RAM Ratings reaffirms Bank Simpanan Nasional’s AAA rating

Published on 14 Sep 2022.

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RAM Ratings has reaffirmed Bank Simpanan Nasional’s (BSN or the Bank) financial institution ratings of AAA/Stable/P1. Concurrently, the Bank’s RM3.5 billion Islamic Medium-Term Notes Sukuk Wakalah Programme (2021/-) has also been reaffirmed at AAA/Stable. The ratings factor in a very high likelihood of government support.

Wholly owned by the Ministry of Finance, BSN plays a crucial public policy role, serving rural and remote communities and fulfilling the government’s financial inclusion objectives. All deposits with the Bank are guaranteed by the government in accordance with Section 20 of the Bank Simpanan Nasional Act 1974. Crucially, it remains the only appointed payee bank from which government cash aid recipients without bank accounts can collect the money.

BSN’s overall gross impaired loan (GIL) ratio stood at a mild 1.25% as at end-March 2022, backed by a sizeable portfolio of salary-deducted personal financing extended to government employees (~40% of total financing). The rest of its loans, comprised mainly of home mortgages, may be more vulnerable to worsening macroeconomic conditions particularly considering the Bank’s mandate to extend more than 50% of its financing to the bottom 40% (B40) income segment. Nonetheless, we believe BSN’s GIL ratio will remain manageable, supported by the reopening of the economy and continued targeted assistance from the government. The Bank’s GIL coverage (including regulatory reserves) was still robust at 211% as at end-March 2022.

Despite broad net interest margins and a relatively high proportion of non-interest income, BSN’s profitability is dragged down by significant operating expenses. The Bank’s cost to income ratio will stay elevated, given its extensive network of branches, bank agents and high staff count – a consequence of its developmental role to reach the unserved and underserved population. Ongoing cost containment measures are viewed positively but will take time to yield the desired results. BSN’s Basel 1 tier-1 capital ratio is low, especially taking into account the impact of an estimated RM291 mil modification loss adjustment to retained earnings on 1 January 2023. This will cause the tier-1 capital ratio to weaken further from 12.3% as at end-March 2022 to a pro forma 10.2%. On balance, loss absorption buffers are ample and there is no urgent dividend pressure from the Bank’s shareholder. These factors will support organic capital accretion. 


Analytical contacts
Chan Yin Huei
(603) 3385 2498

Wong Yin Ching
(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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