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The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the securi ty’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings.
DECEMBER 2013
BANK ISLAM MALAYSIA BERHAD
Financial Institution Ratings
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the securi ty’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings.
CREDIT RATING RATIONALE
FINANCIAL INSTITUTION RATINGS
DECEMBER 2013
BANK ISLAM MALAYSIA BERHAD
– Rating Review
Summary
RAM Ratings has reaffirmed the A1/Stable/P1 financial institution ratings of
Malaysia’s first Islamic bank, Bank Islam Malaysia Berhad (Bank Islam or the
Bank). Bank Islam’s ratings reflect its strong Islamic-banking franchise in
Malaysia. Nevertheless, its market position vis-a-vis larger universal-banking
groups is comparatively limited and its share of the overall banking system’s
financing and deposits is still small. The Bank’s ratings also consider ongoing
support from the Bank’s ultimate controlling shareholder, Lembaga Tabung Haji
(Tabung Haji) – Malaysia’s Hajj pilgrim funds board. Having recapitalised Bank
Islam following its sizeable losses in 2005 and 2006, Tabung Haji continues to
provide a large and steady pool of deposits to the Bank.
Bank Islam’s credit fundamentals have been improving. Notably, its gross
impaired-financing (GIF) ratio clocked in at a low 1.4% as at end-June 2013, with
a still-declining base of impaired financing. Its personal financing portfolio has
expanded rapidly in recent years and this financing portfolio may be unseasoned.
However, the risk of non-payment is largely mitigated as the bulk of its personal
financing facilities comprise those having arrangements with employers for salary
deductions and transfers. With a significant 35% exposure to unsecured
financing as a whole, prudential measures in this space - such as Bank Negara
Malaysia’s (BNM) recent move to reduce the maximum tenure for personal
financing - could moderate Bank Islam’s financing growth momentum. While the
Bank’s capitalisation ratios have been declining on the back of its robust
financing expansion, its common-equity tier-1 (CET-1) capital ratio of 12.3% as at
end-June 2013 is still sturdy.
Bank Islam’s financing-to-deposits ratio of about 61% as at end-June 2013 is
deemed conservative; its current- and savings-account (CASA) deposits, which
formed 37% of its deposit pool, are regarded as favourable. On the other hand,
Bank Islam still has a high level of depositor-concentration risk. This is partly
counterbalanced by its very liquid balance sheet and long-standing relationships
with its depositors.
Analysts: Peter Kong (603) 7628 1029 [email protected] Joanne Kek (603) 7628 1163 [email protected] Principal Activity: Islamic banking Financial Institution Ratings: A1/Stable/P1 [Reaffirmed] Last Rating Action: 29 November 2012
Bank Islam Malaysia Berhad 2
Bank Profile
Figure 1: Bank Islam’s corporate structure as at 30 September 2013
BIMB Holdings Berhad
Bank Islam Malaysia Berhad
Dubai Financial Group LLC
Lembaga Tabung Haji
BIMB Investment Management
Berhad
Al-WakalahNominees
(Tempatan) Sdn Bhd
Bank Islam Trust Company (Labuan)
Ltd
BIMB Offshore Company
Management SdnBhd
Amana Bank Ltd Farihan Corporation
Sdn Bhd
30.5% 51%
51%
17.8% 100% 100% 100% 100%
100%
18.5%
Source: Bank Islam
Bank Islam commenced operations in 1983 as Malaysia’s first Islamic bank,
following the enactment of the Islamic Banking Act that same year. At present,
the Bank falls under the regulatory framework of the Islamic Financial Services
Act 2013. Bank Islam is majority-owned by Bursa Malaysia-listed BIMB Holdings
Berhad (BIMB Holdings), which is in turn 51%-held by Tabung Haji. The Bank’s
asset base amounted to RM40.1 billion as at end-June 2013, representing just
1.9% of the overall banking industry’s assets. Its branch network numbered 131
as at end-September 2013, with 4 more expected to be added by year-end.
Consumer banking forms the bulk of Bank Islam’s operations, with this segment
accounting for some 75% of its financing portfolio and 53% of its revenue in 1H
FY Dec 2013. In the Islamic consumer-banking sphere, the Bank commands
sizeable market shares in personal financing (26.4%) and residential mortgages
(10.5%). While we recognise the Bank’s strong franchise in the Malaysian Islamic
banking arena, its market position vis-a-vis larger universal-banking groups is
comparatively limited and its share of the overall banking system’s financing and
deposits is still small. Bank Islam also provides, among others, unit-trust
management and nominee services through its subsidiaries.
In August 2013, BIMB Holdings proposed to acquire all the remaining Bank Islam
shares it did not own from Dubai Financial Group LLC (30.5%) and Tabung Haji
(18.5%) for US$884.6 million (equivalent to some RM2.9 billion). Should the
acquisition materialise (targeted for completion in mid-December 2013), it would
raise Tabung Haji’s effective stake in the Bank from 44.5% to 51.0%. On this
Malaysia’s first Islamic bank
Primarily a consumer bank
Tabung Haji set to increase effective stake
Bank Islam Malaysia Berhad 3
front, we do not expect any change in Bank Islam’s operations. Although there
could be added pressure to channel dividends to its parent,1 the Bank intends to
maintain its policy of paying out 50% of its net profits (subject to BNM approval
and capitalisation levels). While BIMB Holdings’ proposed acquisition of Bank
Islam’s shares is also reportedly to prepare Bank Islam to assume the listing
status of its parent, plans are still fluid at this juncture.
