RAM Ratings reaffirms Cagamas’ ratings

Published on 08 Nov 2019.

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RAM Ratings has reaffirmed Cagamas Berhad’s (the Company) global, ASEAN and national-scale corporate credit ratings, together with its various issue ratings, as listed in the table below. The affirmation is premised on Cagamas’ strong credit metrics, as reflected by its excellent asset quality and robust capitalisation. The national mortgage corporation is also considered systematically important to the domestic capital markets. It is the largest domestic issuer of corporate bonds and sukuk, and a liquidity provider to the Malaysian financial system. We anticipate government support to be readily extended in the event of financial distress.



Cagamas Berhad:


  • Corporate credit ratings



  • RM60 bil Islamic and Conventional MTN Programme (2007/2067)


  • RM20 bil Islamic and Conventional CP Programme (2015/2022)









Cagamas Global P.L.C.:

USD2.5 bil Multicurrency MTN Programme


Cagamas Global Sukuk Berhad:

USD2.5 bil Multicurrency Sukuk Issuance Programme



Given its primary role as a liquidity provider to the secondary mortgage sector, Cagamas acquires loans/financing assets from financial institutions (FIs), the Government of Malaysia (GoM) and selected corporations - under purchase-with-recourse (PWR) and purchase-without-recourse (PWOR) schemes. In FY Dec 2018, Cagamas’ debt issuance hit a high of RM15.8 bil, with RM12.1 bil of PWR purchases. This is reflected in the 10.9% rise in its gross receivables to RM41.7 bil as at end-December 2018. 

The better performance had been mainly driven by FIs’ need to comply with the liquidity requirements under the Basel III Guidelines. In 9M FY Dec 2019, Cagamas issued RM5.9 bil of debt securities to finance about RM2.0 bil of loan purchases. The balance had been utilised to refinance its short-term papers. 

Overall, Cagamas’ asset quality is deemed robust, as illustrated by the strong credit profiles of its counterparties within its PWR portfolio, with 87% carrying at least AA ratings as at end-December 2018. The gross impaired loan (GIL) ratio of the Company’s PWOR portfolio also stayed healthy at 0.85%, albeit higher y-o-y. The ratio compares well against the Malaysian banking system’s 1.10% for residential property mortgages. As at end-June 2019, the Company’s PWOR GIL ratio had improved to 0.62%. 

Although Cagamas has been relying solely on the wholesale market for funding, Cagamas enjoys ready access to the domestic capital markets in view of its perceived quasi-government status. Going forward, Cagamas’ growth prospects are envisaged to be pressured as most domestic FIs are well capitalised and adopting a wait-and-see approach amid speculation about another interest rate cut. Besides the challenges faced in product pricing and variety, the Company also needs to diversify its client base beyond the primary FIs. 

Meanwhile, Cagamas’ new asset class, i.e. infrastructure and SMEs, has taken longer than expected to gain traction due to challenges in finding the right opportunities for its business model. That said, we derive comfort from the Company’s ongoing efforts to innovate and diversify its product range to broaden its client base.

Without the acquisition of higher-yielding PWOR assets and given the run-down of this portfolio, Cagamas’ overall margins are expected to remain under pressure. In fiscal 2018, the Company’s net interest margin narrowed to 1.0% (fiscal 2017: 1.1%). That said, its total capital ratio (TCR) improved from 22.3% to 29.9% following the adoption of a local risk rating scale. The Company’s robust capital base was further underpinned by its common-equity tier-1 capital ratio of 28.3% (fiscal 2017: 20.8%), as it mainly comprised common share equity and retained earnings. Amid the further run-down of its PWOR portfolio, Cagamas’ TCR continued improving to 32.8% in 1H FY Dec 2019.


Analytical contact
Teoh Tze Yit
(603) 3385 2531

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad

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