MARC Ratings has affirmed its financial institution (FI) rating of AAA on Bank Pertanian Malaysia Berhad (Agrobank). Concurrently, the rating agency has affirmed its rating of AAAIS on the bank’s Islamic Medium Term-Notes Programme of up to RM1.0 billion. The ratings outlook is stable.
The FI rating is driven by Agrobank’s status as a wholly government-owned development financial institution (DFI) with a mandate to chart the growth and development of Malaysia’s agriculture industry. The DFI is regulated by Bank Negara Malaysia (BNM) while its financing activities are guided by policies set by the Ministry of Agriculture and Food Industries.
As at end-2021, Agrobank’s financing portfolio grew by 3.9% y-o-y to stand at RM13.7 billion. Growth was aided by the DFI’s continued role as a conduit to channel the government’s stimulus facilities to those impacted by the pandemic. Continued accommodative relief measures coupled with financing portfolio expansion have led to a slight downtick in the DFI’s gross impaired financing ratio of 6.4% as at end-2021 (end-2020: 6.7%). MARC Ratings notes that Agrobank continues to maintain an accommodative stance, offering rescheduling and restructuring programmes to its customers in managing asset quality levels. Over the same period, net profit improved to RM106.7 million (end-2020: RM27.9 million) largely on the back of lower provisioning expenses.
The DFI’s core capital ratio and risk-weighted capital ratio remained sound at 21.1% and 25.7% as at end-2021 (2020: 22.4%, 25.9%). While downside risk on capital persists in view of its developmental role, we opine that capital support from the government would be forthcoming if required. In terms of funding, Agrobank continued to benefit from funding support from the government as well as BNM.
As at end-2021, 42.9% of its total funding were sourced by way of deposits, financing scheme funds and direct grants from the government and related entities.