MARC has affirmed its ratings on Cagamas Berhad's bonds and sukuk issuances as follows:
- Conventional and Islamic Commercial Papers (CP/ICP) programmes with a combined aggregate limit of RM20.0 billion at MARC-1/MARC-1IS
- Conventional and Islamic Medium-Term Notes (MTN/IMTN) programmes of up to RM60.0 billion at AAA/AAAIS
The ratings outlook is stable. Cagamas' status as the national mortgage corporation and its strategic role in the domestic financial system remain key rating drivers. Its strong capitalisation and healthy liquidity position undergird the rating affirmation.
During 2020, Cagamas' purchase of loans and financing through the purchase-with-recourse (PWR) scheme rose to RM7.0 billion, a sharp increase from RM4.98 billion in 2019, as opportunities arose from banks seeking to address the strain on their liquidity due to the impact from the loans and financing moratorium and targeted repayment assistance (TRA) programmes during the period. Despite the higher purchase, Cagamas' net outstanding loans and financing portfolio stood lower at RM33.2 billion, a 14.2% decline from RM37.8 billion in 2019, driven by greater maturities of PWR assets and run down of purchase-without-recourse (PWOR) assets. Given that the banking sector is now flushed with ample liquidity following central bank measures to mitigate the impact from the pandemic, PWR purchases are likely to be affected and therefore Cagamas' asset base is not likely to see an uptick in the near term.
Cagamas' capitalisation remains sound, underpinned by its exposure to highly rated counterparties as well as minimal impairment losses. As at end-2020, its total capital ratio stood higher at 45.3%, providing ample headroom to fund future business activities. Its funding and liquidity position have also remained healthy with a funding base of RM31.5 billion as at end-2020. Profitability was lower with pre-tax profit of RM301.4 million (2019: RM318.0 million) on a lower asset base. As profitability is largely driven by its loan purchases and pricing strategy, any significant pick-up from the higher-yielding PWOR portfolio and portfolio diversification would improve its profitability performance. Despite lower earnings, Cagamas' return on assets and return on equity stood at 0.78% and 7.46%.
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