[RAM] RAM Ratings affirms MUFG Malaysia at AAA/Stable/P1

RAM Ratings has affirmed MUFG Bank (Malaysia) Berhad’s (MUFG Malaysia or the Bank) financial institution ratings of AAA/Stable/P1.

The ratings reflect a ‘high’ likelihood of extraordinary support from the Bank’s ultimate parent, Mitsubishi UFJ Financial Group (MUFG or the Group), one of the world’s largest financial groups and Japan’s leading banking franchise. MUFG Malaysia’s standalone credit profile is underpinned by still-robust capital buffers and superior asset quality, moderated by its relatively small domestic market presence and profitability that remains sensitive to market conditions given the Bank’s wholesale-focused business.

MUFG Malaysia is closely integrated within the Group through alignment of strategies, risk governance and regional business priorities. The Bank leverages its parent’s extensive global network and technical expertise, supporting its role in servicing multinational and larger domestic corporates operating in Malaysia. Its Islamic banking window – one of only two operated by MUFG globally – further enhances the Bank’s product breadth. We view parental commitment as strong, as consistently demonstrated through ongoing operational and liquidity support, including funding provided under a cash collateral scheme to facilitate loan growth.

Profitability metrics improved during the review period, with the Bank’s net interest margin rising to 1.6% in FY Mar 2025 and 9M FY Mar 2026 (FY March 2024: 1.4%), following the run-off of lower-yielding loans. However, earnings moderated as gross loans contracted, largely reflecting lumpy repayments, strong borrower liquidity and heightened competition from the bond market funding. Consequently, pre-tax profit declined y-o-y to RM456.3 mil in 9M FY Mar 2026 (9M FY Mar 2025: RM490.8 mil), translating to an annualised return on risk-weighted assets of 3.7% (FY Mar 2025: 4.1%). Looking ahead, management expects lending momentum to recover, supported by higher working capital demand in a more uncertain external environment and growth in the Bank's targeted sectors.

Asset quality remains a key credit strength. Impaired loans stayed negligible, reflecting MUFG Malaysia’s conservative underwriting and focus on high-quality borrowers, including established Japanese multinationals and highly rated domestic corporates. Stage 2 loans rose to 7% of gross loans as at end-December 2025 (end-March 2024: 1%). We understand that the increase was driven mainly by the Bank’s conservative staging approach and prudent macroeconomic assumptions, rather than a broad base weakening in underlying borrower fundamentals. Capitalisation continues to provide a meaningful buffer for loss absorption against unexpected losses while supporting growth capacity. As at end-December 2025, the common equity tier-1 capital ratio was 28.9%, which while lower y-o-y, comfortably exceeds the regulatory requirement.


Analytical contacts
Amira Shamsul, CFA
(603) 2708 8242
syahira@ram.com.my

Lee Yee Von
(603) 2708 8217
yeevon@ram.com.my

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