P R E S S A N N O U N C E M E N T
MARC ASSIGNS ICSR OF A-ND TO MAYBANK ISLAMIC AND AFFIRMS ITS FINANCIAL INSTITUTION RATINGS OF AAA/MARC-1
MARC has affirmed Maybank Islamic Berhad’s long-term and short-term financial institution (FI) ratings of AAA and MARC-1 based on the domestic rating scale. Maybank Islamic’s long-term FI rating is equalised to parent Malayan Banking Berhad’s (Maybank) rating of AAA, based primarily on its strategic importance to the Maybank group. The ratings outlook is stable.
MARC has also assigned a non-domestic intrinsic credit strength rating (ICSR) of A-ND to the bank. The ICSR is an assessment of Maybank Islamic’s standalone credit profile and considers its healthy capital buffer and satisfactory funding and liquidity position. The ICSR also factors in the bank’s strong domestic Islamic banking franchise and resilient earnings in the highly competitive Islamic banking sector.
The stable ratings outlook on Maybank Islamic reflects MARC’s expectations that the bank will remain a core entity of the Maybank group and sustain its strong market position in the domestic Islamic banking sector.
Maybank Islamic has maintained its leading position in the domestic Islamic banking sector, benefitting from shared branding and resources of its parent Maybank. Its total gross financing stood at RM171.1 billion as at end-June 2018, translating to a market share of 33.2% of Islamic financing in Malaysia. The bank’s business growth continues to be supported by its parent’s “Islamic first” strategy of prioritising Islamic financing services to its customers. As at end-June 2018, Maybank Islamic’s gross financing totalled RM171.1 billion, registering a 10.7% growth y-o-y.
As at end-June 2018, Maybank Islamic’s gross impaired financing (GIF) ratio stood at 1.35%, an increase from 1.05% at end-2017. The increase in the GIF ratio was due to higher impairments in the shipping industry and a one-off increase of RM121.4 million following the adoption of MFRS 9 in January 2018. Excluding the effect of the new accounting rule, the GIF ratio would stand at 1.28% as at end-June 2018. Over the near term, MARC is of the view that Maybank Islamic may face some downside risks given the increasing challenges in the domestic economy.
The one-off impact from the adoption of MFRS 9 as well as higher risk-weighted assets (RWA) over the quarter led to a decline in the bank’s CET1, Tier 1 and total capital ratios to 13.2%, 14.7% and 19.0% (2017: 14.5%, 16.2% and 20.8%). Maybank Islamic has and will continue to receive capital support from its parent through the absorption of RWA. As at end-June 2018, RWA absorbed by the parent and investment account holders stood at RM16.4 billion (equivalent to capital savings of 3.06%).
In 1H2018, Maybank Islamic recorded slightly lower net profit of RM743.0 million (1H2017: RM776.7 million) on higher impairments from the shipping sector as well as higher provision requirements under MFRS 9. The bank’s net financing margin was flat at 1.88% (2017: 1.88%), while its cost-to-income ratio was 33.6% (2017: 35.1%).
Maybank Islamic’s liquidity position remains healthy, with its gross financing-to-fund ratio standing at 89.8% as at end-June 2018 (2017: 87.8%). In terms of funding, the bank has reduced its reliance on costlier investment accounts which declined to RM19.2 billion or 9.7% of total funding (2017: RM24.6 billion; 12.8%).
October 16, 2018
[This announcement is available in MARC’s corporate homepage at http://www.marc.com.my]
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This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.
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