Thursday, Oct 01, 2020
MARC has assigned its rating of AAAIS to Bank Pembangunan Malaysia Berhad’s (Bank Pembangunan) RM5.0 billion Islamic Medium-Term Notes Programme. Concurrently, the rating agency has affirmed Bank Pembangunan’s financial institution (FI) rating at AAA. The ratings carry a stable outlook.
Bank Pembangunan’s status as a wholly government-owned development financial institution (DFI) and its key role in providing financial support to promote the growth of specific sectors as directed by the government remain key rating drivers. Government assistance to Bank Pembangunan is given through government guarantees, interest rate subsidies and infrastructure support funds for eligible projects.
Bank Pembangunan’s capital position, as reflected by its Basel I core and risk-weighted capital ratios of 32.6% and 39.6% as at 1H2020, remains strong and well above comparable peers in the DFI space. The DFI’s loan/financing book continued to be dominated by the infrastructure sector, of which roads/highways constitute the largest component, which gives rise to concentration risk. MARC understands that most of the existing infrastructure loans/financing are related to government-initiated projects which benefit from direct or indirect government support.
In 2019, the DFI’s profit before tax increased by 45.7% y-o-y to RM379.7 million; the improved performance was supported by lower provisions (2019: RM95.8 million, 2018: RM423.2 million). The DFI’s funding profile remained largely supported by the government as reflected by government-guaranteed borrowings, and deposits from the government and related entities, which account for 36.4% and 28.1% of total funding. Proceeds from the issuance will be utilised to partly replace the existing financing/borrowings.
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