Business Strategies
Following the conclusion of the Bank’s Sustainable Growth Plan in 2012, it has
embarked on its Hijrah to Excellence phase for the next 3 years, with emphasis
on robust organic growth and service excellence. In this regard, Bank Islam has
set annual expansion targets for assets (15%), financing (25%) and pre-tax profit
(15%). Concurrently, it will continue realigning its balance sheet. The Bank
intends to accelerate the growth of business financing, with a view to enlarging
its share to 30% of its financing mix (end-June 2013: 24.5%). Bank Islam’s
agenda also includes plans to lift its proportion of floating-rate financing to 60%
(end-June 2013: 55.1%) and reduce the share of unsecured financing2 from 58%
to 50%.
Bank Islam operates with the backing of Tabung Haji, as demonstrated by the
latter’s capital infusion following the Bank’s sizeable losses in 2005 and 2006.
This support is also clearly demonstrated by Tabung Haji’s placement of a steady
and sizeable pool of deposits. Operational synergies remain evident from the
sharing of resources,3 providing Bank Islam the opportunity to offer retail
products to Tabung Haji’s depositors. The Bank also stands to benefit from deal
referrals from Tabung Haji. Having been admitted to the Securities Commission’s
panel of principal advisors in 2009, Bank Islam is able to advise on and submit
corporate proposals – such as IPOs and M&As – to the regulator for approval.
In 2012, the Bank had been in talks for a stake in an Islamic bank in Indonesia;
this had been in part hindered by the introduction of more onerous bank-
ownership rules there. Nevertheless, Bank Islam remains keen on acquiring an
interest in Indonesia banks, as part of its regionalisation strategy. At present,
Bank Islam holds 17.8% of Amana Bank Limited, Sri Lanka’s first Islamic bank.
The Bank will pare down its stake soon via an IPO, in compliance with a
condition set by the Sri Lankan regulator during its initial purchase in 2011;4 this
is estimated to reduce Bank Islam’s stake to 13.6%. Overall, Amana Bank is not
1 BIMB Holdings’ purchase of Bank Islam’s shares, amounting to some RM2.9 billion, will be funded
by a planned sukuk issuance of RM1.7 billion and a rights issue. 2 Financing that is considered unsecured includes personal financing, credit-card receivables and
business financing that are not collateralised. For this purpose, the Bank also views financing for transport vehicles as unsecured.
3 Tabung Haji-related transactions can be conducted at all Bank Islam branches while some of the
Bank’s ATMs are located within Tabung Haji’s premises. 4 Sri Lankan law limits foreign shareholding in banks to 15%.
Embarks on Hijrah to Excellence
Backing from Tabung Haji
Still eyeing Indonesian banks
Bank Islam Malaysia Berhad 4
expected to contribute materially to Bank Islam’s bottom line.
Risk Profile
Figure 2: Bank Islam’s financing profile as at end-June 2013
Primary agriculture
1%
Manufacturing
3%
Electricity, gas &
water1%
Wholesale & retail
trade, hotels, restaurants
3%
Construction
5%
Real estate
3%
Transport, storage &
communications1%
Finance, insurance &
business activities7%
Education, health &
others1%
Other sectors
1%
House financing
26%
Personal financing
34%
Credit cards
2%
Purchase of passenger
cars12%
Household sector
74%
Source: Bank Islam
Bank Islam has maintained its above-industry-average growth momentum,
chalking up a 37% y-o-y financing expansion in fiscal 2012 before tapering to
19% (annualised) in 1H FY Dec 2013. Its growth had been led by a surge in
personal financing, increasing its exposure to unsecured financing to 35.4% of its
financing base as at end-June 2013 (end-December 2011: 30.4%). This portfolio
predominantly comprised personal financing and a small base of credit-card
receivables. Residential mortgages (26.4%) and financing for the purchase of
transport vehicles (12.3%) made up the rest of its household financing. Within
business banking, the financing base is equally split between corporate and
commercial banking.
Since January 2012, the Bank’s personal financing facilities have been offered as
floating-rate products.5 As a result, floating-rate facilities ballooned to 55.1% of
Bank Islam’s financing portfolio as at end-June 2013, from only 26.1% as at end-
December 2011; this is close to the Bank’s targeted 60%. Meanwhile, we note
that the Bank’s personal financing products have been shifting away from the
Inah concept, and are now offered through the generally more accepted
Tawarruq concept.
5 For its floating-rate personal financing product, customers still pay a fixed monthly repayment as
adjustments are made to the tenure of the instrument to reflect rate changes.
Robust financing growth driven by surge in personal financing
Closer to targeted level of floating-rate financing
Bank Islam Malaysia Berhad 5
Figure 3: Bank Islam’s selected asset-quality indicators
end-Dec 2010 end-Dec 2011 end-Dec 2012 end-June 2013
GIF (post-June 2006) (RM million) 171 121 149 155
GIF (pre-June 2006) (RM million) 381 259 160 143
Overall GIF ratio (%) 4.5% 2.6% 1.5% 1.4%
Banking industry gross impaired-loan ratio (%)
3.4% 2.7% 2.0% 2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0
100
200
300
400
500
600
RM
mill
ion
FRS 139 MFRS 139
Source: Bank Islam
Note: Pre- and post-June 2006 refer to the period when the financing was originated.
