Published on 29 September 2015RAM Ratings has reaffirmed the AA3/Stable/P1 ratings of Pac Lease Berhad’s (PacLease or the Company) CP/MTN Issuance Programme of up to RM500 million (2011/2018). The issue ratings incorporate our expectation that PacLease, as a wholly owned subsidiary of Oversea-Chinese Banking Corporation Limited (the Group), will continue to enjoy funding and operational support from either OCBC Bank (Malaysia) Berhad (rated AAA/Stable/P1 by RAM) or the Group, if needed.
PacLease’s asset-quality indicators have weakened since 2013 due to the impairment of several sizeable accounts. Its gross impaired-loan and annualised credit-cost ratios had slipped to 2.10% as at end-March 2015 and 0.97% in 1Q 2015 (end-December 2013: 1.28%; 2013: 0.49%), respectively. While the Company’s asset quality will likely stay under pressure given the more challenging economic environment, we do not expect further major deterioration.
As a non-deposit-taking entity, PacLease relies on wholesale borrowings to fund its lending business, exposing the Company to refinancing risks. Nonetheless, we derive comfort from its ability to tap OCBC Malaysia for funding and liquidity support. PacLease’s profitability remains robust, supported by its wide-margin products. In 1Q FY Dec 2015, the Company’s net interest margin and annualised pre-impairment ROA came in at 5.1% and 3.6%, respectively. In addition, the Company’s gearing ratio stood at 4.3 times as at end-March 2015 – well within its internal prudential limit.
Poh Wen Jun
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