RAM Ratings affirms AAA(s)/Stable rating of Toyota Capital's guaranteed debt facilities

RAM Ratings has affirmed the AAA(s)/Stable rating of Toyota Capital Malaysia Sdn Bhd's (Toyota Capital or the Company) RM2.5 billion Conventional and Islamic Medium-Term Notes (MTN) Programme (2016/2031) and RM2.5 billion Conventional and Islamic MTN Programme (2025/2040). 

The enhanced(s) ratings reflect the strength of the irrevocable and unconditional guarantees from Toyota Motor Finance (Netherlands) BV (Toyota Netherlands), a wholly owned subsidiary of Toyota Financial Services Corporation (TFS). These guarantees are further supported by a chain of credit support agreements extending up to Toyota Motor Corporation (TMC or the Group). TMC, a leading global automotive manufacturer, boasts a solid business profile, underpinned by diversified geographical operations and a conservative financial profile marked by low leverage and solid liquidity. 

On a stand-alone basis, Toyota Capital's performance has remained within expectations. Despite economic headwinds, inflationary pressures and seasonal factors, the Company's asset quality remained satisfactory as reflected by a gross impaired financing (GIF) ratio of 1.3% as at end-March 2025. Although GIF coverage declined to 88.4% as at end-March 2025 (end-March 2024: 108.2%), prudent risk management should keep asset quality pressures contained. 

The Company's profitability and gearing remain weaker compared to peers. In FY Mar 2025, the Company's adjusted pre-tax profit eased to RM92.4 mil (FY Mar 2024: RM96.2 mil), translating into a lower adjusted return on assets of 0.8% (FY Mar 2024 1.0%). The weaker profit performance was mainly driven by heftier operating costs and impairment charges as well as a narrower net interest margin. Toyota Capital's adjusted net gearing ratio of 14.4 times as at end-March 2025 remains among the highest in RAM's rated portfolio of hire purchase and leasing players. Nevertheless, the elevat