Table 3: Movements of impaired financing
Source: Bank Islam
On the back of robust financing growth – coupled with a still-declining base of
impaired financing – Bank Islam’s GIF ratio had eased further to 1.4% as at end-
June 2013 (end-December 2011: 2.6%). This was better than the overall banking
system’s average of 2.0%. Notably, newly accrued impaired financing has been
reducing, although we believe that this is partly due to the Bank’s relatively
unseasoned financing portfolio after its recent rapid growth. The Bank’s legacy
impaired-financing portfolio – those approved prior to 2006 (i.e. before the entry
of its new management team) – has also decreased over time. Only considering
financing extended after 2006, the Bank’s GIF ratio would stand at just 0.8%. For
fiscal 2012, Bank Islam’s credit-cost ratio came in at 0.4%, before improving to
0.02% (annualised) for 1H FY Dec 2013 on the back of a sizeable recovery from
a corporate account.
RM million End-Dec
2010
End-Dec
2011
End-Dec
2012
End-June
2013
At the start of the period 1,360.45 552.22 379.79 308.71
Impact of FRS139 adoption 675.07 - - -
Adjusted opening balance 2,035.52 522.22 379.79 308.71
(+) Classified as impaired 315.24 549.08 427.78 190.18
(-) Reclassified as not
impaired (362.28) (297.19) (254.87) (115.58)
(-) Amount recovered (311.45) (238.88) (92.26) (36.20)
(-) Amount written off (1,079.12) (187.14) (151.47) (51.44)
Foreign exchange
differences (45.70) 1.70 (0.25) 2.37
At the end of the period 552.22 379.79 308.71 298.03
GIF ratio now better than industry average
Bank Islam Malaysia Berhad 6
The Bank’s ratio on collective assessment allowances over gross financing (less
individual assessment allowances) came in at 1.6% as at end-June 2013 (end-
December 2011: 2.3%) – reflecting an improvement in the asset quality of its
overall portfolio. Bank Islam’s GIF coverage ratio had climbed to a lofty 163.8%
as at the same date, among the highest in RAM’s portfolio of rated commercial
banks, on account of the decline in its impaired financing. Nevertheless, the
Bank’s restructured and rescheduled (R&R) financing – albeit reducing – still
came in at a relatively high 3.6% of its financing portfolio; these R&R financing
facilities could be more susceptible to defaults during times of stress.
The Bank’s personal financing portfolio swelled 60% in fiscal 2012, followed by
an annualised 30% in 1H FY Dec 2013. As personal financing facilities with
repayment periods of 10-15 years made up a sizeable segment of its portfolio
(end-June 2013: 36%), BNM’s recently announced limit on the maximum tenure
of personal financing to 10 years would moderate the growth of personal
financing.
Following rapid growth, Bank Islam’s personal financing portfolio’s GIF ratio
came in at an exceptionally low 0.4% as at end-June 2013 (end-December 2011:
0.8%). While this portfolio is still somewhat unseasoned, non-payment risk is
mitigated to some extent by financing facilities with repayments made via direct
salary deductions6 by employers (e.g. government departments, government-
linked agencies and entities as well as corporates). These constituted 89% of the
Bank’s personal financing mix as at the same date, with the ratio of repayments
from salary deductions to salary transfers standing at 29:71. Bank Islam is
moderately exposed to customer segments that are perceived to be more
vulnerable; those earning monthly incomes of RM3,000 or less made up 21% of
its financing facilities, with those earning RM2,000 or less only responsible for
2%.
The default rate of the Bank’s residential mortgage portfolio came in at 1.4% at
end-June 2013 (banking industry: 1.7%). However, mortgages classified as R&R
remained high, coming in at 9% of its mortgage portfolio; the Bank takes pre-
emptive action to assist borrowers to cover their repayments.7 Bank Islam has
been shifting its residential mortgage mix away – albeit gradually – from lower-
priced properties, which typically entail higher default rates, focusing instead on
those valued at RM250,000 or more. Such higher-priced properties still only
accounted for about a quarter of its residential mortgage portfolio as at end-June
2013. A key growth strategy for Bank Islam is to provide refinancing facilities for
completed properties, which does not expose the Bank to construction risk.
6 Through 2 repayment methods: under the salary-deduction mode, the salaries of borrowers are paid
into Bank Islam accounts and the Bank uses a direct debit to deduct repayment once the salaries are credited. Under the salary-transfer mechanism, employers deduct repayments from the salaries of their employees and subsequently remit payments to Bank Islam.
7 Pre-emptive measures form the bulk of the R&R financing in mortgages. The Bank could offer to
lengthen the financing tenures of borrowers that miss their repayments. These would be tagged as R&R until their arrears are regularised.
