Published on 12 Dec 2017.
RAM Ratings has reaffirmed Bank Islam Malaysia Berhad’s (the Bank) AA3/Stable/P1 financial institution ratings. Concurrently, we have also reaffirmed the A1/Stable rating of the Bank’s RM1.0 billion Subordinated Sukuk Murabahah Programme (2015/2045).
The reaffirmation reflects our expectation that the Bank will be able to count on ready financial support from its major shareholder, Lembaga Tabung Haji (the Fund), in times of need. Nonetheless, any significant change in the Fund’s effective shareholding in Bank Islam would necessitate a reassessment of the Bank’s ratings.
While Bank Islam has a well-established franchise in the Malaysian Islamic banking sphere, its market position is still limited relative to the larger domestic universal-banking groups. This remains a challenge against the expansion of its retail deposits, which only made up a relatively small 14% of its total deposits as at end-June 2017. Its liquidity coverage ratio is also below the industry average, although it exceeds the minimum requirement.
That said, the Bank continues to display commendable asset quality, with a low gross impaired-financing ratio of 1.0% as at end-June 2017 (industry average: 1.6%). Its credit-cost ratio also remains benign, hovering around 20-25 bps. While the spiralling cost of living may weaken the asset quality of the Bank’s household financing, a significant portion (55%) of such financing is repaid via non-discretionary salary transfers or salary deductions. These repayment features are expected to sustain the Bank’s overall asset quality. Meanwhile, the Bank’s capital position has remained strong, with respective common-equity tier-1 and total capital ratios of 13.0% and 16.0% as at end-June 2017.
Analytical contact
Chew Wei Li
(603) 7628 1025
weili@ram.com.my
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
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