RAM Ratings reaffirms Bank Pembangunan’s AAA/Stable/P1 ratings

Published on 28 November 2013

RAM Ratings has reaffirmed Bank Pembangunan Malaysia Berhad’s (Bank Pembangunan or the Bank) AAA/Stable/P1 financial institution ratings, along with the AAA/Stable rating of its up to RM7 billion Conventional MTN and/or Islamic Murabahah MTN Programmes (2006/2036).

The ratings reflect Bank Pembangunan’s strategic importance to the Government of Malaysia (GoM) given its role in the socio-economic development of the country. As a developmental financial institution, Bank Pembangunan functions as the GoM’s key conduit to develop its mandated sectors of infrastructure, technology, maritime as well as oil and gas. The Bank’s operations are viewed to be integral to the GoM, with strong influence from the latter. Given Bank Pembangunan’s crucial developmental role, it has traditionally enjoyed substantial financial support from the GoM, including equity injections, guarantees for funding, and compensation for interest income and credit losses. In 2008, the GoM extended a guarantee on RM6 billion of the Bank’s RM7 billion MTN Programme, underlining our belief that the entirely GoM-owned Bank Pembangunan will receive adequate and timely financial assistance, if required.

Some of Bank Pembangunan’s 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. As at end-June 2013, the Bank’s gross impaired-loan ratio stood at a very high 12.2% while about 34% of its lending portfolio had been restructured or rescheduled as at end-December 2012. However, the Bank’s strong level of capitalisation, as reflected by its tier-1 and total capital ratios of a respective 33.4% and 35.8% as at end-June 2013, acts as a buffer against potential credit losses.

Media contact

Athirah Amer

(603) 7628 1172

athirah@ram.com.my