MARC assigns preliminary ‘AAAIS’ rating to CIMB Islamic’s senior sukuk wakalah

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has assigned a preliminary rating of “AAAIS” to CIMB Islamic Bank Bhd’s proposed RM10 billion senior sukuk wakalah programme with a “stable” outlook.

It said the rating reflected CIMB Islamic’s financial institution ratings, which MARC had recently affirmed at “AAA/MARC1/stable”.

The sukuk wakalah would provide an additional platform to raise liquidity for the bank should it need to strengthen its funding base, said MARC.

Previously, MARC had affirmed a “stable” outlook on CIMB Islamic’s sukuk issuances, namely the RM5 billion Tier 2 junior sukuk programme at “AA+IS” and the RM2 billion Tier 2 junior sukuk programme at “AA+IS”.

In its note, MARC said it expected CIMB Islamic’s capital position to remain sound, supported by internal capital generation and its restricted profit sharing investment account.

CIMB Islamic is the Islamic banking arm of CIMB Bank Bhd.

MARC said accordingly, the financial institution ratings on CIMB Islamic had been equalised to that of CIMB Bank, which had “AAA/stable” rating.

As at end-September, CIMB Islamic accounted for 20.2 per cent of its parent’s consolidated loans and contributed 15.1 per cent to CIMB Bank’s consolidated pretax profit.

For the nine months, CIMB Islamic’s net financial margin (NFM) declined to 1.73 per cent, largely due to stiff competition for financing and deposits.

MARC said the intense competition among Islamic banks would continue to weigh on the bank’s NFM.

CIMB Islamic’s funding and liquidity profile remained sound, with a financing-to-fund ratio of 79.2 per cent as at end-September.

“The ratings on CIMB Islamic reflect the credit strength of its parent, CIMB Bank. Any revision in MARC’s assessment of this relationship or change in CIMB Bank’s ratings could lead to a change in the Islamic bank’s ratings,” added MARC.