MARC has affirmed Maybank Islamic Berhad’s (Maybank Islamic) long-term
and short-term financial institution (FI) ratings of AAA and MARC-1
respectively with a stable outlook. The long-term rating of
Maybank Islamic is equalised with the rating of its parent Malayan Banking
Berhad (Maybank) on the basis of the former’s significance as Maybank’s Islamic
banking arm and its contribution to group profitability. Both banking entities
are also operationally integrated with shared branding between them, underpinning
MARC’s assessment of a high likelihood of full and timely financial support
from the parent.
Maybank Islamic maintains a lead position in the
domestic Islamic banking industry with a 30.9% market share of assets as at
end-June 2016. Financing growth, averaging at
22.9% per annum (p.a.) over the last five years, has outpaced the industry
average of 19.3% p.a. over the same period. The rapid pace of financing growth
has contributed to a weakening in Maybank Islamic’s asset quality
metrics, partly due to the seasoning effect. The gross impaired financing ratio
increased to 1.17% as at end-June 2016 from 0.67% as at end-2015 with the
higher impairment arising mainly from the corporate segment. However, Maybank
Islamic’s financing loss coverage ratio has declined to an adequate 74.6% as at
end-June 2016 from 109.5% as at end-2015. MARC views that in light of the
prevailing challenging economic conditions, the likelihood for the Islamic
bank’s asset quality to weaken further has increased, which could result in
higher provisioning over the near term.
Maybank
Islamic maintains a sound capital position as reflected by CET1 and total
capital ratios of 13.9% and 18.4% respectively as at end-June 2016 (2015:
12.4%; 16.5%), supported by internal capital generation and the Restricted
Profit Sharing Investment Account (RPSIA) maintained by its parent. In
addition, its capital position benefited from the reclassification of
Mudharabah deposits to investment accounts in June 2015, enabling the Islamic
bank to transfer the credit risk on assets funded by investment accounts to
investment account holders. Largely due to the reclassification, the
risk-weighted assets (RWA) for credit risk absorbed by the parent and
investment account holders rose to RM15.4 billion (2015: RM9.1 billion for
RPSIA). As a result, total RWA declined by 8.7% y-o-y as compared to the 14.6%
y-o-y increase in capital base in 1H2016, providing an improved buffer for
growth and for absorbing credit loss.
.
MARC observes Maybank Islamic’s customer deposits has remained fairly
unchanged at RM106.3 billion as at end-June 2016 following the reclassification
of Mudharabah deposits; however, on including its investment account balance of
RM31.0 billion, customer deposit growth was strong at 28.9% y-o-y as at
end-June 2016. The gross financing-to-deposit ratio remained high at 100.8%
(2015: 107.3%) but would stand lower at 88.7% on excluding financing support
from Maybank via the RPSIA
of RM12.9 billion (end-2015: RM11.0 billion).
For 1H2016, the net financing margin was marginally
higher at 1.90% due to an uptick in financing rate for certain segments
(1H2015: 1.88%). Maybank Islamic’s pre-tax pre-provision profit grew by 14.7%
y-o-y to RM1,086.0 million, largely attributed to the increase in financing
growth in the period. MARC notes that Maybank Islamic is on track to comply
with the Basel III framework; it issued RM2.0 billion Tier-2 Basel
III-compliant subordinated sukuk in February 2016 and redeemed its RM1.0
billion non-Basel III-compliant sukuk in March 2016.
The stable outlook on Maybank Islamic reflects MARC’s
expectation that Maybank Islamic will sustain its strong market position in the
domestic Islamic banking industry and remain a core entity of the Maybank
group.
Contacts: Afeeq Amiri, +603-2082 2256/ afeeqamiri@marc.com.my; Sharidan
Salleh, +603-2082 2254/ sharidan@marc.com.my.
October 10, 2016
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