Tuesday, Nov 19, 2019
MARC
has affirmed CIMB Islamic Bank Berhad’s (CIMB Islamic) financial institution
(FI) ratings of AAA/MARC-1 with a stable outlook. CIMB Islamic’s FI
rating is equalised to parent CIMB Bank Berhad (AAA/Stable) based on
its strategic importance in Islamic banking, its shared branding and close
operational integration within the group.
The
rating agency has concurrently affirmed the ratings on CIMB Islamic’s sukuk
issuances with a stable outlook as follows:
- RM10.0 billion Senior Sukuk Wakalah Programme
(Sukuk Wakalah) at AAAIS; and
- RM5.0 billion Tier 2 Junior Sukuk Programme
at AA+IS.
At
end-1H2019, CIMB Islamic’s total assets stood at RM104.4 billion,
accounting for 13.0% of Malaysia’s Islamic banking system assets. The bank
remains the second-largest Islamic bank domestically. Financing growth
continued to be strong, growing 14.2% y-o-y in 1H2019 compared to the Islamic
banking industry growth of 8.2% in the same period. The bank’s financing growth
policy benefits from its parent’s “Islamic First” strategy under which
Islamic financing services are prioritised.
As
a result of the strong financing growth during 1H2019, pre-tax profit was
higher at RM557.1 million (1H2018: RM496.5 million). On annualising the
net financing margin for 2019, it would be marginally lower at 1.69%
(2018: 1.72%). MARC views margin pressure to continue due to intense
competition among domestic Islamic banks. The bank’s liquidity and funding
profiles remain sound, with a financing-to-funds ratio of 81.4% as at
end-1H2019 (2018: 81.1%); liquidity coverage ratio is above the minimum 100%
requirement.
CIMB Islamic’s gross
impaired financing (GIF) ratio rose sharply to 1.76% (2018: 0.62%) largely due
to an impairment in the working capital segment related to financing in real
estate and manufacturing. The rating agency understands that this impairment is
expected to be reversed in the near term. Asset quality could be affected due
to the seasoning effect following strong financing growth in recent years.
CIMB Islamic’s healthy capitalisation ratios
will continue to mitigate asset quality concerns. Common Equity Tier 1 (CET1)
and total capital ratios stood at 13.2% and 15.5% as at end-1H2019 (2018:
13.5%; 16.2%). The bank’s capital position is supported by internal capital
generation and by its parent CIMB Bank through the restricted profit-sharing
investment account which absorbs credit risk. As at end-June 2019, the
total risk-weighted assets for credit risk absorbed by the parent stood at
RM6.7 billion (2018: RM6.9 billion).
Contacts:
Raj Shankar, +603-2717 2956/ rajshankar@marc.com.my;
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my