MARC AFFIRMS CIMB ISLAMIC'S FI RATING AT AAA AND CONCURRENTLY AFFIRMS ITS TIER 2 JUNIOR SUKUK AT AA+IS ; OUTLOOK STABLE

Nov 29, 2011 -

MARC has affirmed CIMB Islamic Bank Berhad’s (CIMB Islamic) long-term financial institution rating at AAA and concurrently affirmed its rating on CIMB Islamic’s Tier 2 Junior Sukuk Programme at AA+IS. The outlook on the long-term rating is stable. CIMB Islamic’s financial institution rating is equated to parent CIMB Bank Berhad’s (CIMB Bank), on account of the high level of the Islamic bank’s integration with and support from CIMB Bank. CIMB Islamic also derives credit strength from being part of a larger group, CIMB Group, on account of the group’s very strong competitive position, sustainable core profitability, strong credit metrics and focused growth strategy. CIMB Islamic’s Junior Sukuk is rated one notch lower than its financial institution rating due to the subordination of the Sukuk to the bank’s deposits and its other senior unsecured debt.

CIMB Islamic was incorporated as a wholly-owned subsidiary of CIMB Bank to spearhead the Islamic banking activities of the Group. CIMB Islamic’s banking model leverages its parent bank’s banking infrastructure and resources. CIMB Islamic continues to enhance its Islamic banking franchise through its active participation in the domestic Islamic capital market and the constant roll-out of new retail offering. This has contributed positively to the bank’s recurring income generation and balance sheet growth. For the first six months of 2011, financing growth moderated to 7.5% following a strong full-year financing growth of 38.9% for the 12 months ended December 31, 2010 (FY2010). Meanwhile, the bank’s gross impaired financing ratio improved slightly to 1.4% (FY2010: 1.5%). Over half of the bank’s financing portfolio is allocated to working capital and residential property financing, which accounted for 28.3% and 25.3% of the bank’s financing portfolio as at end-1H2011.

CIMB Islamic’s customer deposits stood at RM23.0 billion as at end 1H2011, however as the growth in the bank’s financing outpaced its deposit growth, financing to customer deposits ratio came in higher at 106.0%, indicating an increasing dependence on non-core funding sources. Inter-bank deposits increased by 35.3% in FY2010 to support the growth in financing activity during the year. About 82% of its inter-bank deposits or RM9.1 billion is placed by CIMB Bank, which underscores the operational and financial linkages between the two entities.

The bank’s profitability continued its growth momentum in FY2010 with its profit after tax more than doubling to RM301.8 million from FY2009’s RM123.7 million. The strong performance is reflective of the bank’s return on assets which was 0.95% (FY2009 ROA: 0.54%). In 1H2011, the bank recorded a profit after tax of RM197.9 million compared to RM118.0 million in the previous corresponding period. The bank’s profitability was supported by a much lower allowance for impaired financing and higher financing income during the first half of the year.

The bank’s capital levels remained healthy with Tier-1 capital adequacy ratio (CAR) and Total CAR at 10.9% and 15.0% respectively as at end-1H2011, relative to Malaysia’s Islamic banking system ratios of 12.0% and 14.9% respectively. In tandem with the growth in risk weighted assets during the first half of the year, the bank had also enhanced its capital base through the issuance of RM250 million ordinary shares and the issuance of another RM250 million Sukuk from the current rated Programme.

The stable outlook on CIMB Islamic is underpinned by the stable rating outlook of its parent.

Contact:
Milly Leong, +603-2082 2288/ milly@marc.com.my.