Very robust GIF
coverage ratio
Recent rules on personal financing likely to dampen
growth
Exceptionally low GIF ratio for
personal financing
Gradual shift away from lower-priced
properties
Bank Islam Malaysia Berhad 7
Meanwhile, Bank Islam has ramped up the financing of new national vehicles,
which constitute the lion’s share of its transport-vehicle financing. National
vehicles were responsible for 95% of such financing as at end-June 2013. At the
same time, the default rate for the financing of transport vehicles came in at a low
0.9%, although we note that deliquencies have been showing some uptick. This
follows the introduction of more onerous industry procedures in relation to vehicle
repossession,8 leading to some customers delaying their repayments.
The default rate for Bank Islam’s business financing had eased slightly to 2.7%
as at end-June 2013 (end-December 2012: 2.9%). We note that provisioning risk
for large defaulted financing is minimal, given that its top 5 impaired financing
facilities (i.e. those above RM10 million, which represented 70% of its total
impaired business financing) have essentially been fully provided for. Bank Islam
is not significantly exposed to any particular sector or customer group. We
understand that the Bank is compliant with BNM’s single-customer exposure
limit, introduced in February 2013.
Bank Islam holds a relatively large securities portfolio, which formed 34% of its
asset base as at end-June 2013. The Bank’s investments in securities have low
credit risk; government-guaranteed, quasi-government, AAA- and AA-rated
securities made up some 99% of its securities portfolio as at the same date; at
present, it adheres to an investment policy of only holding securities carrying at
least AA ratings. We note that the Bank has exposure to a defaulted issue (in
2007) amounting to RM15.2 million, of which RM13.4 million had been provided
for as at end-June 2013. The Bank keeps to a short investment duration. Mainly
because of this, the impact of the recent yield spike in 1H 2013 shaved just a
small RM9.5 million (representing about 1% of gross income) from overall mark-
to-market gains of its securities portfolio, although we note the yield spike is likely
to also have some impact on its results for Q3 2013.
Funding and Liquidity
Bank Islam’s liquid-asset ratio is one of the highest among RAM-rated
commercial banks, coming in at 47.1% as at end-June 2013. Its very liquid
balance sheet and long-standing relationships with its depositors partially
mitigate its high degree of depositor-concentration risk. The Bank’s top 10
depositors accounted for 29.8% of its deposit base as at end-June 2013. We
note that Tabung Haji has consistently been among its largest depositors –
providing a stable source of funding – contributing 8% of the Bank’s deposits as
at the same date. Meanwhile, the Bank’s financing-to-deposits ratio has been
inching up steadily, coming in at 61.4% as at end-June 2013, which is still
conservative by industry standards; this is within expectations as it plans to lift
8 Among others, the repossession of a vehicle now requires the customer’s consent, must be
conducted during office hours and the vehicle must be seized from the customer’s premises.
Uptick in delinquency for transport-vehicle financing
Improving asset quality of business
financing
Only invests in low-
risk securities
Very liquid balance sheet, conservative
funding profile
Bank Islam Malaysia Berhad 8
this ratio to 65% by end-2013, and further to 75% by end-2015.
Customer deposits typically cover 95%-98% of Bank Islam’s funding needs. Bank
Islam’s deposit pool remains anchored by contributions from businesses – still its
chief driver of deposit growth. Deposits from individuals, on the other hand,
comprised just 14.3% of its deposit base as at end-June 2013. Notably, the
Bank’s CASA deposits, which formed 37% of its deposit base as at the same
date, affords it a funding-cost advantage over its peers, although this proportion
has slipped a little compared with 41.2% as at end-December 2012.
Financial Performance
Figure 4: Bank Islam’s selected profitability indicators
FY June 2009 FY Dec 2010^ FY Dec 2011 FY Dec 2012 1H FY Dec 2013
Pre-tax profit (RM million) 235.9 499.5 492.5 597.4 322.5
Net financing margin (%) 2.8% 3.1% 3.1% 3.4% 3.1%
ROA (%) 0.9% 1.2% 1.6% 1.7% 1.7%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
RM
mill
ion
**
Source: Bank Islam
*Annualised
^Reflects financial results for an 18-month period.
Propelled by its robust financing growth, Bank Islam’s pre-tax profit surged to
RM597.4 million in FY Dec 2012 (FY Dec 2011: RM492.5 million), translating into
a sound return on assets (ROA) of 1.7%. Notably, the Bank enjoys some of the
broadest net financing margins in RAM’s portfolio of rated commercial banks,
thanks to its significant amount of unsecured financing, as well as its higher
proportion of low-cost funding from CASA deposits. We note, however, that this
margin peaked in fiscal 2012 at 3.4%; it clocked in at an annualised 3.1% in 1H
FY Dec 2013, chiefly due to greater utilisation of relatively more costly fixed
deposits. In addition, the shift in the Bank’s asset mix to more secured financing
and keen market competition are also expected to continually exert downward
pressure on its net financing margin.
Still relies heavily on non-retail
deposits
Net financing margin peaked in
2012
Bank Islam Malaysia Berhad 9
Bank Islam’s high cost-to-income ratio dampens its profitability; this ratio stood at
55.1% for 1H FY Dec 2013, and is likely to stay elevated in the near term as the
Bank anticipates more expenditure to support its business expansion, including
costs associated with new premises. The Bank’s non-financing income formed
just below 19% of its gross income in 1H FY Dec 2013 – a smaller proportion
relative to its larger peers. At present, the main contributors of non-financing
income are investment income, fees from debit and credit cards, and the Bank’s
Bancatakaful9 and Ar-Rahnu (Islamic pawnbroking) operations.
