MARC Ratings has affirmed its financial institution rating of AAA on Bank Pembangunan Malaysia Berhad (BPMB) and its AAAIS rating on the bank’s RM11.0 billion Islamic Medium-Term Notes (IMTN) Programme. The outlook on both ratings is stable.
The ratings reflect MARC Ratings’ expectation of a very high likelihood of government support for BPMB, given its status as a fully government-owned policy bank, its key role in national infrastructure development, and its history of receiving such support. Part of BPMB’s borrowings are government-guaranteed, and the bank also receives grants that can partially cover credit losses.
On 1 May 2025, BPMB completed its acquisition of Small Medium Enterprise Development Bank Malaysia Berhad and Export-Import Bank of Malaysia Berhad (EXIM Bank) via a share swap at their net asset values. Post-acquisition, group-level asset quality indicators moderated due to higher impairments from the acquired entities, with the group’s gross impaired financing (GIF) ratio at 14.8% versus BPMB’s standalone 10.1%, and financing loss coverage at 115.9% (bank level: 174.8%). The consolidated group benefits from more diversified sectoral exposures, and capital levels across all three entities remain supportive of their developmental mandates. Synergies may arise from cross-selling, lower funding costs, and system or function consolidation. The developmental financing mandates of BPMB and its subsidiaries remain intact, and strong government support is expected to continue.
As of 1H2025, BPMB group’s financing book was RM36.9 billion (bank level: RM21.9 billion) following the consolidation of the two newly acquired banks. At the bank level, infrastructure financing accounted for approximately 92% of total financing, with ~79% directed to government-related projects, reflecting BPMB’s role as the country’s infrastructure financing bank.
BPMB faces inherently higher credit risk due to its developmental role. Its bank-level GIF ratio was 10.1% as of 1H2025, having remained around this level over the past five years. Asset quality may be pressured by the high share of its financing book under restructured and rescheduled programmes, at 36.7% in 1H2025 (2024: 37.0%). However, the bank’s capital and loss provisions are sufficient to absorb this risk, with a core capital ratio of 32.4% and financing loss coverage of 174.8%.
In 2024, BPMB’s pre-tax profit increased to RM546.9 million (2023: RM526.3 million), driven by financing portfolio growth and recoveries on impaired financing. Net profit margin declined slightly to 2.8% (2023: 2.9%) due to higher holdings of lower-yielding investments. Pre-tax return on assets and return on equity were 1.6% and 6.1%. Bank-level earnings momentum continued in 1H2025, with pre-tax profit increasing to RM435.9 million (1H2024: RM420.2 million).
As of 1H2025, BPMB’s funding is supported by customer deposits and stable sources, including senior debt, which together accounted for 85.2% of total funding at the bank level, whereas that for the consolidated group level stood at 86.8%. Around 49% of deposits are from government-related entities, and are expected to remain stable due to the bank’s governmental ties. Liquidity coverage ratio and net stable funding ratio stood comfortably above regulatory requirements at 349.5% and 130.1%.