KUALA LUMPUR: RAM Rating Services has reaffirmed the A2/Stable/P1 financial institution ratings of Bank Muamalat Malaysia Bhd – which is among the smaller banks in the country.
The ratings agency had on Monday also reaffirmed the bank’s A3/Stable rating of its RM400mil Islamic subordinated Sukuk programme (2011/2026).
“The one-notch difference between the bank’s long-term financial institution rating and that of its subordinated Sukuk reflects the subordination of the debt facility to the bank’s unsecured obligations,” it said.
The bank accounts for 1% of the banking system’s outstanding financing and deposits.
Bank Muamalat posted an annualised 12.7% financing growth in 9M FY Mar 2015, mainly driven by home financing.
“The bank intends to refocus its growth strategy on personal financing this year while scaling down its home-financing portfolio given the slower property market and competitive mortgage segment,” it said.
RAM Ratings said the bank’s asset-quality indicators had weakened during the period under review.
Its gross impaired-financing (GIF) ratio had increased to 3.0% as at end-December 2014 (end-March 2014: 2.7%), with the largest upticks in home and personal financing.
Consequently, sizeable provisions had weighed on its performance, thereby negating the gains from its healthier net financing income.
The bank’s pre-tax profit shrank to RM102mil in 9M FY March 2015 (9M FY March 2014: RM130 million).
“However, some of the increase in impairments had been due to technical issues arising from its migration to a new core-banking system in mid-2014 as well as the system’s ability to classify impaired financing in a timelier manner.
“The bank has resolved these issues and is in the midst of recovering the overdue amounts. As a result, it had written back some of its provisions in 4Q FY March 2015 and net impairment charges on financing had eased for the full year,” it said.
RAM Ratings said on the funding front, the bank faces a high level of depositor-concentration risk, although this is partly mitigated by its liquid balance sheet.
It said Bank Muamalat’s capitalisation is sturdy, as reflected by its respective common-equity tier-1 and total capital ratios of 12.8% and 16.0% as at end-December 2014.