MARC Ratings has assigned preliminary ratings of AAA/AAAIS to Cagamas Berhad’s proposed Conventional/Islamic Medium-Term Notes (MTN/IMTN) Programmes with a combined limit of up to RM80.0 billion. Concurrently, the rating agency has affirmed its ratings on Cagamas’ bonds and sukuk issuances as follows:
- MARC-1/MARC-1IS on Conventional/Islamic Commercial Papers (CCP/ICP) Programmes with a combined limit of RM20.0 billion
- AAA/AAAIS on Conventional/Islamic Medium-Term Notes (MTN/IMTN) Programmes of up to RM60.0 billion.
The outlook on all ratings is stable. The ratings reflect Cagamas’ status as the national mortgage corporation, strategic importance in the domestic financial system, strong capital levels and stable liquidity position.
As at end-June 2024, Cagamas’ net outstanding loans and financing stood at RM46.1 billion, of which approximately 94% is in the residential mortgage sector. Cagamas’ five-year strategic plan — Cagamas House of the Future 2024-2028 — focuses on new product development aimed at expanding its product offerings. The plan also aims to diversify funding sources by looking at funding opportunities both locally and abroad. The proposed MTN/IMTN Programmes, larger at RM80 billion with a perpetual tenure, are part of the funding strategy.
Cagamas’ capital position was solid with Common Equity Tier 1 ratio and total capital ratio of 33.7% and 34.1% as at end-1H2024, attributable to its low-risk weight density, minimal impairment losses, and credit exposure to highly rated counterparties. Under its purchase-with-recourse scheme (86% of Cagamas’ outstanding loans and financing), the originators, which are largely financial institutions, bear the risk of default by the borrower or household. Cagamas’ funding and liquidity positions have also remained healthy, benefitting from easy access to the domestic capital market; it raised RM29.3 billion worth of debt securities in 2023 and a further RM8.2 billion in 1H2024.