RAM Ratings reaffirms MBF Cards' A2/P1 ratings, with stable outlook

Published on 15 November 2011
RAM Ratings has reaffirmed the respective long- and short-term ratings of A2 and P1 for MBF Cards (M’sia) Sdn Bhd’s (“MBF Cards” or “the Company”) RM600 million Commercial Papers/Medium-Term Notes Programme (2007/2014); the long-term rating has a stable outlook. MBF Cards is a non-bank credit-card issuer and merchant acquirer.
MBF Cards commands a firm foothold in the merchant-acquiring industry, where it is ranked second (in terms of merchant base) in Malaysia, with an estimated market share of about 16% as at end-June 2011. We expect the Company to continue deriving a significant portion of its earnings from this segment, underpinned by its stable position in this business. MBF Cards has also carved a niche in the local credit-card market, and is the largest among the 4 non-bank credit-card issuers. The domestic credit-card industry is highly competitive and subject to potential regulatory changes. Against this backdrop, retaining cardholders and protecting market share will be the Company’s key focus.

Over the years, MBF Cards’ profitability has remained robust, supported by its sturdy fee income and healthy net interest margin. The Company’s lucrative net interest margin is a function of its concentration on unsecured credit-card lending. On balance, MBF Cards’ asset quality is deemed more susceptible to adverse changes in economic conditions than banks whose loan portfolios are typically more diversified. In August 2011, MBF Cards ventured into personal lending, which has lower levels of income eligibility than credit cards. Although this business fetches high margins and will diversify the Company’s earnings base, we are cognisant of the risks of lending to low-to-medium-income consumers and will keep vigilant for signs of any potential impact on MBF Cards’ asset quality. Meanwhile, the Company’s gearing level stood at 2.3 times as at end-June 2011. This remained lower than those of the other non-bank financial institutions within RAM Ratings’ universe.

Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my