RAM Ratings reaffirms Public Bank’s and Public Islamic’s AAA ratings on solid financial footing

Published on 01 Jun 2021.

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RAM Ratings has reaffirmed the AAA/Stable/P1 financial institution ratings of Public Bank Berhad (the Group) and its core subsidiary, Public Islamic Bank Berhad. The reaffirmation reflects the Group’s track record of superior asset quality and significant loss absorption buffers that, in our view, will allow it to weather pandemic-related credit headwinds. While delinquencies could increase next year when relief measures expire, Public Bank has demonstrated strong resilience during past credit downcycles, underpinned by prudent risk 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 and private retail unit trusts. Commanding 16.3% of the domestic banking system’s deposits, Public Bank was designated as a domestic systemically important bank by Bank Negara Malaysia last year.

Public Bank’s gross impaired loan (GIL) ratio of 0.4% as at end-March 2021 remained significantly lower than the industry’s 1.6%. Its credit cost ratio rose to 33 bps in fiscal 2020 (fiscal 2019: 5 bps) due to pre-emptive provisioning but was still relatively benign compared to the average of 84 bps reported by a selected eight domestic banking groups. As at end-March 2021, approximately 12% (industry: ~13% in February 2021) of the Group’s domestic loan book was under targeted repayment assistance. We take comfort in its robust GIL coverage of 338% (including regulatory reserves) and heathy common equity tier-1 capital ratio of 14% which will provide a substantial cushion against potentially higher credit losses. 

Public Bank’s track record of profitability has been unbroken since its inception. Hefty pre-emptive provisions, a net modification loss and net interest margin (NIM) compression, however, resulted in a lower pre-tax profit of RM6.3 bil in FY Dec 2020 (FY Dec 2019: RM7.1 bil). In view of the Group’s defensive risk profile and tight rein on cost efficiency, its cost-to-income ratio is still the lowest among peers at 33% while its pre-tax return on risk weighted assets of 2.2% remains at the upper band of our rated portfolio. In 1Q fiscal 2021, the Group’s pre-tax profit improved to RM2.0 bil from RM1.7 bil in the previous corresponding period, fuelled by a rebound in NIM and higher fee-based income. Despite the better showing, we remain wary as the path to full economic recovery is uncertain. 

With 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 stem from individuals (industry: 38%), providing diversity and stability to the Group’s funding. Public Bank’s funding and liquidity position is sound – the Group’s Basel III liquidity coverage ratio and net stable funding ratio were a respective 138% and 118% as at end-December 2020.

Public Islamic’s financial institution ratings are equated to those of Public Bank, considering its strategic importance to the latter. The issue ratings of the two entities have also been reaffirmed (Table 1).

Table 1: Issue ratings of Public Bank and Public Islamic


Long-term rating

Rating outlook

Public Bank Berhad

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



Public Islamic Bank Berhad

RM5 billion Sukuk Murabahah Programme:

  • Senior sukuk
  • Subordinated sukuk3








1 The one-notch rating differential between Public Bank’s AAA long-term financial institution rating and the AA1 rating of its Subordinated Notes reflects the subordination of the debt facility 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.

3 The one-notch rating differential between Public Islamic’s AAA long-term financial institution rating and the rating of its subordinated sukuk reflects the subordination of the securities to the Bank’s senior unsecured obligations.


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 2021 by RAM Rating Services Berhad

Rating Rationale: Public Bank Berhad

Rating Rationale: Public Islamic Bank Berhad

Ratings on Public Bank Berhad