MARC Ratings has affirmed MBSB Bank Berhad’s (MBSB Bank) A+ financial institution (FI) rating and the A+IS rating on the bank’s RM5.0 billion Sustainability Sukuk Wakalah Programme. Concurrently, the ratings on the following instruments under MBSB Bank’s Sukuk Wakalah Programme of up to RM10.0 billion have been affirmed:
- Senior Sukuk Wakalah at A+IS
- Tier-2 Sukuk Wakalah at AIS
- Additional Tier-1 Capital Sukuk Wakalah (AT-1 Sukuk Wakalah) at BBB+IS
The outlook on all ratings is stable.
The Senior Sukuk Wakalah rating is aligned with MBSB Bank’s FI rating. The Tier-2 Sukuk Wakalah and AT-1 Sukuk Wakalah ratings are notched down by one and three notches, respectively, from the FI rating, reflecting their relative subordination and loss-absorption characteristics in accordance with MARC Ratings’ methodology.
MARC Ratings’ affirmation of MBSB Bank’s FI rating reflects the bank’s longstanding presence in the banking sector, particularly in personal financing; adequate capitalisation and relatively low balance-sheet leverage that support loss-absorption capacity; and expected support from its ultimate majority shareholder, the Employees Provident Fund, if required. These strengths are tempered by asset quality and profitability metrics that remain weaker than those of its Islamic banking peers.
As at end-June 2026, MBSB Bank remained Malaysia’s second-largest standalone Islamic bank with total assets of RM63.8 billion. The bank continues to pursue financing diversification and improve its deposit mix under its FLIGHT26 strategy. Gross financing grew by 7.8% in 1H2026 to RM45.1 billion, compared with growth of 2.7% in 2025, driven mainly by corporate financing. Retail financing remained the dominant segment and is expected to support financing growth through end-2026.
Asset quality remains a key rating constraint, with the gross impaired financing ratio rising from 4.6% in 2024 to 5.5% in 2025 and remaining at this level as at end-June 2026, well above the Islamic banking industry average of 1.5%. This is partly mitigated by salary-deduction arrangements covering 31.9% of gross financing, which provide some protection against repayment defaults. Financing loss coverage, including regulatory reserves, remains relatively low, although collateral provides an additional source of potential recovery.
The bank’s funding profile improved, with the current and savings account (CASA) ratio rising to 19.8% from 13.0% in 2024, although it remained below the industry average of 28.9%. Depositor concentration remains relatively high, with the top 20 depositor groups accounting for an estimated 50.4% of customer deposits. Nonetheless, liquidity remained adequate, with the liquidity coverage ratio and net stable funding ratio at 124.2% and 104.8%, respectively, both above regulatory minimums.
Profitability weakened further amid margin compression and higher provisioning. Pre-tax profit declined by 58.9% to RM248.1 million in 2025, from RM604.0 million in 2024, reflecting a 21.8% contraction in net financing income and a narrower net profit margin of 1.92%. Earnings remained subdued in 1H2026, with pre-tax profit declining to RM54.8 million from RM191.3 million in 1H2025. While the improved CASA mix helped ease funding costs, earnings continued to be weighed down by lower contributions from personal financing.
Capitalisation remains adequate, with regulatory capital ratios maintaining comfortable buffers above minimum requirements. The Common Equity Tier 1 ratio remained above the industry average, while the total capital ratio was broadly in line with industry levels.