RAM Ratings reaffirms AmIslamic's AA3/P1 ratings

The 1-notch rating differential between AmIslamic’s AA3 long-term financial institution rating and the A1 rating of its Subordinated Sukuk reflects the subordination of the debt facility to its senior unsecured obligations.
AmIslamic’s financial institution ratings mirror the AA3/Stable/P1 ratings of AmBank (M) Berhad (AmBank), the core entity within the AMMB Holdings Berhad (AMMB or the Group) universal-banking group. As the Islamic banking arm of the Group, the Bank leverages on AmBank’s risk-management systems, back-room operations and common infrastructure, in addition to riding on its branch network and distribution channels. Funding and capitalisation are managed at group level and support is expected to be forthcoming from AmBank, should the need arise.

Together, AmIslamic and AmBank have a well-established franchise in vehicle financing as Malaysia’s third-largest automobile financier. The Bank’s strategies are closely aligned with those of AmBank. In line with AmBank’s focus on portfolio diversification, AmIslamic has placed greater emphasis on the business and corporate segments, which are viewed to yield better returns given the greater cross-selling opportunities. The Bank’s proportion of vehicle financing declined to 46.7% as at end-September 2011 (end-March 2010: 52.9%), albeit still its largest financing component.

AmIslamic’s asset quality is still deemed sound despite having been affected by regulatory structural changes in the personal-financing space in 2010. Personal financing formed 14% of the Bank’s gross financing as at end-September 2011. Although higher financing impairment charges arising from this portfolio had dragged down AmIslamic’s profit performance in FYE 31 March 2011 (FY Mar 2011), this moderated in 1H FY Mar 2012. Meanwhile, AmIslamic’s capitalisation is deemed sufficient, with respective tier-1 and overall risk-weighted capital-adequacy ratios of 8.2% and 14.3% as at end-September 2011.

Media contact
Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my