MARC has affirmed its financial institution (FI) rating of AAA with a stable outlook on Credit Guarantee Corporation Malaysia Berhad (CGC).
The rating reflects CGC’s status as a development financial institution (DFI) with an explicit public policy role, underpinned by the support provided by the government through Bank Negara Malaysia (BNM), its key shareholder. We have incorporated a very high systemic support extended by BNM which has a 78.6% interest in the DFI.
CGC provides credit guarantees on loans and financing extended to micro, small and medium-sized enterprises (MSMEs) by FIs. As at end-1H2021, CGC’s net loans guaranteed stood higher at RM13.0 billion (1H2020: RM11.6 billion) with the growth coming from funds channelled to MSMEs under various relief programmes — Special Relief Facility (SRF) and Targeted Relief and Recovery Facility (TRRF) — to lessen the impact of the COVID-19 pandemic on the MSME sector. CGC has approved RM2.5 billion guarantees under SRF in 2020 and RM2.1 billion under TRRF as of end-September 2021.
CGC’s Portfolio Guarantee (PG) and Wholesale Guarantee (WG) schemes remain its key products, accounting for 63.5% and 29.5% of the total main guaranteed schemes in 1H2021. Under these schemes, CGC provides guarantees with various coverage levels on new and existing loans of participating financial institutions (PFIs). This allows CGC to share its guarantee risks with the PFIs.
Gross non-performing loans/financing ratio reduced to 3.5% in 1H2021 (2020: 5.3%), attributed to a combination of write-offs and recovery. We also note that recovery for the subrogated accounts of RM12.5 million in 2020 was lower than in prior years (2019: RM19.3 million, 2018: RM22.8 million) due to the moratorium extended to its customers. In addition, increase in the winding up petition and bankruptcy thresholds have affected recovery efforts.
For 1H2021, its net profit improved to RM127.5 million due to write-back of expected credit losses of RM7.2 million. Accordingly, its return on assets and return on equity stood at 4.89% and 6.81%. CGC maintains a stable liquidity profile, supported by strong cash balances and term deposits, accounting for 18.4% of total assets. Debt and sukuk securities constituted around 56.3% of its total investment portfolio as at 1H2021; the majority of these are rated AA and above.
Contacts:
Farhan Darham, +603-2717 2945/ farhan@marc.com.my;
Haziq Najmuddin, +603-2717 2965/ haziq@marc.com.my;
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my.
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