CREDIT ANALYSIS REPORT

BANK MUAMALAT MALAYSIA BERHAD - 2019

Report ID 60444 Popularity 1047 views 24 downloads 
Report Date Jan 2020 Product  
Company / Issuer Bank Muamalat Malaysia Bhd Sector Finance - Financial Institution
Price (RM)
Normal: RM500.00        
  Add to Cart
Rationale
 MARC has affirmed its financial institution (FI) ratings of A/MARC-1 on Bank Muamalat Malaysia Berhad (Bank Muamalat) and AIS rating on the bank’s Islamic Senior Notes Programme (Senior Sukuk) of up to RM2.0 billion. The rating on Bank Muamalat’s Senior Sukuk programme is equalised to its long-term FI ratings based on the seniority of the sukuk. The ratings outlook is stable.

The FI ratings incorporate Bank Muamalat’s modest asset size and slow financing growth that have weighed on profitability as well as its strong capitalisation. 

Bank Muamalat’s financing portfolio continues to register modest growth; for the first half ended September 30, 2019, (1HFY2020), financing grew by 3.9% y-o-y, lower than the Islamic banking industry average growth of 8.4% for the same period. Its market share in the domestic Islamic banking industry’s gross financing and total deposits segments stood at a modest 4.0% and 3.2% as at end-1HFY2020. The bank remains hampered by a lack of economies of scale in contrast to its domestic bank-backed peers that are able to share infrastructure and resources with their parent banks.

Bank Muamalat’s gross impaired financing (GIF) ratio rose to 1.55% at end-1HFY2020 from 1.43% at end-FY2019 (industry average: 1.60%), with the increase mainly arising from higher household financing impairments. Its financing loss coverage ratio stood at 72.8% (industry average: 85.2%). The bank’s capitalisation has remained healthy with Tier 1 and total capital ratios standing at 15.9% and 18.6% (industry average: 13.2%; 17.2%). 

In 1HFY2020, Bank Muamalat’s pre-tax profit fell 32.4% y-o-y to RM67.7 million, mainly on the back of higher staff and information technology costs as it rolled out its digital transformation plan. The transformation plan will result in the development of a predictive analytics system by leveraging on big data and artificial intelligence to understand customer segmentations and preferences.


Major Rating Factors

Strength
Strong capitalisation ratios.

Challenges/Risks
Modest financing growth; and
Intense competition in the Malaysian banking industry.

Related