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RAM Ratings: Bank Pembangunan’s acquisition of Danajamin has no impact on AAA ratings of the two entities

Published on 04 Oct 2021.

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RAM Ratings is of the view that Bank Pembangunan Malaysia Berhad’s acquisition of Danajamin Nasional Berhad will allow the enlarged entity to have a greater market impact, cementing its strategic importance. This exercise reflects the government’s commitment to strengthen the development finance industry by streamlining the public policy mandates of development financial institutions. 

Both Bank Pembangunan and Danajamin are currently rated AAA/Stable/P1 and our rating assessments already considered the solid backing of the government, anchored by the role of each entity in fulfilling the nation’s developmental agenda. 

Bank Pembangunan provides medium to long-term financing to sectors vital to the country’s socio-economic development while Danajamin – the national financial guarantee insurer – is tasked with developing the debt capital markets through credit enhancements for bond and sukuk issuances.  If well executed, the acquisition will yield synergistic advantages given the complementary roles of the entities. Post-acquisition, Danajamin will become a wholly owned subsidiary of Bank Pembangunan. Details on the eventual corporate structure and operational integration have not been disclosed at this time.

Bank Pembangunan will acquire Danajamin’s shares from Credit Guarantee Corporation Malaysia Berhad and Minister of Finance (Incorporated). Slated to be completed in November this year, the exercise will be funded with a combination of cash and issuance of new shares. We expect the move to have minimal impact on Bank Pembangunan’s capitalisation. The Bank’s tier-1 and total capital ratios stood strong at 33.4% and 42.6%, respectively, as at end-June 2021.

Consequently, we do not envisage the corporate exercise to affect the AAA/Stable ratings of Bank Pembangunan’s RM7 billion Conventional Medium Term Notes (MTN) and/or Islamic Murabahah MTN Programmes (2006/2036). Similarly, we do not anticipate any changes to the respective AAA/Stable and AA1/Stable ratings of the Senior and Subordinated Sukuk under Danajamin’s RM2 billion Sukuk Murabahah Programme.

 

Analytical contact
Wong Yin Ching, CFA
(603) 3385 2555
yinching@ram.com.my

 

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 2021 by RAM Rating Services Berhad



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