[RAM] RAM Ratings affirms Sabah Credit Corporation's AA1/Stable/P1 issue ratings

RAM Ratings has affirmed the AA₁/Stable/P1 ratings of Sabah Credit Corporation’s (SCC) sukuk programmes (see table).



The issue ratings reflect SCC’s healthy profitability, comfortable gearing and well-controlled asset quality risks. The ratings also benefit from an uplift based on SCC’s strong ties with the Sabah state government, as evidenced by the latter’s board representation and past financial support. This underscores our assessment of a ‘high’ likelihood of extraordinary government support for SCC, if needed. The state government’s implied strength is deemed ‘superior’, underpinned by its healthy fiscal position. The rating strengths are moderated by SCC’s small franchise, portfolio concentration and funding profile.

In FY Dec 2024, SCC’s pre-tax profit rose 10.1% y-o-y to RM118.0 mil, mainly driven by broader margins and a robust 8.0% annual growth in personal financing (PF) (FY Dec 2023: +0.6%), supported by promotional campaigns and the civil servant salary hike last year. About 96% of its RM3.3 bil financing book comprises PF facilities extended to civil servants, most of which are repaid through non-discretionary salary deductions made by the Services Bureau of the national apex cooperative, Angkasa, and the Sabah state treasury. Compulsory deductions, coupled with the low attrition rate in the civil service, mitigate repayment risk and support sturdy asset quality. 

As at end-December 2024, SCC’s overall gross impaired financing (GIF) and GIF coverage ratios improved to 2.0% and 143.7% (end-December 2023: 2.2% and 138.0%) respectively, thanks to a broadly stable GIF base and an enlarged financing portfolio. As a state-owned entity, SCC’s write-offs are slower than peers’. Excluding impaired PF facilities that are 12 months or more in arrears and those which came under a moratorium in 2020, for which repayments have resumed, the adjusted GIF and GIF coverage ratios would have been a better 1.4% and 206.8%, respectively.  

Potential refinancing risk, given SCC’s reliance on market-based wholesale funding, is mitigated by expected state funding support if necessary. Despite a modest rise in debt levels to fund increased financing activity, stronger retained earnings kept gearing largely unchanged at 2.5 times as at end-December 2024, a comfortable level given the nature of its business. 


Analytical contacts
Liew Kar Ling
(603) 2708 8216
karling@ram.com.my

Johan Faizul
(603) 2708 8235
johan@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8210
sakinah@ram.com.my