[RAM] RAM Ratings affirms Bank Islam's AA3/Stable/P1 ratings

RAM Ratings has affirmed Bank Islam Malaysia Berhad’s (the Bank) AA₃/Stable/P1 financial institution ratings (FIR), as well as the ratings of its sukuk programmes (see table below). The affirmations reflect the Bank’s consistently strong asset quality, robust capitalisation as well as sound funding and liquidity profile. These credit strengths are balanced by the Bank’s relatively smaller franchise and moderate profitability.

Bank Islam’s asset quality continues to outperform the industry despite a modest rise in its gross impaired financing (GIF) ratio to 1.1% as at end-June 2025 (from 0.9% at end-December 2023). Core portfolios – home and personal financing – stay healthy, with new impaired financing mainly stemming from working capital exposures. While rising cost of living and a higher share of personal financing without salary transfer or deduction arrangements introduce some risk, any deterioration is expected to be manageable. The Bank’s high GIF coverage (including regulatory reserves) of 147% and common equity tier-1 capital ratio of 13.9% underpin its solid loss absorption capacity.

Profitability remains subdued, moderated by considerable operating costs despite incremental gains in non-financing income. In 1H FY Dec 2025, the Bank’s cost-to-income ratio rose to 64.5% (FY Dec 2024: 64.5%; FY Dec 2023: 60.9%), reflecting continued investments in talent and technology. Concurrently, net financing margin narrowed to 2.08% (FY Dec 2024: 2.24%; FY Dec 2023: 2.23%), impacted by higher funding costs following a strategic shift towards longer-tenure, higher-cost deposits and investment accounts to strengthen funding stability. Consequently, annualised return on risk-weighted assets and total assets stood at 1.3% and 0.7%, respectively.

RAM Ratings’ support assessment indicates a ‘moderate’ likelihood of extraordinary support from the Bank’s majority shareholder, Lembaga Tabung Haji (LTH), which holds an effective stake of 48.9%. Bank Islam is considered a strategic investment for LTH, with past support demonstrated through capital injections, dividend reinvestments, subscription of capital securities, and sizeable deposit placements. No rating uplift has been applied, given the Bank’s strong stand-alone credit profile.

Bank Islam’s sukuk ratings¹



Analytical contacts
Chew Wei Li
(603) 2708 8301
weili@ram.com.my

Wong Yin Ching, CFA
(603) 2708 8280
yinching@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my