Published on 16 Jul 2018.
RAM Ratings has reaffirmed the AA1/Stable/P1 ratings of Sabah Credit Corporation's (SCC or the Corporation) outstanding sukuk instruments. SCC is wholly owned by the State Government of Sabah and operates under the purview of the Sabah Ministry of Finance. The ratings continue to reflect our expectation of continued support from the State Government. This has been clearly demonstrated through the subordination of SCC’s loans from the State Government to debt securities, the conversion of such loans into share capital, and the extension of letters of support for the Corporation’s debt securities.
In view of its monoline business model, personal financing accounted for almost all (97%) of SCC’s financing book as at end-December 2017. These facilities are primarily extended to civil servants and are repaid via direct salary deductions, thereby containing the Corporation’s credit risk. Financing growth slowed to 6.8% in fiscal 2017 (fiscal 2016: 13.5%) in view of the absence of a mid-year salary increment and the lower cost of living allowances for SCC’s civil servant-centric customer base. The Corporation conservatively projects low single-digit financing growth for fiscal 2018 as a mid-year salary increment for civil servants appears unlikely.
Aided by larger write-offs during the year, SCC’s gross impaired financing (GIF) ratio eased further to 2.7% as at end-December 2017 (end-December 2016: 3.0%). However, the Corporation recorded an improved credit-cost ratio of 0.8% in fiscal 2017 (fiscal 2016: 1.0%) while its GIF coverage ratio stood at a stronger 104% (end-December 2016: 98%).
SCC continues to be exposed to refinancing and liquidity risks, given the large composition of short-term market-based borrowings in its portfolio. Nevertheless, we anticipate ready funding and liquidity support from the State Government, if needed. The Corporation’s gearing ratio stayed manageable at 4.3 times as at end-December 2017.
Analytical contact
Choong Andrea
(603) 7628 1115
Media contact
Padthma Subbiah
(603) 7628 1162
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