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Press Release
11 Dec | Tuesday
RAM Ratings reaffirms Bank Pembangunan’s AAA ratings
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 are premised on our expectation of continued support from the Government of Malaysia (GoM), given the Group’s status as a wholly government-owned development financial institution and its strategic role in financing its mandated sectors; BPMB is the GoM’s key conduit in financing Malaysia’s developmental projects in the infrastructure, technology, maritime, and oil and gas (O&G) sectors. The GoM has demonstrated strong support for BPMB’s operations in the past through a capital injection, the provision of funds to compensate credit losses on infrastructure loans, a minimum lending spread (on specific financing), and the extension of guarantees on its borrowings.
 
Given its developmental mandate, BPMB typically takes on higher-risk credits that are not usually accepted by commercial banks. A substantial proportion of the Group’s loan book typically comprises large-scale development projects, which gives rise to a high degree of borrower-concentration risk. As at end-June 2018, BPMB’s asset-quality metrics remained weak although its gross impaired loan ratio had eased to 13.4% (end-December 2016: 15.0%), the result of significantly less accretion of new impaired loans (RM184 million in fiscal 2017 vs RM1.5 billion in fiscal 2016) and a RM704 million write-off.
 
BPMB’s pre-tax profit came in at a slightly higher RM323.5 million in fiscal 2017 (+2% y-o-y) as lower net impairment charges helped offset a weaker topline arising from the continued contraction in its loan book. Although the deconsolidation of a former shipping subsidiary no longer subjects the Bank to vessel impairment charges that had plagued its earnings in previous years, BPMB’s return on risk-weighted assets of 1.3% in fiscal 2017 is deemed weak. Meanwhile, the Group’s healthy capitalisation provides an adequate buffer against further credit losses and is also supportive of future portfolio growth to achieve its developmental mandate.
Analytical contact
Lynette Lee
(603) 7628 1182
lynette@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 11 December 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Ó Copyright 2018 by RAM Rating Services Berhad
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