[RAM] RAM Ratings affirms Bank Rakyat's AA2/P1 ratings

RAM Ratings has affirmed Bank Kerjasama Rakyat Malaysia Berhad’s (Bank Rakyat or the Bank) AA₂/Stable/P1 financial institution ratings (FIRs) as well as the enhanced ratings of the Bank’s sukuk issued through its funding conduits (see Table 1). The enhanced ratings reflect Bank Rakyat’s irrevocable purchase undertakings to meet its obligations under the sukuk. 

The ratings consider the Bank’s dual role as a cooperative bank and developmental financial institution, and benefit from a credit uplift based on our assessment of a ‘moderately high’ likelihood of government support. The Bank’s standalone credit profile is underpinned by its strong foothold in personal financing (PF) to civil servants and ample loss absorption buffers. While asset quality slippage may still surface in its mortgage and non-retail portfolios, Bank Rakyat’s healthy gross impaired financing (GIF) coverage and solid capital position provide meaningful buffers against potential credit impairment. 

The Bank’s GIF ratio was largely unchanged at 2.0% as at end-June 2025 (end-December 2023: 2.0%) despite some credit deterioration in the business and home financing portfolios. In contrast, the PF portfolio continues to exhibit strong credit quality, backed by a sizeable proportion of salary-deductible financing. Notably, the GIF ratio for the PF portfolio improved to 0.7% as at end-June 2025 (end-December 2023: 0.9%), reflecting stronger recoveries. Bank Rakyat’s GIF coverage (including regulatory reserves) and Basel I Tier-1 capital ratio stayed strong at a respective 132.9% and 23.5% (end-December 2023: 161.5% and 23.9%).

The Bank’s net financing margin continued its steady decline, reflecting both portfolio diversification away from PF and keen market competition. Nonetheless, profitability indicators remain satisfactory and continue to support the Bank’s credit profile. The net financing margin, although narrowing, remains above the industry average at 2.7% for FY Dec 2024 and an annualised 2.5% for 1H FY Dec 2025. Pre-tax profit stayed at RM1.8 bil in FY Dec 2024, mainly driven by a net writeback of provisions and stronger non-financing income. 

Bank Rakyat’s funding profile is characterised by a limited retail deposit franchise and some depositor concentration, which partially offsets its credit strength. The reliance on wholesale funding, however, is moderated to some extent by strong liquidity coverage and established relationships with large wholesale depositors. We do not expect Bank Negara Malaysia’s recent PF guidelines, which kept the maximum tenure of PF unchanged at 10 years, to materially affect the Bank. Nevertheless, Bank Rakyat’s significant PF exposure (end-June 2025: 67% of total financing) remains susceptible to regulatory or industry shifts.

Table 1: Bank Rakyat’s issue ratings



Analytical contacts
Sean Lim, CFA 
(603) 2708 8253
sean@ram.com.my

Amy Lo
(603) 2708 8289
amy@ram.com.my

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