Published on 12 November 2014
RAM Ratings has reaffirmed Bank Pembangunan
Malaysia Berhad’s (the Bank) AAA/Stable/P1 financial institution
ratings, along with the AAA/Stable rating of the Bank’s up to RM7
billion Conventional Medium-Term Notes and/or Islamic Murabahah
Medium-Term Notes Programmes (2006/2036).
As a development financial institution, Bank
Pembangunan functions as the Government of Malaysia’s (GoM) key conduit
in developing its mandated sectors of infrastructure, technology,
maritime, and oil and gas. The Bank’s functions and operations are
integral to and strongly influenced by the GoM.
The reaffirmation of the ratings reflects the strong
likelihood of government support for Bank Pembangunan in times of need,
given the Bank’s strategic and crucial role in the socio-economic
development of Malaysia. The GoM has demonstrated a solid track record
of support through capital injections, the settlement of a defaulted
loan, the provision of guarantees on the Bank’s borrowings, as well as
the guarantee of a minimum lending spread for certain sectors. The GoM
had also provided an infrastructure support fund to absorb the Bank’s
credit losses.
Given its developmental role, the Bank takes on
higher-risk credits. As at end-June 2014, the Bank’s gross impaired-loan
ratio remained high at 10.3% while about a third of its lending
portfolio had been restructured or rescheduled. Bank Pembangunan is also
exposed to a high level of borrower-concentration risk, a result of the
Bank’s exposure to lumpy infrastructure loans. Further, the Bank’s
exposure to the still-challenging shipping industry renders its profit
performance volatile due to potential lumpy vessel provisions.
Nonetheless, Bank Pembangunan’s capitalisation remains healthy, as
reflected by its tier-1 ratio of 28.7% as at end-June 2014.
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