RAM Ratings reaffirms Public Bank’s AAA rating on resilience against Covid-19 crisis

Published on 19 May 2020.

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RAM Ratings has reaffirmed Public Bank Berhad’s (the Group) financial institution ratings at AAA/Stable/P1. Concurrently, the respective ratings of its outstanding debt instruments have also been reaffirmed. The reaffirmation reflects our view that the Group will be able to withstand the challenges brought about by the impact of the Covid-19 pandemic. While downside risks have magnified amid the macroeconomic challenges and uncertainties, Public Bank has demonstrated strong resilience during credit downcycles in the past due to its strong management.

Public Bank is the third-largest banking group in Malaysia by asset size and the market leader in residential mortgages, commercial property financing, automobile financing as well as private retail unit trust. Commanding 16.5% of the domestic banking system’s deposits, Public Bank is systemically important to the Malaysian banking sector. Early this year, Public Bank was designated as a domestic systemically important bank by Bank Negara Malaysia (BNM).

Public Bank’s track record of superior asset quality and its prudent credit culture will allow the Group to fare better than its domestic peers in navigating the economic fallout. While a regulatory relief measure in the form of a temporary loan deferment provides a breather to borrowers, delinquencies are set to rise next year, albeit from a very low base. As at end-December 2019, the Group’s gross impaired loan (GIL) ratio of 0.5% (end-December 2018: 0.5%) was significantly lower than the industry’s 1.5%, while its credit cost ratio was equally benign at 5 bps (fiscal 2018: 5 bps). Its solid GIL coverage ratio of 250% (including regulatory reserves) and common equity tier-1 capital ratio of 13.5% further afford a strong buffer to shield against potentially higher credit losses.

The Group recorded a flat profit before tax of RM7.1 billion in FY Dec 2019 as a result of sluggish loan growth and a narrowing net interest margin (NIM). We expect Public Bank’s profitability indicators to stay under pressure in fiscal 2020 given the impact of three overnight policy rate cuts totalling 100 bps, along with the prospect of further cuts, on its NIM. Similar to all domestic banks, the Group may also need to incur a modification charge arising from its hire purchase and Islamic fixed-rate financing under the repayment moratorium. Despite this, Public Bank’s pre-provision profit continues to provide the Group ample headroom to absorb an anticipated rise in impairment charges next year without affecting capital. 

Underscored by a strong retail deposit heritage and extensive branch network, Public Bank boasts one of the largest proportions of retail deposits in the banking system. Slightly over half of its customer deposits stemmed from individuals (industry: 37%), providing diversity and stability to the Group’s funding. Public Bank is expected to have sufficient liquidity throughout the loan deferment period, underlined by its sound funding and liquidity profile as well as BNM’s accommodative stance in ensuring that the banking system remains liquid.


Long-term rating

Rating outlook

RM20 billion Senior MTN Programme (2013/2043)



RM10 billion Subordinated MTN Programme (2013/2043)1



RM10 billion Additional Tier-1 Capital Securities Programme (AT-1 Programme)2




1 The one-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.

2 The three-notch rating differential between Public Bank’s AAA long-term financial institution rating and the AA3 rating of its RM10 billion AT-1 Programme reflects the subordinated nature and fully discretionary coupon payments of the capital securities, as well as our assessment that the Bank possesses a high capital buffer level.


Analytical contact
Wong Yin Ching, CFA 
(603) 3385 2555

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

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