[RAM] RAM Ratings affirms Bank Muamalat's A2/P1 financial institution ratings

RAM Ratings has affirmed Bank Muamalat Malaysia Berhad’s (the Bank) A₂/Stable/P1 financial institution ratings (FIR) and the A₃/Stable rating of its RM1 billion Subordinated Sukuk Murabahah Programme (2016/2036). The one-notch difference between the two ratings reflects the subordination of the facility to the Bank’s senior unsecured obligations.

Bank Muamalat’s credit profile remains anchored by its sound asset quality, underpinned by a notable share of personal financing with salary transfer and deduction arrangements and government-guaranteed home loans, which collectively constitute around 30% of its financing base. While delinquencies may continue to edge up, we expect the slippage to remain contained. As at end-March 2025, the Bank’s gross impaired financing (GIF) ratio stood at 1.2%. Impairment charges were higher last year, primarily owing to non-retail exposures. Management anticipates both the credit cost and GIF coverage ratios to improve by end-fiscal 2025, aided by provision writebacks and recoveries. 

The Bank has slowed financing growth as part of a rebalancing strategy, a trend which we anticipate continuing in the near term. This more measured and capital-efficient financing growth, along with the ongoing optimisation of risk-weighted assets (RWA) will support its capital ratios, which have been under strain from a rapid increase in financing in recent years (three-year compound annual growth rate: 16%). The Bank’s common equity tier-1 capital ratio stood at 11.1% (industry: 13.9%). The weaker-than-industry capitalisation is a key moderating factor.

Bank Muamalat’s three-year average return on RWA and return on assets were modest at 1.1% and 0.7%, respectively, lagging peers’. Profitability, although improving, has been weighed down by an elevated cost structure and a relatively low proportion of non-finance income. Nonetheless, the Bank’s strategic pivot towards higher-yielding segments is expected to aid margin expansion. In FY Dec 2024, Bank Muamalat reported a weaker profit before tax of RM129 mil (-56% y-o-y) due to higher impairment charges.


Analytical contacts
Chan Yin Huei
(603) 2708 8296
yinhuei@ram.com.my

Johan Faizul
(603) 2708 8235 
johan@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my