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July 25 (The following statement was released by the rating agency)
Fitch Ratings has today affirmed Export Import Bank of Malaysia Berhad's (MEXIM) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A-', Support Rating at '1' and Support Rating Floor at 'A-'. The Outlook on the rating is Negative. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS
MEXIM's IDR, Support Rating Floor and senior debt rating are equalised with that of the Malaysian sovereign. This reflects Fitch's expectations of an extremely high probability of state support being available to MEXIM, if necessary. This expectation also drives the Support Rating of '1'.
MEXIM's modest size in proportion to the overall size of Malaysia's GDP and the domestic banking sector implies that the sovereign should have the ability to support the bank in times of need. Moreover, the sovereign is expected to have a very high propensity to provide extraordinary support to the bank, if necessary, as MEXIM fulfils a unique policy role to support and develop the export-oriented sector, an area of strategic importance to Malaysia's economic development. The Negative Outlook on MEXIM's ratings corresponds to the Negative Outlook on the Malaysian sovereign ratings.
The ratings of MEXIM and its senior notes are sensitive to any deterioration in the sovereign's creditworthiness and ratings, and also to any perceived weakening in the sovereign's propensity to support the bank.
MEXIM's ratings may be notched downwards from the sovereign's ratings, if Fitch believes that the sovereign's propensity to support the bank has weakened. However, this is not expected to occur in the near to medium term.
MEXIM's gross loans and contingent credit commitments grew 31% in 2013, meeting its target of 30% annual growth in business volumes. The bank has worked to improve the credit quality of its exposures over the last few years. However, credit costs are expected to remain volatile due to the concentrated nature of the bank's lending - a consequence of its mandated policy role. MEXIM relies on wholesale funding, largely sourced from commercial banks and capital markets, and the bank's quasi-sovereign status underpins its stable funding profile. Capital generation is weak due to the periodic development of large loan losses, and capitalisation may be eroded by the bank's rapid balance sheet growth. However, MEXIM's capital remains high, with a Tier 1 capital adequacy ratio (CAR) of 35.3% and a total CAR of 36.0% at end-2013.
FULL LIST OF RATING ACTIONS
Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Negative
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A-'
Senior unsecured debt rating affirmed at 'A-'