RAM reaffirms SDB debt ratings

PETALING JAYA: RAM Ratings has reaffirmed the debt ratings of Sabah Development Bank Bhd’s (SDB) debt programmes at AA1/ Stable/P1 ratings.

The reaffirmation reflected the rating house’s expectation that extraordinary support from the Sabah state government would remain forthcoming in times of need, as SDB played a strategic role in advancing the state government’s developmental agenda.

The Sabah state government has backed SDB’s operations with sizeable deposits, business referrals and letters of support for the bank’s debt facilities.

The debt programmes entailed a commercial paper (CP) programme of up to RM1.5bil in nominal value (2014/2021) and a medium-term note (MTN) programme of up to RM1.5bil in nominal value (2013/2033); a CP programme of up to RM1bil in nominal value (2013/2020) and MTN programme of up to RM1bil in nominal value (2012/2032); a CP programme of up to RM3bil (2012/2019) and MTN programme of up to RM3bil (2011/2036); as well as a RM1bil MTN programme (2008/2028).

According to RAM Ratings, SDB’s loan book grew 4.2% year-on-year (y-o-y) to RM6.1bil as at end-December 2017, mainly driven by the construction and real estate sector.

“The bank projects a slower growth of about 3% in 2018 amidst economic uncertainties, particularly the ongoing review of major state development projects, with key growth sectors closely mirroring the current state government’s near-term focus,” it said.

Given its policy role, SDB’s lending activities naturally entail higher credit risks.

SDB reported a lower gross impaired loan (GIL) ratio of 9.2% as at end-March 2018, albeit still weaker than its peers, in view of its less stringent impaired loan classification, which are loans that are more than six months in arrears. Applying the “three months past due” measure to SDB’s loan book would see its GIL ratio standing at a higher 34.1% as at end-March 2018.