[RAM] RAM Ratings affirms Public Bank's and Public Islamic's AAA ratings on solid fundamentals

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, together with the issue ratings of the entities (Table 1).

The ratings are premised on the Group’s entrenched domestic franchise, excellent asset quality, strong loss absorption buffers and systemic importance, which continue to support its resilience against credit headwinds, including spillover risks from Mideast tensions. While the knock-on effects are still being assessed, any deterioration in asset quality should be contained by the Group’s robust risk management.

Public Bank is Malaysia’s third-largest banking group, with total assets of RM562 bil (including overseas operations) as at end-December 2025 and leading market positions in residential mortgages, auto financing, small and medium enterprise lending and retail unit trusts. Accounting for 17.8% of industry loans and 16.4% of deposits, the Group is designated as one of three domestic systemically important banks.  

Credit fundamentals remain strong, with a low gross impaired loan ratio of 0.51% as at end-December 2025 and robust loan loss coverage (including regulatory reserves) of 249%, well above the industry average. Some mild weakness emerged in the overseas portfolio, mainly owing to an impaired Hong Kong syndicated commercial real estate loan and credit strains in Cambodia amid the border crisis. Credit cost, however, remained benign at 2 bps in FY Dec 2025 and is anticipated to stay within the single-digit range this year.

Pre-tax profit rose to RM9.5 bil in FY Dec 2025 (FY Dec 2024: RM8.9 bil), translating into a higher return on risk-weighted assets of 2.66% (FY Dec 2024: 2.61%), driven mainly by contributions from LPI Capital Berhad and stronger investment and unit trust-related fee income. Combined with a common equity tier-1 capital ratio of 13.9% and healthy pre-provision profit, the Group maintains ample loss absorption capacity to withstand potential asset quality slippages. Public Bank’s strategic pivot towards higher-yielding commercial loans and growth in non-interest income streams are anticipated to support earnings resilience in the near to medium term, although external uncertainties may pose downside risks.



 

Analytical contacts
Jeremy Noel Paul
(603) 2708 8230
jeremynp@ram.com.my

Wong Yin Ching, CFA
(603) 2708 8280   
yinching@ram.com.my

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