RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of Public Islamic Bank Berhad (the Bank).

Published on 26 April 2016

RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of Public Islamic Bank Berhad (the Bank). Concurrently, we have reaffirmed the respective AAA/Stable and AA1/Stable ratings of the senior and subordinated sukuk under the Bank’s Sukuk Murabahah Programme of up to RM5 billion (2014/2044). Public Islamic’s ratings reflect its strategic importance as the Islamic banking arm of Public Bank Berhad (the Group, rated AAA/Stable/P1); capital and funding support are expected to be forthcoming, if needed. 

Public Islamic’s financing base expanded 24.4% in FY Dec 2015, above the Islamic banking system's financing growth of 16.2% during the same period. Despite this, the Bank’s asset quality remained sturdy, a testament of the Group’s prudent credit culture. Alongside an enlarged financing base, the reduction of Public Islamic's gross impaired-financing (GIF) had led to an excellent GIF ratio of 0.6% as at end-March 2016. At the same time, its GIF coverage ratio came up to a robust 151%. Amid its strategy of rebalancing its financing portfolio in favour of floating-rate facilities, Public Islamic's vehicle financing had contracted slightly in FY Dec 2014. Nonetheless, this segment returned to growth in FY Dec 2015 while the Bank's ratio on fixed to floating-rate financing was almost evenly split as at end-March 2016 - in stark contrast to the 80:20 mix as at end-December 2011.

Underpinned by its ability to leverage off its parent’s extensive branch network, Public Islamic’s deposit base expanded a brisk 27.2% in FY Dec 2015, leading to a comfortable financing-to-deposits ratio of 81.2% as at year-end. Nonetheless, the Bank remains exposed to depositor-concentration risk. That said, we derive comfort from Public Islamic’s satisfactory liquidity profile; its liquidity coverage ratio was kept above 100% as at the same date. Moreover, we expect ready funding and liquidity support from the Group if needed. Meanwhile, the Bank’s capitalisation levels remained strong as at end-March 2016, with respective common-equity tier-1 and total capital ratios of 11.3% and 13.9%.

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Choong Andrea
(603) 7628 1115
andrea@ram.com.my