RAM Ratings has assigned an AA3(s)/Stable rating to the Proposed RM5 billion Subordinated Sukuk Murabahah Programme of Mumtaz Rakyat Sukuk Berhad - a funding conduit of Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat or the Bank, rated AA2/Stable/P1). The issue rating reflects Bank Rakyat's credit profile as it is the obligor of the Proposed Subordinated Sukuk Murabahah.
The 1-notch difference between Bank Rakyat's AA2 long-term financial institution rating and the AA3 rating of the Proposed Subordinated Sukuk Murabahah reflects the subordination of the instrument to the Bank's deposits and other senior obligations. The Proposed Subordinated Sukuk Murabahah is Basel III-compliant and will qualify as Bank Rakyat's tier-2 capital. It has a loss-absorption feature linked to a non-viability event of Bank Rakyat and/or Mumtaz Rakyat.
Bank Rakyat is a leading cooperative and developmental financial institution (DFI) in Malaysia, with a strong foothold in the provision of personal-financing (PF) facilities to civil servants. Given the Bank's status as a cooperative-cum-DFI, we expect it to receive ready support from the Government, if needed.
Backed by a sizeable PF portfolio that benefits from repayments via non-discretionary salary deductions administered by Biro Perkhidmatan Angkasa, Bank Rakyat's asset quality remained sound with a gross-impaired financing ratio of 1.9% as at end-December 2015. The Bank recorded a credit-cost ratio of only 0.1% in fiscal 2015 (fiscal 2014: 0.8%), thanks to better recoveries and lower individual impairment charges.
Although still healthy, Bank Rakyat's pre-tax profit and ROA declined to RM2.0 billion and 2.2%, respectively, in fiscal 2015 (fiscal 2014: RM2.2 billion and 2.5%). Excluding the utilisation of its profit-equalisation reserve and other one-off items, however, the Bank's underlying pre-tax profit would have improved to RM1.8 billion in fiscal 2015 (fiscal 2014: RM1.6 billion), mainly attributable to sharply lower impairment charges. Underscored by its healthy internal capital generation and the periodic issuance of new shares, the Bank's capitalisation is robust. Its core capital and risk-weighted capital adequacy ratios stood at a respective 18.9% and 20.1% as at end-December 2015.
Media contact
Lim Yu Cheng, CFA
(603) 7628 1188
yucheng@ram.com.my
© Press Release 2016
