FW: RAM Ratings reaffirms Bank Pembangunan's AAA ratings

 

Published on 05 Jan 2018.

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

The ratings remain anchored by the solid backing from the Government of Malaysia (GoM), given the Group’s strategic role in fulfilling the government’s major socioeconomic development goals in the country. BPMB is the GoM’s key conduit in financing Malaysia’s developmental projects in its mandated sectors of infrastructure, technology, maritime, and oil and gas (O&G). The GoM has demonstrated a solid track record of support for BPMB’s operations in the past, including a capital injection and the extension of guarantees on the Group’s borrowings, as well as a minimum lending spread (on specific financing) and compensation for credit losses on infrastructure loans.

Given its policy role, BPMB’s financing portfolio inherently carries a relatively higher credit risk compared to that taken on by commercial banks, although about 75% of gross financing are extended to fund government-related infrastructure projects. A substantial proportion of the Group’s loan book typically comprises large-scale developmental projects, which gives rise to a high degree of borrower-concentration risk. BPMB’s gross impaired-loan ratio stood at a higher 15.7% as at end-June 2017 (end-December 2015: 11.1%), mainly due to exposures from the technology, maritime and O&G sectors. 

The Group’s earnings in fiscal 2016 were affected by higher impairment provisions; its pre-tax profit came in at just RM213 million (fiscal 2015: RM416 million, restated), after excluding non-recurring accounting gains from the deconsolidation of its former shipping subsidiary, Syarikat Borcos Sdn Bhd (Borcos). As BPMB’s financial performance has been hit by Borcos in the last few years, the Group’s post-deconsolidation earnings should become less volatile without the latter’s vessel impairment charges. Elsewhere, the Group’s healthy capitalisation adequately buffers against further credit losses and is also supportive of future portfolio growth to achieve its developmental mandate.

 

Analytical contact
Loh Kit Yoong
(603) 7628 1032
kityoong@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my