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Press Release
06 Sep | Thursday
RAM Ratings assigns initial ratings to Bank Islam’s proposed RM10 billion Sukuk Murabahah Programme
RAM Ratings has assigned respective AA3/Stable and A1/Stable ratings to the Senior and Subordinated Sukuk Murabahah to be issued under Bank Islam Malaysia Berhad’s (the Bank) proposed RM10 billion Sukuk Murabahah Programme. Concurrently, we have reaffirmed the Bank’s AA3/Stable/P1 financial institution ratings (FIR). The A1/Stable rating of the Bank’s RM1.0 billion Subordinated Sukuk Murabahah Programme (2015/2045) has also been reaffirmed.   
 
The reaffirmation reflects our expectation that the Bank will be able to count on ready financial support from its major shareholder, Lembaga Tabung Haji (the Fund), in times of need. Nonetheless, any significant change in the Fund’s propensity to support the Bank or in its effective shareholding would necessitate a reassessment of the ratings.
 
While Bank Islam has a well-established franchise in the Malaysian Islamic banking sphere, its market position is still limited relative to larger domestic universal-banking groups. This remains a challenge in expanding the Bank’s retail deposits, which only made up a relatively small 11% of total deposits as at end-March 2018 (industry: 38%). That said, the Bank continued to display commendable asset quality, with a low gross impaired-financing ratio of 1.0% as at the same date (industry average: 1.6%). The Bank’s capital position has also stayed strong, with respective common-equity tier-1 and total capital ratios of 12.6% and 16.5%. 
 
The Subordinated Sukuk are Basel III-compliant and will qualify as tier-2 regulatory capital. These are rated one notch below Bank Islam’s long-term FIR, underlining their lower ranking in the priority of claims in the event of bankruptcy or liquidation, relative to the Bank’s senior unsecured creditors. The Subordinated Sukuk also entail a Consolidated Capital Recognition Option (CCRO), which facilitates the recognition of the sukuk in the computation of the Group’s regulatory capital base. If the CCRO is selected, it will be a condition precedent to the issuance of such tranche for which a rating has been procured from RAM.
 
 
Analytical contact
Chew Wei Li
(603) 7628 1025
weili@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 6 September 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Ó Copyright 2018 by RAM Rating Services Berhad
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