‘Merger of DFIs will not affect their ratings’

PETALING JAYA: RAM Ratings opined the proposed merger of four development financial institutions (DFIs) will not affect their ratings.

Budget 2020 discloses plans for a two-stage restructuring of DFIs involving Bank Pembangunan Malaysia Bhd (Bank Pembangunan), Danajamin Nasional Bhd (Danajamin), Export-Import Bank of Malaysia Bhd (MEXIM) and the Small & Medium Enterprise Development Bank Malaysia Bhd (SME Bank).

“The proposed exercise is not anticipated to affect the respective AAA/Stable/P1 financial institution ratings of Bank Pembangunan and MEXIM, nor have any impact on Danajamin’s AAA/Stable/P1 insurer financial strength ratings or the ratings of Danajamin-guaranteed issues.”

“The rating assessments for Bank Pembangunan, MEXIM and Danajamin already consider the solid backing of the Government of Malaysia, anchored by each entity’s strategic role in fulfilling the nation’s developmental goals,” the rating agency said in a statement.

The four entities have a combined asset base in excess of RM45 billion and an aggregate guarantee portfolio of about RM6 billion.

RAM said with a larger market impact, the merged DFI’s strategic importance is expected to remain well preserved.

“The DFI’s credit profile and the ratings of debts that may be transferred to it will continue to benefit from a strong likelihood of government support if required.”

It also highlighted that the integration of resources, cultures and systems is critical to a merger of this scale.

“If well implemented, the proposed realignment of the strategic mandates of DFIs will support the nation’s aspirations in a new global digital economic landscape.”

“Bank Pembangunan provides medium to long-term financing to sectors vital to the nation’s socio-economic development, while MEXIM supports and promotes Malaysia’s external trade.”

As the national financial guarantee insurer, Danajamin is tasked with developing the debt capital markets through credit enhancements for bond and sukuk issuances.

Meanwhile, SME Bank nurtures and serves the financing needs of SMEs – a segment which accounts for more than a third of the country’s gross domestic product.