RAM reaffirms AmBank Islamic’s ratings

KUALA LUMPUR: RAM Ratings has reaffirmed AmBank Islamic Bhd’s AA2/Stable/P1 financial institution ratings (FIRs), alongside the ratings of the Bank’s outstanding debt facilities.

The reaffirmed FIRs reflect those of AmBank (M) Berhad (rated AA2/Stable/P1), the core banking subsidiary of AMMB Holdings Bhd.

AmBank Islamic is a highly strategic entity given its role as the Group’s Islamic banking arm. The Bank’s operations are strongly linked with that of its sister banks, AmBank and AmInvestment Bank Bhd (rated AA2/Stable/P1), under a universal banking model. The Bank is expected to receive ready group support if required.

Am Bank Isl a mic’ s gross impaired financing (GIF) ratio deteriorated to two per cent as at end-September 2018 from 1.8 per cent (end-March 2017), mainly attributed to an oil and gas-related borrower and a lumpy real estate account.

AmBank Islamic’s financing portfolio grew seven per cent (annualised) in 1HFY19, driven by a strong emphasis on SME and residential property financing, while vehicle financing continued to contract.

The bank’s GIF coverage ratio – inclusive of regulatory reserves – stood at an adequate 99 per cent as at end-September 2018.

However, AmBank Islamic’s credit cost ratio increased to 0.5 per cent (annualised) in 1HFY19 amid lower recoveries, higher impairment allowances due to a newly impaired account, and stronger financing growth.

AmBank Islamic’s deposit funding capabilities still lag peers’, with its financing-to-deposits ratio at a high 100 per cent as at end-September 2018. Including non-deposit funding, the Bank’s financing-to-funds ratio stood at 86 per cent.