MARC Ratings has upgraded Bank Muamalat Malaysia Berhad’s financial institution ratings to A+/MARC-1 from A/MARC-1 and concurrently upgraded its rating on the bank’s Islamic Senior Notes Programme (Senior Sukuk) of up to RM2.0 billion to A+_IS. The ratings outlook is stable.

The ratings upgrade is premised on Bank Muamalat’s continued improvement in its financial performance, particularly its asset quality and profitability metrics which are in line with its peers in the same rating band. The bank has maintained its financing growth trend since 2018. The improved credit metrics were also achieved on the back of healthy capitalisation levels.

Bank Muamalat registered higher pre-tax profit of RM256.6 million in 2021 (2020: RM174.8 million), attributed to a larger financing base and higher net financing income. The bank’s financing base grew by 14.5% y-o-y to RM20.9 billion during the period, anchored by personal financing which registered a 27.2% y-o-y increase to RM6.3 billion. Bank Muamalat’s gross impaired financing ratio stood at 0.83% in 2021, lower than the industry average of 1.25%.

Common Equity Tier 1 and total capital ratios stood at 13.7% and 17.3% as at end-2021, providing a buffer against any weakening in its asset quality once the extended relief assistance ceases. The bank’s retail deposit franchise remains modest with individual deposits accounting for 11.1% of total funding while the proportion of current and savings account deposits declined marginally to 35.3% (end-2020: 36.1%). Bank Muamalat’s liquidity coverage ratio and net stable funding ratio stood at 133.2% and 109.3%, well above the required regulatory levels.