RM194 mil in 1H FY Mar 2026 (FY Mar 2024: RM361 mil; 1H FY Mar 2025: RM206 mil), mainly reflective of lower writebacks. Given its conservative risk appetite, SMBC Malaysia’s margins and pre-tax return on risk-weighted assets are weaker than peers’, with three-year averages of 1.1% and 2.2%, respectively (peer averages: 1.7% and 4.5%). 

 

Analytical contacts
Sean Lim, CFA 
(603) 2708 8253
sean@ram.com.my

Loh Kit Yoong
(603) 2708 8285
kityoong@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
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