[RAM] RAM Ratings reaffirms AAA financial institution ratings of Maybank and its banking entities

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings (FIRs) of Malayan Banking Berhad (Maybank or the Group) and its banking subsidiaries. Concurrently, the ratings of the entities’ sukuk/debt facilities have also been reaffirmed (listed in Table 1). 

The rating action reflects Maybank’s dominant market position as the largest bank in Malaysia, its strong funding capabilities and proven management track record. Maybank’s diverse income sources continue to generate healthy operating income before impairment charges. This, combined with sturdy capitalisation, provides the Group with sufficient financial headroom to withstand asset quality pressures over the next 12-18 months. Considering Maybank’s systemic importance to Malaysia, we believe extraordinary support will come through if needed.

Loans under some form of relief as a proportion of outstanding loan balances declined in all key markets but in Malaysia, the figure is somewhat higher than the domestic industry average. The repayment capacity of certain portfolios remains untested as some of these loans will only commence repayments by end-2022 or are under assistance until at least March 2023 (Indonesian portfolio). Owing to heightened inflationary pressures, we expect some uptick in Maybank’s gross impaired loan (GIL) ratio over the next few quarters, albeit staying manageable. The ratio came in at a controlled 1.8% as at end-June 2022, thanks to recoveries, write-offs and low formation of newly impaired loans which we believe is due to ongoing forbearance for some portfolios including the Indonesian segment. Total management overlay amounted to RM1.7 bil as at the same date. This has strengthened the Group’s loan loss coverage, which stood at 139% (including regulatory reserves) as at end-June 2022 (end-December 2020: 117%). 

Investments to support strategic initiatives under its M25+ Strategy will keep Maybank’s cost to income ratio above current levels of 45%-46% in the near term. This will limit potential upside to the Group’s return on risk-weighted assets (RoRWA) despite gradual net interest margin (NIM) expansion in line with rate rises. In 1H FY Dec 2022, NIM and RoRWA climbed to an annualised 2.4% and 2.8%, respectively. Maybank’s capital position remains a key rating strength, its post-dividend common equity tier-1 capital ratio standing at a sturdy 14.3% as at end-June 2022. 


Maybank Islamic Berhad’s and Maybank Investment Bank Berhad’s FIRs mirror those of the Group, given our view that these core subsidiaries are strategically important to it. Maybank Islamic, the Group’s flagship Islamic banking entity, is the largest Islamic bank in Malaysia and is well regarded in the global Islamic finance industry. The Group’s investment banking and stockbroking arm, Maybank Investment, is a prominent name in the local investment banking scene, consistently ranking among the top three in the domestic equity and debt capital market league tables.
 

Analytical contacts
Chan Yin Huei
(603) 3385 2498
yinhuei@ram.com.my

Loh Kit Yoong
(603) 3385 2493
kityoong@ram.com.my