Page 186 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

DIRECTORS’
REPORT

Total operating expenses for the year recorded an increase of RM42.0 million or 9.3% to RM494.8 million. The increase was
due to higher Personnel Expenses by RM30.2 million attributable to an increase in number of sales personnel and also includes
one-off payment under Union Collective Agreement. Finance Cost increased 49.1% from RM55.1 million in financial year
ended 31 December 2022 to RM82.2 million recorded in financial year ended 31 December 2023 which was mainly contributed
by the additional Financing Sold to Cagamas.

The Group’s total assets recorded a double digit annual growth of 23.9% outperformed industry average of 7.5% from the
financial year ended 31 December 2022 position, to stand at RM39.1 billion as at 31 December 2023 largely spurred by growth in
financing.

Gross financing to customers grew by RM4.3 billion or 17.7% to RM28.6 billion for the year under review, while customer
deposits and investment accounts stood at RM33.0 billion which was an increase of RM6.4 billion or 24.1%. CASA composition
from total customer deposits was at healthy level of 30.9% as compared to industry average of 26.5%.
With the issuance of Tier-1 Perpetual Sukuk of RM350.0 million in September 2023, the Group’s capital ratios remained strong
with CET 1, Tier 1 and Total Capital Ratio stood at 11.401%, 12.848% and 17.343% respectively.

PROSPECTS AND FORECAST
In 2023, Malaysia’s economic growth slowed to 3.7% from the previous year’s robust 8.7%, primarily due to weakened
external demand and cautious consumer spending. Global monetary tightening and geopolitical uncertainties led to a
significant 11.3% decline in net exports, impacting the manufacturing sector, which saw a 1.1% decrease in output for
export-oriented industries. Consumer spending, which accounts for nearly two-thirds of the economy, grew modestly from
11.7% to 4.7% as Malaysian households adopted a more vigilant approach to managing finances amidst rising living costs.
Notwithstanding, the expansionary fiscal policy acted as a buffer, with public investment growing to 8.6% from 5.3% in
the previous year, supported by substantial allocations for development spending. This played a vital role in offsetting the
adverse effects of weakened external demand and cautious consumer spending. As a result, the construction sector expanded
to 6.1% in 2023 from 5.0% in the preceding period.

Despite the challenges posed by weak external demand in 2023, there are indications of a forthcoming recovery, particularly
for Electrical & Electronics exports, which are expected to support GDP growth in 2024. Domestic demand is anticipated
to continue underpinning the Malaysian economy, although consumer and business sentiments might be tempered by policy
adjustments regarding subsidies and taxes. In light of these developments, Bank Muamalat is set to adhere to cautious credit
underwriting practices, while seeking new opportunities in government development spending and the establishment of
special economic zones to enhance its non-retail sector operations.

RATING BY EXTERNAL RATING AGENCIES

Details of the Bank’s ratings are as follows:

Rating Agency Date Classification Rating
RAM Rating Services Berhad May 2023 Long term A2
Short term P1
Subordinated Sukuk A3

Outlook Stable
Malaysia Rating Corporation Berhad June 2023 Long term A+
Short term MARC-1
Senior Sukuk A+
Additional Tier-1 Sukuk BBB
Outlook Stable
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