RAM Ratings has reaffirmed Bank Kerjasama Rakyat Malaysia Berhad's (Bank Rakyat or the Bank) AA2/Stable/P1 financial institution ratings. The ratings of the sukuk programmes under Bank Rakyat's funding conduits, Imtiaz Sukuk Berhad and Imtiaz Sukuk II Berhad, carrying respective AA2(s)/Stable and AA2(s)/Stable/P1(s) ratings, have also been reaffirmed as they mirror the credit profile of the Bank.
Bank Rakyat's financial institution ratings reflect its position as a leading cooperative and developmental financial institution (DFI) in Malaysia, with a strong foothold in the provision of personal-financing facilities to civil servants. Our ratings also factor in the expectation of government support given the Bank's role as a cooperative bank-cum-DFI.
Bank Rakyat's financing quality has remained sound, underscored by a sizeable portfolio of personal financing serviced via direct salary deductions. These account for 85% of the Bank's gross financing, and offset the weaker credit quality of its commercial-banking portfolio. As at end-March 2015, its gross impaired-financing ratio had eased to 2.0% (end-December 2013: 2.2%), supported by the Bank's more active monitoring and recovery efforts that began in early 2014, to reduce delinquencies.
During the period under review, the Bank's profitability stayed healthy, although its margins remained challenged amid competition in both financing and deposits. While Bank Rakyat's net interest margin narrowed considerably to 3.4% in FY Dec 2014 (from 4.0% a year ago), we expect it to remain wider than the banking industry's norm given the Bank's sizeable exposure to personal financing, which fetches higher yields compared to other types of consumer loans.
Notably, the Bank's efforts to manage depositor-concentration risk by increasing its pool of individual depositors have gained traction; retail deposits accounted for 17% of its deposit base as at end-March 2015 (end-December 2011: 8%). Relative to its risk profile, the Bank's capitalisation is deemed robust, backed by its healthy income-generating capacity and the periodic issuance of new shares. As at end-March 2015, the Bank's tier-1 and total capital ratios stood at 17.6% and 18.9%, respectively.
Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my
© Press Release 2015
