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 FI rating of Maybank Islamic has been equalised to that of its parent Malayan Banking Berhad (Maybank) based on the former’s significance as the Islamic banking arm of Maybank group, underpinned by shared infrastructure and resources.

Maybank Islamic has a leading market position with gross financing and total customer deposits accounting for 33.6% and 25.6% respectively of the total domestic Islamic banking sector as at end-June 2017. Its market strength stems from the ability to leverage on Maybank’s well-established brand name, infrastructure and distribution network, enabling Maybank Islamic to register strong financing growth. This growth continues to be supported by the group’s “Islamic first” strategy. As at end-2016, Maybank Islamic's gross financing portfolio grew by 14.3% y-o-y, higher than the domestic Islamic banking sector’s average growth rate of 11.4% in the same period. For 1H2017, however, Maybank Islamic’s financing growth slowed down to 3.1% which was in line with the trend in the domestic Islamic banking sector.

Maybank Islamic’s gross impaired financing (GIF) ratio increased marginally to 1.09% (end-2016: 0.99%). The bank’s financing loss allowance coverage declined to 89.8% from 92.0% in 2016, but remains higher than the Islamic banking sector’s average of 83.6%. Over the intermediate term, the GIF could come under pressure from the seasoning effect following the sharp growth in financing in recent years. The bank has a sound capital position as reflected by its CET1 and total capital ratios of 13.4% and 17.8% respectively as at end-June 2017. MARC opines that the bank’s capital position will continue to be supported by internal capital generation and capital savings from investment accounts as well as restricted profit sharing investment accounts (RPSIA). As at end-June 2017, the total risk-weighted assets for credit risk absorbed by the bank’s parent and investment account holders were RM16.0 billion (equivalent to 3.51% capital savings).

For 1H2017, Maybank Islamic posted a 38.6% y-o-y higher net profit of RM776.7 million, mainly supported by a 13.0% increase in net financing income, due largely to the bank’s larger financing base. Returns on asset and equity measures have shown improvement to 0.9% and 17.1% respectively on an annualised basis (1H2016: 0.7%; 13.5%). MARC notes that bank’s cost-to-income ratio remains low at 36.3% compared to its peers. Maybank Islamic’s funding growth has been largely driven by the increase in investment accounts to RM27.8 billion as at end-June 2017 compared to RM17.7 billion as at end-2015. Investment accounts comprised 15.8% of the bank’s total funding. The bank’s liquidity level remains healthy as reflected by the gross financing-to-fund ratio of 83.4% and CASA-to-total customer deposits ratio of 28.0%. Nonetheless, term deposits, which remain the dominant component of the bank’s deposit base, and the sizeable investment accounts would pressure the bank’s funding cost.

The stable outlook on Maybank Islamic reflects MARC’s expectation that the bank would remain as a core entity of the Maybank group and will sustain its strong market position in the domestic Islamic banking sector.

Contacts:
Afeeq Amiri, +603-2717 2956/ afeeqamiri@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my.