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RAM Ratings affirms AAA(s)/Stable rating of Toyota Capital’s guaranteed debt facilities
Published on 02 Nov 2026.
RAM Ratings has affirmed the AAA(s)/Stable ratings of Toyota Capital Malaysia Sdn Bhd’s (Toyota Capital or the Company) RM2.5 bil Conventional and Islamic Medium-Term Notes (MTN) Programme (2016/2031) and RM2.5 bil Conventional and Islamic MTN Programme (2025/2040).
The issue ratings reflect the credit strength of the irrevocable and unconditional guarantees provided by Toyota Motor Finance (Netherlands) BV (Toyota Netherlands), a wholly owned subsidiary of Toyota Financial Services Corporation (TFS). These guarantees are further supported by a chain of credit support agreements extending to Toyota Motor Corporation (TMC or the Group). TMC’s solid business profile is underpinned by its leading global automotive franchise, geographically diversified operations and its conservative financial profile, characterised by low leverage and solid liquidity.
Toyota Capital plays a strategic role as the captive financier for Toyota-affiliated automotive franchises in Malaysia and benefits from financial and operational support from its shareholders. The Company also finances Perodua vehicles, reflecting the Group's indirect ownership interest in Perodua through its subsidiary, Daihatsu Motor Co., Ltd. Financing penetration for new Toyota and Perodua cars reached a respective 20.6% and 9.3% in 1Q FY Mar 2027 (FY Mar 2025: 18.4% and 6.2%). Beyond the guarantees, shareholder support has been demonstrated by a RM100 mil capital injection from its shareholders in 2014 as well as credit lines from Toyota Netherlands and Toyota Motor Credit Corporation.
On a stand-alone basis, Toyota Capital’s credit profile is constrained by its highly leveraged balance sheet, large exposure to lower income borrowers, and weaker-than-peer profitability. Its financial profile has weakened since the previous review, reflecting a further increase in leverage amid sustained double-digit financing growth and some deterioration in asset quality. As at end-June 2026, the Company’s adjusted net gearing ratio rose to 16.1 times from 14.4 times at end-March 2025 (end-March 2024: 13.4 times). The ratio is likely to increase further amid as receivables growth continues to be debt-funded. Nonetheless, the parent guarantee on all outstanding bonds and sukuk, which formed about a quarter of total borrowings, provides some funding and refinancing comfort.
As at end-March 2026, Toyota Capital’s gross impaired financing (GIF) ratio increased to 1.6% from 1.3% a year earlier, reflecting weaker borrower repayment performance due to inflationary pressures and seasonal factors. Consequently, credit costs rose to 75 bps in FY Mar 2026 from 66 bps in FY Mar 2025, while GIF coverage moderated to 75.4% as at end-March 2026 from 88.4%. We expect asset quality indicators to remain weaker than historical levels as borrower affordability pressures persist. The Company's role in supporting vehicle sales may also limit its ability to moderate growth or tighten underwriting standards materially.
The Company’s profitability remains modest relative to peers. Its adjusted pre-tax profit declined 4% to RM88.9 mil in FY Mar 2026, reducing adjusted return on assets to 0.7% from 0.8% in FY Mar 2025. Although net interest income expanded, heftier impairment charges and operating expenses weighed on earnings. Net interest margin narrowed slightly to 2.36% in FY Mar 2026 from 2.44% over the same period, mainly owing to higher funding costs. We expect margins to remain broadly stable this year, aided by the growing share of better-yielding Perodua and used-car financing segments.
Analytical contacts
Jeremy Noel Paul
(603) 3385 2556
jeremynp@ram.com.my
Amy Lo
(603) 2708 8289
amy@ram.com.my
Media contact
Sakinah Arifin
(603) 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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