RAM Ratings assigns A1 rating to AmIslamic's proposed RM2 billion subordinated sukuk

Published on 23 September 2011
RAM Ratings has assigned an A1 rating to AmIslamic Bank Berhad’s (AmIslamic or the Bank) proposed RM2 billion Subordinated Sukuk Musyarakah Programme (Proposed Securities); the long-term rating has a stable outlook. Meanwhile, AmIslamic’s long- and short-term financial institution ratings have been reaffirmed at AA3 and P1, respectively. Concurrently, the ratings of the Bank’s RM3 billion Senior Sukuk Musyarakah Programme (2010/2040) and RM400 million Subordinated Sukuk Musyarakah Programme (2006/2016) have also been reaffirmed at a respective AA3 and A1. The 1-notch differential between the AA3 financial institution rating of AmIslamic and the A1 rating of the Proposed Securities denotes the subordinated nature of the latter. All the long-term ratings have a stable outlook.

AmIslamic’s financial institution ratings mirror the AA3/Stable/P1 ratings of its sister bank, AmBank (M) Berhad (AmBank). AmIslamic leverages on the back-room operations and risk-management systems of AmBank, on top of relying on the latter’s branches and network. Given that AmIslamic is viewed as a key component of the larger AMMB Holdings Berhad (AHB) universal-banking group, liquidity and financial support is expected to be readily extended if required.

Additionally, the ratings are underpinned by AmIslamic’s relatively sound asset-quality indicators. The Bank’s gross impaired-financing ratio stood at 1.8% as at end-June 2011 (end-March 2010: 1.5%), compared to the industry average of 2.9%. At the same time, AmIslamic’s tier-1 and overall risk-weighted capital-adequacy ratios declined to a respective 8.0% and 12.5% (end-March 2010:10.5% and 15.3%), due to a spike in risk-weighted assets. This had been brought by a change in the Bank’s financing mix (i.e. a larger portion of financing for business enterprises, which attract higher credit risk charges), financing growth, as well as the reinstatement of capital charge on undrawn credit facilities. We expect the Bank’s overall RWCAR to improve after the drawdown of the Proposed Securities, which qualify as tier-2 capital.

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Amy Lo
(603) 7628 1078
amy@ram.com.my