Published on 04 Nov 2020.
RAM Ratings has reaffirmed Export-Import Bank of Malaysia Berhad’s (MEXIM or the Bank) respective gA2/Stable/gP1, seaAAA/Stable/seaP1 and AAA/Stable/P1 financial institution ratings on the global, ASEAN and Malaysian scales. We have also reaffirmed the global-scale gA2(s)/Stable rating of EXIM Sukuk Malaysia Berhad’s USD1.0 bil Multi-currency Sukuk Issuance Programme. EXIM Sukuk Malaysia is the Bank’s funding conduit.
MEXIM’s ratings are equated to that of the Government of Malaysia (GoM), underpinned by our view that the Bank remains highly strategic to the latter, given the Bank’s mandate to advance Malaysia’s trade agenda and support the outward investments of domestic firms. MEXIM has received solid backing from the GoM in the past, as demonstrated by a recapitalisation exercise, funding schemes at preferential rates and the subscription of the Bank’s RM250 mil convertible cumulative preference shares.
MEXIM’s very weak asset quality remains a major shortcoming in view of the Bank’s exposure to higher-risk credits arising partly from its developmental role. Although outstanding impaired loans were largely stable, the Bank’s headline gross impaired loan (GIL) ratio spiked to 38% as at end-December 2019 (end-December 2018: 25%) as a result of a sizeable 34% contraction of its loan book. While absolute GIL was stable, the Bank recorded higher loan provisions in FY Dec 2019, amounting to RM566 mil, compared to RM479 mil a year earlier. Accordingly, its GIL coverage improved to 85% from 70% previously. The current challenging operating landscape amidst the COVID-19 crisis may put further pressure on the Bank’s asset quality.
MEXIM recorded a loss for the fourth consecutive year in FY Dec 2019. The RM478 mil loss (FY Dec 2018: RM264 mil) came on the back of substantial impairment charges and the marked depletion of its lending portfolio that had crimped its net interest income. Accumulated losses amounting to RM1.4 bil as at end-December 2019 eroded the Bank’s capital. Nonetheless, loan contraction caused its risk-weighted assets to shrink by 37%, improving the Bank’s tier-1 capital and total capital ratios to a respective 19.9% and 29.0% as at the same date (end-December 2018: 17.2% and 22.7%).
Hafiz Abdul Aziz
(603) 3385 2534
(603) 3385 2577
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Ratings on Export-Import Bank of Malaysia Berhad