MARC Ratings has affirmed MBSB Berhad’s A+/MARC-1 corporate credit ratings with a stable outlook.

The ratings reflect MBSB’s role as a non-operating financial holding company whose credit profile mirrors that of its core, wholly-owned subsidiary, MBSB Bank Berhad (A+/Stable). With no borrowings, and earnings mainly coming from MBSB Bank’s dividends, MBSB’s performance is closely tied to that of the bank, which accounted for approximately 90% of total assets (RM58.1 billion) and 95% of consolidated gross financing as of end-June 2025. Dividend income from MBSB Bank has ranged between RM133.7 million and RM458.9 million in recent years. The ratings also incorporate expected support from majority shareholder Employees Provident Fund (57.5%), strengthening the group’s credit profile.

MBSB’s financing portfolio remains concentrated in retail exposures, mainly personal financing to government servants, accounting for about 70% of total financing over the past three years. The segment’s salary-deduction repayment mechanism, covering roughly 90% of these facilities, helps mitigate default risk. The group’s gross impaired financing ratio improved to 5.58% as of 1H2025 (2023: 7.27%), though still remaining above the Islamic banking industry average of 1.34%. As of end-June 2025, the Common Equity Tier 1 and total capital ratios were 19.5% and 22.0%, exceeding industry averages of 13.9% and 17.7%.

Earnings remained driven by net financing income, accounting for about 90% of operating income in 2024. Pre-tax profit rose marginally to RM586.3 million (2023: RM559.7 million), supported by growth in the high-yield retail book. Net profit margin improved to 2.45% (2023: 1.79%) but was limited by high funding costs from a low Current Account and Savings Account ratio and reliance on wholesale deposits. Non-financing income fell sharply to RM159 million (2023: RM393 million) following a one-off gain of RM354 million on the acquisition of MIDF Group in 2023. Fee income, however, increased to RM111.3 million (2023: RM64.3 million), with management targeting a 15% share of total income over the medium term (2024: 6.74%). In 1H2025, pre-tax profit rose to RM250.5 million (from RM201.6 million in 1H2024).

MBSB’s acquisition of MIDF Group modestly increased consolidated assets, with the latter contributing about 10% of total assets as of end-June 2025. MBSB Bank remains the principal financing entity (95% of total financing), but the addition of MIDF Group broadened operations to include investment banking and asset management. Within the MIDF Group, MBSB Investment Bank Berhad is the main contributor, accounting for 41% of profit and 90% of assets.