RAM reaf­firms Bank Rakyat rat­ing

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: RAM Rat­ings has reaf­firmed Bank Ker­jasama Rakyat Malaysia Ber­had’s (Bank Rakyat) AA2 rat­ing with a sta­ble out­look, af­ter the bank’s chair­man Tan Sri Ab­dul Aziz Zainal and manag­ing direc­tor Datuk Mustafha Abd Razak were charged for cor­rup­tion last Septem­ber.

In a state­ment yes­ter­day, the rat­ing agency said con­cur­rently, the rat­ings of its sukuk, is­sued through its fund­ing con­duits, have also been reaf­firmed.

RAM Rat­ings said the charges against the top man­age­ment of Bank Rakyat draw its con­cern as man­age­ment as­sess­ment fea­tures as a key part of the rat­ing con­sid­er­a­tion.

“Not­with­stand­ing this, our view of ex­pected ready sup­port from the gov­ern­ment, Bank Rakyat’s strong per­sonal fi­nanc­ing fran­chise and ro­bust loss-ab­sorb­ing ca­pac­ity un­der­pin the rat­ing reaf­fir­ma­tion at this junc­ture,” it ex­plained.

Aziz was charged un­der Sec­tion 109 of the Pe­nal Code with abet­ment, while Mustafha was charged with crim­i­nal breach of trust of the bank’s al­lo­ca­tion for mar­ket­ing ex­pen­di­ture in­volv­ing RM15 mil­lion, un­der Sec­tion 409 of the Pe­nal Code. Both pleaded not guilty to the charges.

RAM Rat­ings said Bank Rakyat’s as­set qual­ity is sup­ported by a size­able per­sonal fi­nanc­ing port­fo­lio that ben­e­fits from re­pay­ments via non-dis­cre­tionary salary-de­duc­tion/trans­fer mech­a­nisms but bal­anced by a weak cor­po­rate­fi­nanc­ing port­fo­lio.

Its gross im­paired-fi­nanc­ing (GIF) ra­tio re­mained sat­is­fac­tory at 2.1% as at end-June 2016, but is higher than the 1.9% as at end-De­cem­ber 2015, due to a few cor­po­rate bor­row­ers.

Ow­ing to strong re­cov­er­ies, Bank Rakyat recorded a net im­pair­ment write-back in the first half of 2016 even though fur­ther pro­vi­sions on lumpy im­paired ac­counts can­not be ruled out.

As at end-June 2016, its GIF cov­er­age ra­tio (in­clu­sive of reg­u­la­tory re­serves) stood at a com­fort­able 108%.

RAM Rat­ings said Bank Rakyat’s prof­itabil­ity has been ta­per­ing off amid keen com­pe­ti­tion that has eroded its mar­gins over the years. The mar­gin com­pres­sion is also at­trib­ut­able to Bank Rakyat’s rel­a­tively weak de­posit fran­chise.

Bank Rakyat re­ported a pre-tax profit of RM900 mil­lion in the first half of the year with a re­turn on as­set of 1.9% on the back of a lu­cra­tive net an­nu­alised fi­nanc­ing mar­gin of 2.9%.

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