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RAM Ratings affirms Sabah Credit Corporation
Published on 09 Jul 2025.
RAM Ratings has affirmed the AA1/Stable/P1 ratings of Sabah Credit Corporation’s (SCC) sukuk programmes (see table).
The issue ratings reflect SCC’s healthy profitability, comfortable gearing and well-controlled asset quality risks. The ratings also benefit from an uplift based on SCC’s strong ties with the Sabah state government, as evidenced by the latter’s board representation and past financial support. This underscores our assessment of a ‘high’ likelihood of extraordinary government support for SCC, if needed. The state government’s implied strength is deemed ‘superior’, underpinned by its healthy fiscal position. The rating strengths are moderated by SCC’s small franchise, portfolio concentration and funding profile.
In FY Dec 2024, SCC’s pre-tax profit rose 10.1% y-o-y to RM118.0 mil, mainly driven by broader margins and a robust 8.0% annual growth in personal financing (PF) (FY Dec 2023: +0.6%), supported by promotional campaigns and the civil servant salary hike last year. About 96% of its RM3.3 bil financing book comprises PF facilities extended to civil servants, most of which are repaid through non-discretionary salary deductions made by the Services Bureau of the national apex cooperative, Angkasa, and the Sabah state treasury. Compulsory deductions, coupled with the low attrition rate in the civil service, mitigate repayment risk and support sturdy asset quality.
As at end-December 2024, SCC’s overall gross impaired financing (GIF) and GIF coverage ratios improved to 2.0% and 143.7% (end-December 2023: 2.2% and 138.0%) respectively, thanks to a broadly stable GIF base and an enlarged financing portfolio. As a state-owned entity, SCC’s write-offs are slower than peers’. Excluding impaired PF facilities that are 12 months or more in arrears and those which came under a moratorium in 2020, for which repayments have resumed, the adjusted GIF and GIF coverage ratios would have been a better 1.4% and 206.8%, respectively.
Potential refinancing risk, given SCC’s reliance on market-based wholesale funding, is mitigated by expected state funding support if necessary. Despite a modest rise in debt levels to fund increased financing activity, stronger retained earnings kept gearing largely unchanged at 2.5 times as at end-December 2024, a comfortable level given the nature of its business.
Analytical contacts
Liew Kar Ling
(603) 2708 8216
karling@ram.com.my
Johan Faizul
(603) 2708 8235
johan@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8210
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
© Copyright 2025 by RAM Rating Services Berhad
