RAM Ratings has assigned AAA/Stable/P1 financial institution ratings to OCBC Al-Amin Bank Bhd while affirming the same ratings for OCBC Bank (Malaysia) Bhd, citing the banking group’s strong domestic franchise, improving asset quality and healthy financial position.
The rating agency said OCBC Al-Amin’s ratings are equalised with those of OCBC Malaysia, reflecting a “very high” likelihood of extraordinary support given the Islamic bank’s strategic role as OCBC Malaysia’s Islamic banking platform.
RAM similarly views OCBC Malaysia as a core subsidiary of Oversea-Chinese Banking Corporation Ltd (OCBC Group), given its importance to the Singapore-based group’s regional expansion and diversification strategy as well as its position as one of the group’s largest contributors outside Singapore.
While the likelihood of parental support is considered very high, RAM said no rating uplift was necessary because OCBC Malaysia already has a strong standalone credit profile.
OCBC Malaysia’s asset quality continued to strengthen through 2025 and the first three months of 2026, supported by improved loan recoveries and healthy borrower repayment performance.
Its headline gross impaired loan (GIL) ratio fell to a multi-year low of 1.3% at end-March 2026, from 2.1% at end-December 2024.
The adjusted GIL ratio, which excludes impaired retail financing less than 90 days past due, improved to 1.0% from 1.7% over the same period. RAM said both measures outperformed industry averages.
Credit costs, however, are expected to normalise in 2026 as the bank adopts a more cautious provisioning approach amid heightened global uncertainties. Annualised credit costs stood at 30 basis points in the first quarter.
RAM considers the expected increase manageable given OCBC Malaysia’s strong earnings-generating capacity.
OCBC Malaysia recorded a 14% increase in pre-tax profit to RM2.0 billion in FY2025, from RM1.8 billion a year earlier, supported by a net provision writeback, loan growth and higher investment and trading gains.
Pre-tax return on assets stood at 1.9%, while return on risk-weighted assets was 3.3%.
Earnings moderated in the first three months of 2026, with pre-tax profit falling 6% to RM485 million from RM514 million a year earlier as heavier impairment charges offset continued revenue growth.
The bank nevertheless maintained strong capitalisation, with its post-dividend common equity tier-1 capital ratio at 15.2% at end-March, above the industry’s 14.2%.
RAM also highlighted OCBC Malaysia’s strong deposit franchise as a key credit strength.
Current and savings accounts represented 52% of customer funding at end-March 2026, while retail deposits accounted for 42%. Both were above the corresponding industry average of 36%.
The rating agency attributed the funding strength partly to OCBC Malaysia’s wealth management franchise and transaction banking capabilities, which support its ability to attract deposits.
Its regulatory liquidity coverage ratio and net stable funding ratio also remained comfortably above minimum requirements at end-March.
Overall, RAM’s assessment points to improving asset quality, strong capital and liquidity buffers and a well-established deposit franchise as key factors supporting OCBC Malaysia’s AAA ratings, alongside the strategic importance of both OCBC Malaysia and OCBC Al-Amin within the wider OCBC Group.
