RAM Ratings Reaffirms Bank Muamalat’s A2/P1 Ratings

 RAM Ratings has reaffirmed Bank Muamalat Malaysia Berhad’s (the Bank) A2/Stable/P1 financial institution ratings. Concurrently, the A3/Stable rating of the Bank’s MYR 400 million Islamic Subordinated Sukuk Programme (2011/2026) has also been reaffirmed.

The one notch difference between Bank Muamalat’s A2 long-term financial institution rating and the A3 rating of its Subordinated Sukuk reflects the subordination of the debt facility to the Bank’s senior unsecured obligations.

Bank Muamalat is among the smaller banks in Malaysia, with a one per cent-share of the banking system’s outstanding financing and deposits. The Bank experienced deterioration in asset quality of its manufacturing sector financing, which led to an uptick in its gross impaired-financing ratio to 2.7 per cent as at end-March 2014 (end-March 2013: 2.5 per cent). The Bank’s non-retail financing portfolio also remains concentrated, with lumpy exposures.

While the Bank posted a stronger y-o-y gross financing growth of 14.6 per cent in FY Mar 2014, its net financing income contracted six per cent to MYR 433.7 million, as the bulk of its new financing had been extended in the second half of the financial year. Coupled with heftier operating expenses and a contraction in investment income, the Bank reported a lower pre-tax profit of MYR 208.3 million for the year. 

On the funding front, the Bank faces a high level of depositor-concentration risk, although this is partly mitigated by its liquid balance sheet. However, Bank Muamalat’s capitalisation remains robust, as reflected by its respective common-equity tier-1 and total capital ratios of 14.2 per cent and 17.6 per cent as at end-March 2014.

Originally published on www.cpifinancial.net/