RAM Ratings reaffirms Sabah Credit Corporation’s AA1/Stable/P1 sukuk ratings

Published on 13 Jun 2022.

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RAM Ratings has reaffirmed the AA1/Stable/P1 ratings of Sabah Credit Corporation’s (SCC or the Corporation) outstanding sukuk instruments. 

The reaffirmation incorporates our expectation of ready financial support from the Sabah state government – which wholly owns the Corporation – if required. Support has been demonstrated through the subordination of SCC’s borrowings from the state government to the Corporation’s debt securities and the conversion of some of these borrowings into share capital.

Personal financing (PF) facilities comprised 98% of SCC’s financing book as at end-December 2021. Almost all these facilities are extended to civil servants and repaid through non-discretionary salary deductions by Biro Perkhidmatan Angkasa and the Sabah state treasury. The salary deduction feature and the historically low attrition rate of government employees significantly alleviate the credit risk associated with this portfolio. The Corporation’s financing base saw mild expansion (2% y-o-y) in FY Dec 2021 amid fierce competition from commercial banks. Growth primarily came from borrowers who refinanced their facilities at a lower profit rate under SCC’s promotional campaign. 

SCC’s asset quality remains sound. Its gross impaired financing (GIF) ratio eased to 3.0% as at end-December 2021 (end-December 2020: 3.7%) on account of slower GIF formation, given relief measures and write-offs involving a substantial portion of impaired PF that was 12 months or more in arrears and some large legacy accounts. Nevertheless, the ratio stayed higher than peers’ given slower write-offs. Adjusted to exclude remaining impaired PF facilities that are 12 months or more in arrears, and facilities that were technically impaired due to a three-month deferment of repayments in 2020 but have resumed repayments, SCC’s overall GIF ratio would be a better 1.7% (end-December 2020: 2.2%, adjusted). GIF coverage clocked in at a healthier 115% (end-December 2020: 106%) while the Corporation’s credit cost moderated to 20 bps in fiscal 2021 (fiscal 2020: 59 bps). 

SCC’s high dependence on short-term borrowings exposes it to refinancing and liquidity risks. We however expect funding and liquidity support from the state government to be forthcoming in times of need. While SCC’s pre-tax profit declined 6% y-o-y to RM92 mil in FY Dec 2021 owing to a sizeable modification loss, profitability stayed healthy backed by broader margins and lighter provisioning expenses. We expect the Corporation’s profit performance this year to be weighed down by margin compression and digitalisation expenses. Gearing improved to 3.0 times as at end-December 2021 (end-December 2020: 3.2 times) on the back of profit accumulation and muted financing growth.

Table: SCC’s issue ratings



  1. RM3.5 billion Islamic Medium-Term Notes Programme (2014/2039)
  2. RM1 billion Islamic Medium-Term Notes Programme (2011/2031)
  3. RM1.75 billion Islamic Commercial Papers Programme (2021/2028)



Analytical contacts
Jeremy Noel Paul 
(603) 3385 2556

Wong Yin Ching, CFA
(603) 3385 2555


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 2022 by RAM Rating Services Berhad

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