RAM Ratings has upgraded the ratings of Pac Lease Berhad’s (the Company) CP/MTN Issuance Programme of up to RM500 million (2011/2018), from A2/Positive/P1 to AA3/Stable/P1.

Published on 03 July 2014

RAM Ratings has upgraded the ratings of Pac Lease Berhad’s (the Company) CP/MTN Issuance Programme of up to RM500 million (2011/2018), from A2/Positive/P1 to AA3/Stable/P1. The 2-notch upgrade is driven by our reassessment of parental support for PacLease, which is fully owned by Oversea-Chinese Banking Corporation Limited (OCBC Ltd or the Group). Given OCBC Ltd’s track record of support since 2008 and its complete takeover of the Company in May 2012, RAM believes that PacLease will receive extraordinary support from either OCBC Ltd or OCBC Bank (Malaysia) Berhad (OCBC Malaysia), as well as operational support to safeguard the Group’s reputation and franchise.
PacLease’s higher-margin equipment-financing business, while small, is a strategic fit for OCBC Ltd as it enhances the suite of financial services provided by OCBC Malaysia and offers cross-selling opportunities. PacLease’s business strategies and operations are under the purview of OCBC Malaysia (rated AAA/Stable/P1 by RAM); the latter oversees the Company’s risk-management framework and performance. At the same time, PacLease is required to adhere to certain internal policies of the Group, to ensure compliance with the requirements of the Monetary Authority of Singapore – OCBC Ltd’s home regulator.
We have also observed greater operational integration between PacLease and OCBC Malaysia in the last 2 years, via a shared service centre. While PacLease has been rapidly expanding its business since 2009, its asset-quality indicators are still healthy, underpinned by its prudent underwriting standards. The Company’s profitability remains robust on the back of its high-margin products. In FY Dec 2013, PacLease’s net interest margin and return on assets came in at 5.3% and 3.1%, respectively.

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Poh Wen Jun
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wenjun@ram.com.my