RAM reaffirms Bank Rakyat's ratings
Malaysia RAM Ratings has reaffirmed Bank Rakyat’s AA2/Stable/P1 financial institution ratings, along with the AA2(s)/Stable/- rating of its RM1 billion IMTN Programme issued by Imtiaz Sukuk Bhd, a funding conduit of Bank Rakyat.
Bank Rakyat is a leading cooperative and developmental financial institution (DFI), with a strong foothold in personal-financing facilities for civil servants. The Bank commands an estimated 36 per cent of the Malaysian personal-financing market. Given its status as a cooperative bank-cum-DFI and large base of individual shareholders, we expect Bank Rakyat to derive government support if necessary.
Bank Rakyat’s overall asset quality is deemed sound. The gross impaired-financing ratio for the Bank’s personal-financing portfolio stood at 1.1 per cent as at end-March 2013, supported by its ability to access Biro Perkhidmatan Angkasa’s direct-salary-deduction system. Salaries are deducted at source and non-discretionary from the borrower’s perspective, thereby moderating the risk of unsecured financing. Its credit-cost ratio remained relatively high at 0.9 per cent as at end-FY December 2012, constrained by its weaker non-personal-financing portfolio and tighter provisioning policy for unsecured financing.
The Bank recorded a 12 per cent y-o-y financing growth in FY December 2012, driven by personal financing. Following BNM’s recent measures to curb household debt levels (which include a 10-year cap on personal-financing tenure), the Bank has further tightened its underwriting criteria by adopting a flat DSR of 60 per cent and imposing maximum tenure of three years for lower income borrowers. This move is expected to moderate Bank Rakyat’s financing growth as it had earlier disbursed personal-financing facilities with maximum tenures of up to 20 years.
Bank Rakyat’s deposit base largely originates from government/statutory bodies and corporates. This brings about a relatively high level of depositor-concentration risk; its top 10 depositors accounted for 26.7 per cent of its deposits as at end-March 2013. However, this risk is moderated by the Bank’s established relationships with these entities. As at end-December 2012, the Bank’s capitalisation remained sturdy, with a tier-1 risk-weighted capital-adequacy ratio of 16.5 per cent.-- Reuters