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RAM Ratings affirms Bank Pembangunan’s AAA/P1 ratings
Published on 16 Dec 2024.
RAM Ratings has affirmed Bank Pembangunan Malaysia Berhad’s (BPMB or the Group) AAA/Stable/P1 financial institution ratings alongside the AAA/Stable rating of its RM7 billion Conventional MTN and/or Islamic Murabahah MTN Programmes (2006/2036).
The ratings mirror the government’s sovereign credit strength, reflecting our expectation of continued government support given BPMB’s status as a wholly government-owned development financial institution (DFI) and its strategic role in the country’s development agenda. The government had extended strong financial support in the past in the form of a capital injection, the provision of grants to cover credit losses on infrastructure financing, cost of funds compensation and profit subsidies for dedicated schemes. Some of the Group’s borrowings are covered by government guarantees.
Since 2020, BPMB has gradually expanded its provision of financing beyond the traditional industry sectors of infrastructure, high technology, maritime, and oil and gas, focusing instead on sustainable financing that promotes a greater socio-economic impact to the nation. The second phase of the DFI consolidation exercise involving BPMB, Small Medium Enterprise Development Bank Malaysia Berhad and Export-Import Bank of Malaysia Berhad (rated AAA/Stable/P1) is still ongoing. This merger is not expected to impact the Group’s ratings given its developmental role and function it plays, although operational integration and streamlining of businesses will be expected.
Like other DFIs with development roles, BPMB invariably takes on higher-risk credits in financing strategic priority sectors. Reflective of its mandate, the Group’s gross impaired financing ratio as at end-March 2024 remained high at 10.2% (end-December 2022: 11.4%). The sizeable share of large-scale and long-term development project financing exposes the Group to concentration risks as well as large impairments.
In FY Dec 2023, impairment charges surged to RM670 mil (FY Dec 2022: RM382 mil), largely driven by additional provisions and overlays made for non-credit impaired accounts. The impact to the Group’s bottom line during the year was however cushioned by a sizeable, exceptional financial investment redemption gain (RM600 mil), allowing pre-tax profit and the return on risk-weighted assets to rise to a respective RM557.9 mil and 2.3% (FY Dec 2022: RM358.7 mil and 1.6%).
Lending support to the ratings are the Group’s robust loss absorption buffers. Its adjusted gross impaired financing coverage ratio (including infrastructure support fund) and bank-level tier-1 capital ratio stood at 203% and 29.6%, respectively, as at end-March 2024, indicating sufficient cover.
Analytical contacts
Hani Hamizah Nor Hashim
03 3385 2575
hani@ram.com.my
Sophia Lee
03 3385 2619
sophia@ram.com.my
Media contact
Sakinah Arifin
03 3385 2500
sakinah@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
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