Capitalisation
Bank Islam’s robust financing growth has been weighing down its capitalisation
ratios since fiscal 2011. Nevertheless, its CET-1 capital ratio clocked in at a
sturdy 12.3% as at end-June 2013. The Bank plans to declare a dividend for FY
Dec 2013 to utilise its section 108 tax balances, which could be partly reinvested
via a dividend reinvestment plan. To support its future growth, Bank Islam is also
evaluating some options, with a capital-raising exercise estimated to take place
before June 2014.
9 Through an arrangement with sister company, Syarikat Takaful Malaysia Berhad, whereby Bank
Islam earns a fee for cross-selling.
Sturdy
capitalisation
Expenses likely to stay high to support business expansion
Bank Islam Malaysia Berhad 10
Corporate Information – Bank Islam Malaysia Berhad
Date of Incorporation:
1 March 1983
Commencement of Business:
July 1983
Major Shareholders (as at 30 September 2013):
BIMB Holdings Berhad Dubai Financial Group LLC Lembaga Tabung Haji
51.0% 30.5% 18.5%
Directors:
Dato’ Zamani Abdul Ghabi Dato’ Sri Zukri Samat Dato’ Paduka Ismee Ismail Johan Abdullah Zahari @ Mohd Zin Idris Zaiton Mohd Hassan Mohamed Ridza Mohamed Abdulla Abdullah Abdulrahman Abdullah Sharafi Mohammed Abdul Ghaffar Ghualoom Hussain Abdulla
Auditor:
KPMG Desa Megat & Co
Listing:
Not listed
Key Management:
Dato’ Sri Zukri Samat Dato’ Wan Ismail Wan Yusoh Hizamuddin Jamalluddin Maria Mat Said Jamilah Abdul Sallam Khairul Kamarudin Mashitah Hj Osman Norashikin Mohd Kassim Abdul Rashid Abdul Hamid Mizan Masram Mohd Nazri Chik Mujibburahman Abd Rashid Wahid Ali Mohd Khalil Malkit Singh Maan Ryan Liew Choon Ching Dato’ Norasni Ayob Jeroen PMM Thijs Leong David @ Leong Sze Khiong
Managing Director General Manager, Strategic Relations General Manager, Strategic Planning General Manager, Legal & Secretarial General Manager, Human Resources Director, Business Development Director, Corporate Investment Banking Director, Treasury Head, Commercial Banking Head, Recovery & Rehabilitation Head, Shariah Head, Consumer Banking Chief Operating Officer – Business Support Chief Financial Officer Chief Technology Officer Chief Operating Officer – Operations Chief Risk Officer Chief Internal Audit
Major Subsidiaries:
BIMB Investment Management Berhad Bank Islam Trust Company (Labuan) Ltd Amana Bank Limited
100% 100% 17.8%
Capital History:
Year Remarks Amount (RM million)
Cumulative Total (RM million)
2004 2005 2006
Balance brought forward Issuance of 100,000,000 shares Issuance of 280,000,000 shares
100.00 280.00
500.00 600.00 880.00
2007 2010
Issuance of 845,490,000 shares Conversion of 540,000,000 convertible redeemable non-cumulative preference shares
845.49
540.00
1,725.49
2,265.49
1 March 1983
1 March 1983
1 March 1983
1 March 1983
July 1983
July 1983
July 1983
July 1983
Bank Islam Malaysia Berhad 11
unaudited
STATEMENT OF FINANCIAL POSITION (RM million) 30-Jun-09 31-Dec-10 31-Dec-11 31-Dec-12 30-Jun-13
Cash & Short-Term Funds 8,448.21 2,519.70 3,364.18 1,657.87 3,455.77
Deposits & Placements with Financial Institutions 0.00 352.80 860.18 38.04 121.09
Securities Purchased Under Resale Agreements 0.00 0.00 0.00 0.00 0.00
Financial Investments at Fair Value Through Profit or Loss 287.68 2,279.45 1,228.95 1,610.56 1,331.93
Financial Investments Available-For-Sale 8,465.43 12,763.02 11,005.12 12,916.06 12,249.67
Financial Investments Held-To-Maturity 162.76 215.94 327.33 178.29 65.14
Gross Financing & Advances 10,711.00 12,284.73 14,565.30 19,948.12 21,858.13
Collective Impairment Provisions (170.84) (347.07) (327.69) (313.33) (359.23)
Individual Impairment Provisions (878.30) (79.06) (75.77) (126.99) (128.85)
Net Financing & Advances 9,661.86 11,858.60 14,161.84 19,507.80 21,370.05
Statutory Deposits 139.73 10.00 912.00 1,059.90 1,156.50
Investments in Subsidiaries/Associates/Jointly-Controlled Entities 0.00 0.00 21.18 22.91 21.58
Goodwill & Intangibles 0.00 0.00 0.00 0.00 0.00
Property, Plant & Equipment 127.71 181.49 200.85 222.98 213.76
Other Assets 197.75 203.53 125.68 208.49 127.53
Total Assets 27,491.13 30,384.53 32,207.32 37,422.89 40,113.01
Customer Deposits 25,204.63 26,866.56 28,279.68 32,550.99 34,825.34
Current Account Deposits 6,347.08 7,098.68 8,415.67 8,963.89 8,208.90
Savings Account Deposits 2,713.05 3,564.22 3,862.83 4,457.53 4,511.45
Investment Deposits 8,950.06 10,304.86 10,275.63 15,096.98 18,498.13
Negotiable Instruments of Deposits 7,133.79 5,819.88 5,622.29 3,954.03 3,525.22
Other Deposits 60.65 78.92 103.26 78.56 81.64
Interbank Deposits 8.08 378.13 384.63 860.28 1,320.94
