RAM Ratings assigns AA1/Stable rating to Public Bank’s RM20 bil Subordinated MTN

Published on 08 Sep 2023.

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RAM Ratings has assigned an AA1/Stable rating to Public Bank Berhad’s (Public Bank or the Group) proposed RM20 bil Subordinated Medium-Term Notes Programme. The issue is rated one notch below the Group’s long-term financial institution rating to reflect its lower ranking in the priority of claims in the event of bankruptcy or liquidation, relative to senior unsecured creditors. Concurrently, the ratings of the Group’s existing sukuk/debt facilities have been affirmed (listed in Table 1).

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 17.5% of the industry’s loans and 16.5% of deposits as at end-June 2023, the Group is designated as one of the three domestic systemically important banks. The rating affirmation is premised on the Group’s consistently superior asset quality, solid balance sheet and resilient earnings throughout economic cycles.

Public Bank’s gross impaired loan (GIL) ratio saw a marginal increase as at end-June 2023 but remained commendably low at 0.55% (end-December 2022: 0.42%; industry: 1.76%). The mild deterioration largely stemmed from a fully secured property-related corporate loan originating from the Group’s operations in Hong Kong. On the domestic front, Public Bank’s asset quality has held up well after the expiry of relief measures, its GIL ratio ticking up slightly to 0.37% (end-December 2022: 0.34%) due to delinquencies in the residential mortgage portfolio.

Solid GIL coverage (including regulatory reserve) of 226%, coupled with healthy pre-provision profit and capitalisation afford the Group a strong buffer against any asset quality weakening, especially amid current heightened inflationary pressures. We also draw comfort from the Group’s prudent underwriting standards, provisioning policies and strong collection procedures. Management expects to write back some overlays this year but will carefully assess the quantum of reversals, given prevailing uncertainties in the operating landscape.

Public Bank boasts an unblemished long track record of profitability. Thanks to significantly lighter credit costs, healthy loan expansion (+5.4% y-o-y) and higher foreign exchange income, the Group’s pre-tax profit was up 7.0% y-o-y at RM4.3 bil in 1H FY Dec 2023. Its net interest margin (NIM) narrowed in 1H fiscal 2023 to 2.18% (1H fiscal 2022: 2.22%). The decline is in line with the industry trend, driven by ongoing upward deposit repricing and heightened deposit competition, although alleviated somewhat.

Table 1: Public Bank’s issue ratings


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

Wong Yin Ching, CFA
(603) 3385 2555

Media contact 
Sakinah Arifin
(603) 3385 2500


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
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