RAM Ratings reaffirms Public Islamic’s AAA rating on firm parental support

Published on 19 May 2020.

Share Tweet Email

RAM Ratings has reaffirmed Public Islamic Bank Berhad’s (the Bank) AAA/Stable/P1 financial institution ratings as well as the respective AAA/Stable and AA1/Stable ratings of the senior and subordinated sukuk under the Bank’s RM5 billion Sukuk Murabahah Programme (2014/2044). The ratings are premised on Public Islamic’s strategic importance as Public Bank Berhad’s (the Group, rated AAA/Stable/P1) Islamic banking arm. As such, support from the Group is envisaged to be readily available, if required. While the economy faces adverse repercussions from the Covid-19 pandemic, we expect the Group to be able to navigate the unprecedented challenges. Public Bank has demonstrated strong resilience during credit downcycles in the past, underlined by its robust risk management capabilities.

Reflecting the Group’s prudent and disciplined underwriting standards, Public Islamic’s gross impaired financing (GIF) ratio came in at a robust 0.5% as at end-December 2019 (industry: 1.5%) while its credit cost ratio was a benign 9 bps.  Although Bank Negara Malaysia’s six-month financing repayment moratorium would keep the Bank’s asset quality indicators largely steady this year, it could defer the crystallisation of credit risk to 2021 should borrowers’ weaknesses stretch beyond the payment holiday. In addition, similar to other Islamic banks, Public Islamic may need to incur a modification charge arising from its hire purchase and other fixed-rate financing under moratorium. Even so, the Bank is on a strong footing to ride out the downturn due to its very low base of impaired financing at present. In addition, its sturdy GIF coverage ratio of 224% (including regulatory reserves) and sound common equity tier-1 capital ratio of 12.4% will help buttress the Bank against Covid-19 stresses.

As at end-February 2020, Public Islamic’s liquidity coverage and net stable funding ratios stood at 151% and 100%, respectively, in compliance with the regulatory requirement. While it is still highly exposed to depositor concentration risk, we take comfort in the Bank’s ability to derive funding support from the Group, if needed.


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

Rating Rationale

Ratings on Public Islamic Bank Berhad