Bills & Acceptances Payable 283.21 163.19 259.15 385.14 211.47
Securities Sold Under Repurchase Agreements 0.00 0.00 0.00 0.00 0.00
Senior Islamic Securities 0.00 0.00 0.00 0.00 0.00
Subordinated Islamic Securities 100.00 0.00 0.00 0.00 0.00
Hybrid Capital Islamic Securities 0.00 0.00 0.00 0.00 0.00
Other Sources of Funds 0.00 0.00 0.00 0.00 0.00
Other Liabilities 364.03 442.42 476.02 523.52 496.42
Total Liabilities 25,959.95 27,850.30 29,399.48 34,319.93 36,854.16
Equity Share Capital 1,725.49 2,265.49 2,265.49 2,265.49 2,265.49
Share Premium 500.02 500.02 500.02 0.00 0.00
Treasury Shares 0.00 0.00 0.00 0.00 0.00
Statutory Reserve 589.12 795.01 974.59 505.65 505.65
Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Available-For-Sale Reserve (9.54) 83.43 117.46 121.41 106.52
Other Reserves 35.45 0.00 (9.46) 1.09 (9.25)
Retained Profits/(Accumulated Losses) (1,309.36) (1,110.20) (1,040.27) 209.32 390.44
Non-Controlling Interests 0.00 0.48 0.00 0.00 0.00
Total Equity 1,531.18 2,534.23 2,807.84 3,102.97 3,258.85
Total Liabilities + Total Equity 27,491.13 30,384.53 32,207.32 37,422.89 40,113.01
Additional Disclosure:
Commitments & Contingencies 7,693.38 13,544.29 9,423.11 10,928.79 10,850.04
Risk-Weighted Assets 11,781.36 14,798.76 16,925.67 22,493.68 23,820.22
T ier-1 Capital Base * 1,443.61 2,325.40 2,631.76 2,911.03 2,927.96
Total Capital Base * 1,634.46 2,503.29 2,829.45 3,145.89 3,185.01
Notes:
* After proposed dividends
FINANCIAL SUMMARY Bank Islam Malaysia Berhad – Group
Bank Islam Malaysia Berhad 12
unaudited
STATEMENT OF COMPREHENSIVE INCOME (RM million) 30-Jun-09 31-Dec-10 31-Dec-11 31-Dec-12 30-Jun-13
18 months 6 months
Financing Income 1,137.35 1,939.74 1,429.81 1,720.47 960.12
Financing Expense (434.00) (622.34) (477.11) (593.05) (379.15)
Net Financing Income 703.36 1,317.40 952.71 1,127.42 580.97
Fee Income 86.46 164.68 131.12 155.85 80.05
Investment Income 18.30 51.69 67.98 56.27 54.06
Other Income 32.59 28.97 37.41 57.89 1.20
Gross Income 840.70 1,562.74 1,189.21 1,397.43 716.28
Personnel Expenses (228.43) (430.97) (338.14) (390.99) (220.87)
Other Operating Expenses (248.45) (402.85) (305.45) (333.94) (173.45)
Operating Income before Impairment Charges 363.82 728.92 545.61 672.50 321.96
Net Impairment Charges on Financing (123.29) (209.73) (21.12) (66.07) (1.59)
Net Impairment Charges on Financial Investments (4.66) (19.73) (15.41) 0.58 0.00
Net Impairment Charges on Commitments, Contingencies & Other Assets 0.00 0.00 (15.23) (11.36) 3.48
Operating Income after Impairment Charges 235.87 499.46 493.85 595.65 323.85
Non-Recurring Items 0.00 0.00 0.00 0.00 0.00
Share of Associates/Jointly-Controlled Entities Profits/(Losses) 0.00 0.00 (1.38) 1.73 (1.33)
Pre-Tax Profit/(Loss) 235.87 499.46 492.47 597.38 322.52
Taxation & Zakat (73.99) (92.27) (117.14) (170.12) (90.42)
Net Profit/(Loss) 161.88 407.19 375.33 427.26 232.10
Gain/(Loss) on Available-For-Sale Financial Investments 0.00 92.97 34.03 3.95 (14.90)
Changes in Cash Flow & Net Investment Hedges 0.00 0.00 0.00 0.00 0.00
Foreign Currency Translation Differences 0.00 41.01 (9.45) 10.54 (10.34)
Share of Other Comprehensive Income/(Loss) of Associates/Jointly-Controlled Entities 0.00 0.00 0.00 0.00 0.00
Income Tax Relating to Other Comprehensive Income/(Loss) 0.00 0.00 0.00 0.00 0.00
Other Components of Comprehensive Income/(Loss) 0.00 0.00 0.00 0.00 0.00
Total Comprehensive Income/(Loss) 161.88 541.17 399.91 441.76 206.86
Additional Disclosure:
Net Profit/(Loss) Attributable to Non-Controlling Interests 0.00 (0.05) 0.06 0.00 0.00
Dividends - Ordinary Shares & Preference Shares 0.00 19.11 125.40 146.63 50.97
FINANCIAL SUMMARY Bank Islam Malaysia Berhad – Group
Bank Islam Malaysia Berhad 13
unaudited
KEY RATIOS 30-Jun-09 31-Dec-10 31-Dec-11 31-Dec-12 30-Jun-13
PROFITABILITY (%)
Net Financing Margin 2.82% 3.08% * 3.13% 3.37% 3.12% *
Non-Financing Income to Gross Income 16.34% 15.70% 19.89% 19.32% 18.89%
Cost to Income 56.72% 53.36% 54.12% 51.88% 55.05%
Return on Assets 0.92% 1.15% * 1.57% 1.72% 1.66% *
Return on Risk-Weighted Assets 2.06% 2.51% * 3.10% 3.03% 2.79% *
Return on Equity 16.55% 16.38% * 18.44% 20.21% 20.28% *
ASSET QUALITY (%)
Gross Impaired Financing Ratio 12.70% 4.50% 2.61% 1.55% 1.36%
Net Newly Classified Impaired Financing Ratio (0.82%) (2.08%) * 0.10% 0.47% 0.37% *
Financing Credit Cost Ratio 1.16% 1.22% * 0.16% 0.38% 0.02% *
Impairment Charge Ratio 0.76% 0.65% * 0.13% 0.21% 0.01% *
Gross Impaired Financing Coverage Ratio 77.12% 77.17% 106.23% 142.63% 163.77%
