Posted Date: July 12, 2021

MARC has affirmed its long- and short-term financial institution (FI) ratings of AA-/MARC-1 on KAF Investment Bank Berhad (KAF IB) with a stable outlook.

KAF IB's low-risk business model, strong liquidity and healthy capitalisation levels remain key rating drivers. The susceptibility of its earnings performance to the domestic capital market conditions and the interest rate environment is a key moderating factor.

During the current period, KAF IB has been able to register a strong performance, adjusting its investment strategy in line with its views on prevailing and forthcoming market conditions. For nine months ending February 2021 (9MFY2021), revenue expanded 35.4% y-o-y to RM273.0 million, mainly on profit realisation on bond holdings, benefiting from an aggregate 125bp cut in the overnight policy rate. Its pre-tax profit grew by 40.7% y-o-y to RM207.3 million; accordingly, return of assets and return of equity improved y-o-y to 3.72% and 13.88%.

KAF IB maintains a sound liquidity position; as at end-9MFY2021, its liquid asset ratio stood at 94.1%, underpinned by a conservative investment policy that mitigates funding volatility given its reliance on short-term wholesale funding to finance operations. Government and government-guarantee issuances and private debt securities with a AAA rating accounted for 89.1%.

Its total capital base of RM1.46 billion, which consists of mainly paid-up capital, retained earnings and statutory reserves that accounted for 98.9% as at end-9MFY2021, has remained strong. Its tier 1 capital and total capital ratios stood at 66.8% and 67.5%.

Haziq Najmuddin, +603-2717 2965/ haziq@marc.com.my;
Farhan Darham, +603-2717 2945/ farhan@marc.com.my;
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my.