RAM Ratings affirms Public Bank’s and Public Islamic’s AAA ratings on excellent asset quality and resilient earnings

Published on 24 May 2023.

Share Tweet Email

RAM Ratings has affirmed the AAA/Stable/P1 financial institution ratings of Public Bank Berhad (the Group) and its core subsidiary, Public Islamic Bank Berhad. 

The affirmation is anchored by the Group’s consistently superior asset quality and sturdy loss absorption buffers, reflective of its prudent credit culture. Public Bank is the third-largest banking group in Malaysia by asset size and a market leader in residential mortgages, commercial property financing, automobile financing and retail unit trusts. Commanding a respective 17% and 16% of the domestic banking system’s loans and deposits as at end-December 2022, the Group is one of three domestic systemically important banks. 

The passing of Public Bank’s founder and major shareholder in late 2022 is not expected to have a major impact on its strategic direction and operations. The Group’s experienced leadership team, along with robust internal policies and controls, continues to provide a stable foundation for its business.

Public Bank’s gross impaired loan (GIL) ratio saw mild deterioration but remained commendably low at 0.42% as at end-December 2022 (end-December 2021: 0.31%; industry: 1.7%). The uptick was primarily attributable to three accounts under the same obligor group. These exposures, however, are fully secured by commercial properties and subject to conservative provisions. Any further credit deterioration in the Group’s loan book due to current inflationary pressure and increased borrowing costs is not envisaged to be significant. We draw comfort from the traditionally strong credit profiles of the Group’s borrowers and its strong collection procedures. 

Considerably higher than industry average of 98%, Public Bank’s GIL coverage slid to a still-solid 272% as at end-December 2022 (end-December 2021: 361%). Historically healthy pre-provision profit and capitalisation (common equity tier-1 capital ratio: 14.6%) afford the Group a strong buffer against any asset quality weakening. Management overlay reversals are expected in FY Dec 2023 but will be judicious in view of prevailing uncertainties in the operating landscape.

Public Bank’s track record of profitability has been unbroken since its inception. Pre-tax profit breached the RM8 bil mark to reach an exceptional RM8.8 bil in FY Dec 2022, mainly due to a lower credit cost ratio of 10 bps (-24 bps), accompanied by a broader net interest margin (NIM) of 2.36% (+14 bps). Consequently, the pre-tax return on risk weighted assets improved to 2.9% (FY Dec 2021: 2.5%). Despite the one-off prosperity tax, net profit expanded to RM6.2 bil (FY Dec 2021: RM5.7 bil). For FY Dec 2023, we expect the Group’s NIM to narrow – as with other banks - owing to upward deposit repricing and keener deposit competition.

With a strong retail deposit heritage and an extensive branch network, Public Bank boasts one of the largest proportions of retail deposits in the banking system. Individual depositors made up slightly over half of its customer deposits (industry: 38%), providing diversity and stability to the Group’s funding. 

Public Islamic’s financial institution ratings are equated to those of Public Bank, considering its strategic importance to the latter. We have affirmed the issue ratings of the two entities (see table).

Issue ratings of Public Bank and Public Islamic


Analytical contacts
Ho Chian Leng, CFA
(603) 3385 2527

Wong Yin Ching, CFA
(603) 3385 2555


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 2023 by RAM Rating Services Berhad

Rating Rationale: Public Bank Berhad

Rating Rationale: Public Islamic Bank Berhad

Ratings on Public Bank Berhad