LIQUIDITY & FUNDING (%)
Liquid Asset Ratio 67.38% 65.30% 56.90% 47.93% 47.13%
Interbank Deposits to Total Profit Bearing Funds 0.03% 1.38% 1.33% 2.55% 3.63%
Customer Deposits to Total Profit Bearing Funds 98.47% 98.02% 97.77% 96.31% 95.79%
CASA Deposits to Total Deposits 35.95% 39.69% 43.42% 41.23% 36.53%
Financing to Deposits Ratio 38.33% 44.14% 50.08% 59.93% 61.36%
CAPITALISATION (%)
Internal Rate of Capital Generation 11.36% 12.73% 9.36% 9.50% NA
Tier-1 Capital Ratio 12.25% 15.71% 15.55% 12.94% 12.29%
Total Capital Ratio 13.87% 16.92% 16.72% 13.99% 13.37%
Common Equity T ier-1 Capital Ratio NA NA NA NA 12.29%
Notes:
* annualised
NA = Not Available / Not Applicable
FINANCIAL RATIOS Bank Islam Malaysia Berhad – Group
Bank Islam Malaysia Berhad 14
KEY RATIOS FORMULAE
PROFITABILITY (%)
Net Financing Margin Net Finance Income / Average Profit Earning Assets
Non-Financing Income to Gross Income Non-Finance Income / Gross Income
Cost to Income (Personnel Expenses + Other Operating Expenses) / Gross Income
Return on Assets Pre-Tax Profit/(Loss) / Average Total Assets
Return on Risk-Weighted Assets Pre-Tax Profit/(Loss) / Average Total Risk-Weighted Assets
Return on Equity Pre-Tax Profit/(Loss) / Average Total Equity
Non-Finance Income Fee Income + Investment Income + Other Income
Profit Earning Assets Cash & Short-Term Funds + Deposits & Placements with Financial Institutions
+ Securities Purchased Under Resale Agreements + Total Financial Investments
+ Net Financing & Advances
Total Financial Investments Financial Investments at Fair Value Through Profit or Loss + Financial Investments Available-For-Sale
+ Financial Investments Held-To-Maturity
ASSET QUALITY (%)
Gross Impaired Financing Ratio Total Impaired Financing / Gross Financing & Advances
Net Newly Classified Impaired Financing Ratio Net Newly Classified Impaired Financing / Average Gross Financing & Advances
Financing Credit Cost Ratio Net Impairment Charges on Financing / Average Gross Financing & Advances
Impairment Charge Ratio (Net Impairment Charges on Financing + Net Impairment Charges on Financial Investments) /
(Average Gross Financing & Advances + Average Total Financial Investments)
Gross Impaired Financing Coverage Ratio Total Provisions / Gross Impaired Financing
Total Provisions Collective Impairment Provisions + Individual Impairment Provisions
Net Newly Classified Impaired Financing Newly Classified Impaired Financing - Recoveries on Impaired Financing
- Impaired Financing Reclassified As Performing
LIQUIDITY & FUNDING (%)
Liquid Asset Ratio Liquid Assets / (Customer Deposits + Short-Term Funds)
Interbank Deposits to Total Profit Bearing Funds Interbank Deposits / Profit Bearing Funds
Customer Deposits to Total Profit Bearing Funds Customer Deposits / Profit Bearing Funds
CASA Deposits to Total Deposits (Current Account + Savings Account Deposits) / Customer Deposits
Financing to Deposits Ratio Net Financing & Advances / Customer Deposits
Liquid Assets Cash & Short-Term Funds + Deposits & Placements with Financial Institutions
+ Securities Purchased Under Resale Agreements
+ Quoted Financial Investments (excluding Financial Investments Held-To-Maturity)
Short-Term Funds Interbank Deposits + Bills & Acceptances Payable + Securities Sold Under Repurchase Agreements
Profit Bearing Funds Financial Institutions + Quoted Securities (Excluding Financial Investments Held-To-Maturity)Customer Deposits + Interbank Deposits + Bills & Acceptances Payable
+ Securities Sold Under Repurchase Agreements + Total Borrowings
Total Borrowings Senior Islamic Securities + Subordinated Islamic Securities
Hybrid Capital Islamic Securities + Other Borrowings
CAPITALISATION (%)
Internal Rate of Capital Generation (Net Profit/(Loss) - Dividends) / Average Total Equity
T ier-1 Capital Ratio T ier-1 Capital / Total Risk-Weighted Assets
Total Capital Ratio Total Capital / Total Risk-Weighted Assets
Common Equity T ier-1 Capital Ratio Common Equity T ier-1 Capital / Total Risk-Weighted Assets
FINANCIAL RATIOS Bank Islam Malaysia Berhad – Group
Bank Islam Malaysia Berhad 15
CREDIT RATING DEFINITIONS
Financial Institution Ratings
Long-Term Ratings
AAA
AA
A
BBB
BB
B
C
D
Short-Term Ratings
P1
P2
P3
NP
D
A financial institution rated AAA has a superior capacity to meet its financial obligations. This is the highest long-term FIRassigned by RAM Ratings.
A financial institution rated AA has a strong capacity to meet its financial obligations. The financial institution is resilientagainst adverse changes in circumstances, economic conditions and/or operating environments.
