Published on 13 Jan 2022.
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 on account of our view that the Bank remains highly strategic to the latter owing to its mandate to advance the country’s trade agenda and support the outward investments of domestic firms. MEXIM has received solid backing from the government in the past, as demonstrated by a recapitalisation exercise, funding schemes at preferential rates and the subscription of the Bank’s RM250 mil redeemable convertible cumulative preference shares.
Weak asset quality is still a major shortcoming in view of MEXIM’s exposure to higher-risk credits arising from its developmental role. Its loan book is concentrated by borrower while significant cross-border financing adds risks and complexity to the Bank’s operations. Although gross impaired loans (GIL) declined 10% to RM2.4 bil as at end-December 2020 (end-December 2019: RM2.6 bil), the Bank’s headline GIL ratio worsened to 41.5% (end-December 2019: 37.7%) as a result of an 18% contraction in its loan base. Impairment expense was considerably lower at RM53.6 mil in FY Dec 2020 (FY Dec 2019: RM566.1 mil) as the Bank recorded huge write-backs on recoveries from several impaired accounts during the year. We expect lingering COVID-19 risks and the Bank’s more vulnerable portfolio to keep asset quality indicators under pressure in the next 12 to 18 months.
MEXIM registered a small pre-tax profit of RM51.2 mil in FY Dec 2020, having been in the red since 2016 due to significant impairment charges. The better performance followed substantial recoveries during the period. Challenges in replenishing the Bank’s shrinking loan portfolio will continue to pose headwinds to topline growth going forward. Despite accumulated losses from 2016 to 2019 which eroded capital, persistent loan contraction lifted MEXIM’s tier-1 capital and total capital ratios to a respective 28.1% and 38.8% as at end-December 2020 (end-December 2019: 19.9% and 29.0%).
Loh Kit Yoong
(603) 3385 2493
Wong Yin Ching, CFA
(603) 3385 2555
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Ratings on Export-Import Bank of Malaysia Berhad