RAM Ratings has reaffirmed Public Bank Berhad’s (the Group) AAA/Stable/P1 financial institution ratings as well as the respective ratings of Public Bank’s and PBFIN Berhad’s outstanding debt instruments. PBFIN is the Group’s funding conduit.

Published on 14 April 2015

Public Bank’s ratings reflect its superior asset quality, solid profit track record, strong capitalisation as well as entrenched franchise in the consumer and SME markets. The Group is among the top 3 banking groups in Malaysia by assets as well as the leader in residential mortgages, commercial property financing and automobile financing. Commanding 16% of the domestic banking system’s deposits, Public Bank is a systemically important entity. However, the Group’s investment-banking presence is smaller relative to its peers.
Reflecting its prudent credit culture, Public Bank’s gross impaired-loan (GIL) ratio stood at a mere 0.6% as at end-December 2014 (industry average: 1.6%). Although there was still an uptick in the Group’s hire-purchase impaired loans, the accretion slowed down in 2014. Public Bank’s credit-cost ratio had eased to only 0.1% in fiscal 2014 (fiscal 2013: 0.2%), thanks to lower individual impairment charges and better recoveries. In addition, the Group has a very strong loan-loss buffer, with an adjusted GIL coverage ratio of 219%.
Public Bank boasts a solid profit track record, underpinned by its firm grip on cost-efficiency, low credit costs and above-industry loan growth. Despite industry-wide margin compression, its pre-tax profit ascended 9% to RM5.8 billion in fiscal 2014, equivalent to a healthy return on risk-weighted assets of 2.8%. The Group’s funding profile remained sound as at end-December 2014, with its loan-to-deposit ratio standing at 88% and retail deposits making up 45% of its customer deposits. Public Bank raised RM4.8 billion via a rights issue last year; this had strengthened its common-equity tier-1 capital ratio to a commendable 10.8% as at end-December 2014 (end-December 2013: 8.8%).

Instrument	Long-term rating	Rating outlook
Public Bank Berhad
RM1.2 billion Innovative Tier-1 Capital Securities (2006/2036)1	AA2	Stable
Up to RM5 billion Subordinated MTN Programme (2008/2023)2	AA1	Stable
Up to RM5 billion Non-Cumulative Perpetual Capital Securities (NCPCS) under the Non-Innovative Tier-1 Stapled Securities Programme (2009/2066)1	AA2	Stable
Up to RM5 billion Senior MTN Programme (2013/2033)	AAA	Stable
Up to RM10 billion Subordinated MTN Programme (2013/2043)2	AA1	Stable
PBFIN Berhad
Up to RM5 billion Subordinated Notes (Sub Notes) under the Non-Innovative Tier-1 Stapled Securities Programme (2009/2066)1	AA2	Stable
Notes: 1   The 2-notch rating differential between Public Bank’s AAA long-term financial institution rating and the AA2 ratings of its RM1.2 billion Innovative Tier-1 Capital Securities, up to RM5 billion NCPCS under the Non-Innovative Tier-1 Stapled Securities Programme and up to RM5 billion Sub Notes under the Non-Innovative Tier-1 Stapled Securities Programme reflects the deeply subordinated nature and embedded interest-deferral feature of the hybrid instruments. 2 The 1-notch rating differential between Public Bank’s AAA long-term financial institution rating and the AA1 ratings of its Subordinated Notes reflects the subordination of the debt facilities to its senior unsecured obligations. 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.

Media contact
Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my