Wednesday, Sep 07, 2005
MARC has reaffirmed the long-term and short-term issuer ratings of Cagamas Bhd (Cagamas) at AAA and MARC-1 respectively. The reaffirmation reflects the strong ability and flexibility of the Company to meet its financial commitments, supported by a favourable portfolio of loans and debts with full recourse to the selling institutions; its strong capitalization and a proactive and innovative management team. As the country’s National Mortgage Corporation, the Company’s strategic role in the development of the secondary mortgage market and the strength of the Company’s shareholders are positive factors.
Against the continuing environment of excess liquidity and stable interest rates in the banking system, Cagamas posted a slight increase in outstanding loans and debts held. The Company purchased a total of RM7,166 million loans and debts in 2004 against the historical high of RM11,112 million in 2003.
Cagamas’ assets remain predominantly anchored in housing loans, representing 51.8% of total outstanding loans and debts as at December 2004, followed by hire purchase and leasing debts at 48.1%. However, during the year, purchase of hire purchase and leasing debts outstripped that of housing loans. Cagamas’ well defined terms and conditions for purchase of loans and debts on recourse ensured that its assets are of superior quality while its prudent management of credit exposure to selling institutions enabled the Company to ensure that it is not overly-exposed to any particular financial institution. In the long run Cagamas is expected to further emphasize the development of purchases on a without recourse basis, as the Company pursues its role in developing a true securitization market.
Cagamas employs a close matching of its funding mix with the different interest rate profile of the loans and debts purchased. The proportion of fixed rate purchases funded by fixed rate bonds remains high. Effective 4 September 2004, Bank Negara Malaysia revised the regulatory treatment of Cagamas unsecured debt securities, which includes the reclassification of future issues from Class 1 to Class 2 liquefiable assets. Nevertheless, Cagamas continued to receive firm demand for its primary market issues with commendable oversubscription rates. In addition to the marketability of Cagamas’ debt issues, the Company has good access to the capital and money markets.
The continued adoption of a fine pricing policy and maturity of higher yielding loans and debts will, however, keep profit margins at bay. Against such an environment, the higher interest expenses on its bonds during the year saw the Company’s profit before tax and zakat correspondingly lower by 5.5% to RM183 million.
Against the continuing environment of excess liquidity and stable interest rates in the banking system, Cagamas posted a slight increase in outstanding loans and debts held. The Company purchased a total of RM7,166 million loans and debts in 2004 against the historical high of RM11,112 million in 2003.
Cagamas’ assets remain predominantly anchored in housing loans, representing 51.8% of total outstanding loans and debts as at December 2004, followed by hire purchase and leasing debts at 48.1%. However, during the year, purchase of hire purchase and leasing debts outstripped that of housing loans. Cagamas’ well defined terms and conditions for purchase of loans and debts on recourse ensured that its assets are of superior quality while its prudent management of credit exposure to selling institutions enabled the Company to ensure that it is not overly-exposed to any particular financial institution. In the long run Cagamas is expected to further emphasize the development of purchases on a without recourse basis, as the Company pursues its role in developing a true securitization market.
Cagamas employs a close matching of its funding mix with the different interest rate profile of the loans and debts purchased. The proportion of fixed rate purchases funded by fixed rate bonds remains high. Effective 4 September 2004, Bank Negara Malaysia revised the regulatory treatment of Cagamas unsecured debt securities, which includes the reclassification of future issues from Class 1 to Class 2 liquefiable assets. Nevertheless, Cagamas continued to receive firm demand for its primary market issues with commendable oversubscription rates. In addition to the marketability of Cagamas’ debt issues, the Company has good access to the capital and money markets.
The continued adoption of a fine pricing policy and maturity of higher yielding loans and debts will, however, keep profit margins at bay. Against such an environment, the higher interest expenses on its bonds during the year saw the Company’s profit before tax and zakat correspondingly lower by 5.5% to RM183 million.