A financial institution rated A has an adequate capacity to meet its financial obligations. The financial institution is moresusceptible to adverse changes in circumstances, economic conditions and/or operating environments than those in
higher-rated categories.
A financial institution rated BBB has a moderate capacity to meet its financial obligations. The financial institution is morelikely to be weakened by adverse changes in circumstances, economic conditions and/or operating environments than
those in higher-rated categories. This is the lowest investment-grade category.
A financial institution rated BB has a weak capacity to meet its financial obligations. The financial institution is highlyvulnerable to adverse changes in circumstances, economic conditions and/or operating environments.
A financial institution rated B has a very weak capacity to meet its financial obligations. The financial institution has alimited ability to withstand adverse changes in circumstances, economic conditions and/oroperating environments.
A financial institution rated C has a high likelihood of defaulting on its financial obligations. The financial institution ishighly dependent on favourable changes in circumstances, economic conditions and/or operating environments, the lack
of which would likely result in it defaultingon its financial obligations.
A financial institution rated D is currently in default on either all or a substantial portion of its financial obligations, whetheror not formally declared. The D rating may also reflect the filing of bankruptcy and/or other actions pertaining to the
financial institution that could jeopardise the payment of financial obligations.
A financial institution rated P1 has a strong capacity to meet its short-term financial obligations. This is the highest short-term FIR assigned by RAM Ratings.
A financial institution rated P2 has an adequate capacity to meet its short-term financial obligations. The financialinstitution is more susceptible to the effectsof deteriorating circumstances than thosein the highest-rated category.
A financial institution rated P3 has a moderate capacity to meet its short-term financial obligations. The financialinstitution is more likely to be weakened by the effects of deteriorating circumstances than those in higher-rated
categories. This is the lowest investment-grade category.
A financial institution rated NP has a doubtful capacity to meet its short-term financial obligations. The financial institutionfaces major uncertainties that could compromise its capacity for payment of financial obligations.
A financial institution rated D is currently in default on either all or a substantial portion of its financial obligations, whetheror not formally declared. The D rating may also reflect the filing of bankruptcy and/or other actions pertaining to the
financial institution that could jeopardise the payment of financial obligations.
For long-term ratings, RAM Ratings applies subscripts 1, 2 or 3 in each rating category from AA to C. The subscript 1 indicates that thefinancial institution ranks at the higher end of its generic rating category; the subscript 2 indicates a mid-ranking; and the subscript 3
indicates that the financial institution ranks at the lower end of its generic rating category.
A Financial Institution Rating ("FIR") is RAM Ratings' current opinion on the overall capacity of a financial institution to meetits financial obligations. The opinion is not specific to any particular financial obligation, as it does not take into account theexpressed terms and conditions of any specific financial obligation.
Bank Islam Malaysia Berhad 16
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes
third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has
no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the
objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM
Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
RAM Ratings, its rating committee members and the analysts involved in the rating exercise have not encountered and/or are not aware of any
conflict of interest relating to the rating exercise. RAM Ratings will adequately disclose all related information in the report if there are such
instances.
Published by RAM Rating Services Berhad
Reproduction or transmission in any form is prohibited except by
permission from RAM Rating Services Berhad.
Copyright 2013 by RAM Rating Services Berhad
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