RAM Ratings assigns AA1 rating to Public Bank’s Basel III-compliant debt facility

Published on 11 July 2013

RAM Ratings has assigned a preliminary long-term rating of AA1 to Public Bank Berhad’s (“Public Bank” or “the Group”) proposed up to RM10 billion Subordinated Medium-Term Notes Programme (“Proposed Subordinated Debt Programme”). At the same time, RAM has reaffirmed Public Bank’s respective long- and short-term financial institution ratings at AAA and P1, along with the respective ratings of Public Bank’s and PBFIN Berhad’s (“PBFIN”) outstanding debt instruments. All the long-term ratings have a stable outlook.

The subordinated debts to be issued under the Proposed Subordinated Debt Programme are Basel III-compliant and have a non-viability loss-absorption feature. We opine that the likelihood of a Malaysian bank being non-viable is sufficiently reflected in its long-term financial institution rating. This view takes into account RAM’s interpretation of circumstances that will constitute a non-viability event in Malaysia, as articulated by Bank Negara Malaysia in its Capital Adequacy Framework on Capital Components. The subordinated debts issued under the Proposed Subordinated Debt Programme are rated 1 notch below Public Bank’s long-term financial institution rating, reflecting their lower priority relative to senior unsecured creditors when it comes to claims in the event of bankruptcy or liquidation.

Instrument	Long-term rating	Rating outlook
Public Bank Berhad
RM1.2 billion Innovative Tier-1 Capital Securities (2006/2036)	AA2	Stable
Up to RM5 billion Subordinated Medium-Term Notes Programme (2008/2023)	AA1	Stable
Up to RM5 billion Non-Cumulative Perpetual Capital Securities (“NCPCS”) under the Non-Innovative Tier-1 Stapled Securities Programme (2009/2066)	AA2	Stable
Up to RM5 billion Senior Medium-Term Notes Programme (2013/2033)	AAA	Stable
Proposed up to RM10 billion Subordinated Medium-Term Notes Programme	AA1	Stable
PBFIN Berhad
Up to RM5 billion Subordinated Notes (“Sub Notes”) under the Non-Innovative Tier-1 Stapled Securities Programme (2009/2066)	AA2	Stable

Note:

Each issue of NCPCS by Public Bank will be stapled to the Sub Notes issued by PBFIN. The proceeds from the Sub Notes will be lent to Public Bank as an inter-company loan, based on terms and conditions similar to those of the Sub Notes. The Sub Notes carry the same rating as the NCPCS given that Public Bank’s payment obligations to PBFIN under the inter-company loan - which will be used to cover principal and interest payments on the Sub Notes - rank pari passu with the NCPCS.


The financial institution ratings are anchored by Public Bank’s reputable franchise in the consumer segment as well as among small- and medium-sized enterprises. The Group has leading market shares in residential mortgages, automobile financing and commercial property loans. Public Bank’s asset quality has remained the best in the industry, bearing testimony to the Group’s prudent credit culture and stringent underwriting standards. Its superior asset quality further underscores Public Bank’s solid profit track record, apart from its healthy loan growth and lean cost structure. Public Bank is viewed to be systemically important given that it is Malaysia’s third-largest banking group by asset size.


Media contact
Gladys Chua
(603) 7628 1049
gladys@ram.com.my