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MARC assigns rating of AA+IS to CIMB Islamic's proposed MYR 5 billion Sukuk with a stable outlook

August 26, 2014

MARC has assigned a preliminary rating of AA+IS to CIMB Islamic Bank Berhad's (CIMB Islamic) proposed MYR 5 billion Basel III-compliant Tier 2 Junior Sukuk (Proposed Junior Sukuk) programme. The bank's financial institution (FI) ratings and corporate debt rating on its existing MYR 2 billion Tier 2 Junior Sukuk (Junior Sukuk) programme were affirmed at AAA/MARC-1 and AA+IS respectively. The outlook on the ratings is stable.

The one-notch rating differential between the long-term FI rating of CIMB Islamic and the Junior Sukuk programmes reflects the subordination of the programmes to the bank's deposits and other senior unsecured debt. Given that the issuance under the Proposed Junior Sukuk programme will be included in the consolidated total capital of the bank's parent, CIMB Bank Berhad (CIMB Bank), any outstanding Sukuk under the programme are susceptible to non-viability event triggers at the parent bank level. Accordingly, the rating on the Proposed Junior Sukuk programme will be notched down from the lower of the ratings of CIMB Islamic or CIMB Bank.

CIMB Islamic's FI ratings are equalised to its parent CIMB Bank's ratings premised on MARC's continued view of the Islamic bank's status as a core operating subsidiary of CIMB Bank. CIMB Bank's FI ratings have been affirmed at AAA/MARC-1/Stable to reflect its strong market position in the domestic banking sector, sustained earnings generation, sound risk management and healthy capital adequacy. The ratings also incorporate CIMB Bank's systemic importance in the domestic banking sector as the second largest bank in Malaysia in terms of assets.

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Source: CPI Financial

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