Tuesday, June 8, 2010

RAM Ratings reaffirms Public Islamic?s AAA/P1 ratings

KUALA LUMPUR: RAM Rating Services Bhd'' has reaffirmed Public Islamic Bank Bhd's (Public Islamic) respective long- and short-term financial institution ratings at AAA and P1; the long-term rating has a stable outlook.

Public Islamic, a carve-out of Public Bank Berhad's (Public Bank Group) Islamic banking operations, leverages significantly on the latter's risk management system, branch network and e-channels.

The ratings agency said on Tuesday, May 8 the reaffirmation of the ratings therefore hinges on the Bank's credit profile, which mirrors that of its parent. RAM Ratings reaffirmed Public Bank's AAA/Stable/P1 financial institution ratings in June 2010.

Public Islamic has positioned itself as one of the leading players in the domestic Islamic banking industry. As at end-December 2009, Public Islamic's asset base and financing portfolio accounted for a respective 9.7% and 10.8% of the Islamic banking industry's assets and financing base.

Underscored by the Public Bank Group's prudent credit culture, Public Islamic's gross non-performing-financing ratio remained stable at a low 0.9%, as at end-March 2010.

'While the Bank's financing-to-deposit and capitalisation ratios are weaker vis-''-vis the corresponding industry averages, we note that being an integral part of the larger Public Bank Group affords it with financial flexibility, if required', says Promod Dass, RAM Ratings' Head of Financial Institution Ratings.

As at end-March 2010, Public Islamic's financing-to-deposit ratio stood at 112.9% (end-December 2009: 109.8%). Meanwhile, the Bank's overall risk-weighted capital-adequacy ratio stood at 11.8% (end-December 2009: 12.3%).'' ''

Elsewhere, Public Islamic charted a steady profit performance in 1Q FY Dec 2010. The Bank's pre-tax profit improved 25.2% year-on-year to RM116.5 million, on the back of strong financing growth and lower impairment provisions.

Amid a rising interest rate environment in 2010, we expect some compression in Public Islamic's net financing margins, as its financing assets primarily comprise fixed-rate facilities. This is nonetheless moderated by the Bank's continued focus in expanding its high-yielding personal financing assets, going forward.

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