CREDIT GUARANTEE CORPORATION MALAYSIA BERHAD - 2023 |
||||||||
| Report ID | 60538900469674 | Popularity | 150 views 14 downloads | |||||
| Report Date | Dec 2023 | Product | ||||||
| Company / Issuer | Credit Guarantee Corporation (M) Bhd | Sector | Finance | |||||
| Price (RM) |
|
|||||||
| Rationale |
Rating action MARC Ratings has affirmed its financial institution rating of AAA with a stable outlook on Credit Guarantee Corporation Malaysia Berhad (CGC). Rationale The affirmed rating considers the government’s 78.6% ownership of CGC through Bank Negara Malaysia (BNM), as well as the development financial institution’s (DFI) key public policy role focused on facilitating access to financing for micro, small and medium-sized enterprises (MSMEs). MARC Ratings views the propensity for government support as very high. The rating also considers CGC’s strong capitalisation level. CGC provides credit guarantees on loans and financing extended to MSMEs by participating financial institutions (PFIs). After strong growth between 2019 and 2022 where CGC’s net loans guaranteed increased from RM9.3 billion to RM15.1 billion — bolstered by the various government-initiated financing schemes introduced during the pandemic period — growth has slowed in 2023 as the schemes gradually end. Nevertheless, the rating agency opines that the continued strong support from the government in developing MSMEs, exemplified by a supportive Budget 2024 allocation of RM44 billion for the sector, will bode well for CGC. The Portfolio Guarantee (PG) scheme remains CGC’s key product, accounting for 92.7% of its guaranteed loans in 1H2023. Under the PG scheme, CGC provides guarantees on loans extended by PFIs at various coverage levels (average of 70%), effectively transferring part of the credit risk to the PFIs. The PG scheme involves upfront agreements with the PFIs on CGC’s guarantee approval criteria, including guarantee approval limit on a portfolio and individual basis, sector exposure and financial ratios; the PFIs will assess and approve loans directly based on the criteria agreed, reducing turnaround time for both parties. CGC’s gross non-performing loans/financing (NPL) ratio increased moderately to 4.8% as at end-June 2023, from 4.1% as at end-2022, following the expiry of loan relief programmes and ongoing corporate stress, particularly among MSMEs. While CGC is exposed to high-risk MSME lending given its mandate to support the sector, this risk is mitigated by CGC’s strong capital level, which stood at 39.7% as at end-June 2023 (on a comparable Basel II basis). In this regard, the risk-sharing with PFIs under the PG scheme, which makes up the bulk of CGC’s guarantee portfolio, is also viewed positively. In 1H2023, total income rose by 59.0% y-o-y to RM260.4 million, mainly due to higher investment income of RM122.9 million. Net profit improved to RM54.1 million in 1H2023 (1H2022: -RM62.6 million) on higher income and lower provision of RM133.4 million during the period (1H2022: RM150.7 million). Meanwhile, CGC’s liquidity profile remained stable, supported by strong cash balances and term deposits. As of end-1H2023, debt and sukuk securities constituted around 61.4% of CGC’s total investments, down slightly from 66.4% in 2022. Within the portfolio, bonds and sukuk rated AA and higher continue to form the bulk of the investments at around 86.4%. Rating outlook The stable outlook reflects MARC Ratings’ expectation of continued government support to CGC in carrying out its mandated public policy role. Rating trajectory Downside scenario The rating could come under pressure if there is an explicit decline in financial and/or operational support from the government. Key strengths
Key risks
|
|||||||
| Related | ||||||||
