RAM Ratings reaffirms Bank Pembangunan's AAA/P1 ratings

Published on 27 December 2011
RAM Ratings has reaffirmed Bank Pembangunan Malaysia Berhad’s (BPMB or the Bank) long- and short-term financial institution ratings at AAA and P1, respectively. At the same time, the long-term rating of the Bank’s up to RM7 billion Conventional Medium-Term Notes (MTN) and/or Islamic Murabahah MTN Programmes has also been reaffirmed at AAA. Both long-term ratings have a stable outlook.

BPMB is perceived as being integral to the Federal Government, premised on the Bank’s strategic role and continued involvement in the socio-economic development of Malaysia. As a development financial institution, BPMB functions as a key conduit for the Federal Government in developing its mandated infrastructure, high-technology and maritime sectors. About 60% of the Bank’s funding base was government-guaranteed as at end-March 2011. Given BPMB’s role in financing nationally strategic projects, it has historically derived substantial financial flexibility from the Federal Government; in FYE 31 December 2008, the latter extended an irrevocable and unconditional guarantee on RM6 billion of the Bank’s RM7 billion MTN Programmes. This underscores our belief that the entirely government-owned BPMB will receive adequate and timely financial assistance, if required.

On the flip side, BPMB’s asset quality is very weak as some of its credits are embedded with a social-development agenda and are also typically large, particularly with reference to the infrastructure sector, resulting in a high level of customer-concentration risk. Reflective of the stricter recognition criteria for impaired loans following the adoption of Financial Reporting Standards 139, BPMB’s gross impaired-loan ratio stood at a high 12.7% as at end-March 2011. At the same time, about a third of the Bank’s performing loans had restructured and rescheduled terms. Nonetheless, BPMB enjoys a high level of capitalisation, as reflected by its tier-1 and overall risk-weighted capital-adequacy ratios of a respective 30.6% and 32.4% as at end-March 2011, which acts as a buffer against potential credit losses.

Media contact
Sophia Lee
(603) 7628 1189
sophia@ram.com.my