S&P Global Ratings has affirmed its 'A-' long-term and 'A-2' short-term issuer credit ratings on Public Bank Bhd, with a stable outlook. The rating agency expects the bank to maintain healthy capitaliSation, earnings, robust asset quality, and funding profile over the next 24 months.
KUALA LUMPUR: S&P Global Ratings has affirmed its 'A-' long-term and 'A-2' short-term issuer credit ratings onKUALA LUMPUR: S&P Global Ratings has affirmed Public Bank Bhd ’s ‘A-’ long-term and ‘A-2’ short-term issuer credit ratings, with a stable outlook .
“We expect Public Bank to maintain healthy capitaliSation and earnings, robust asset quality and funding profile over the next 24 months. In our assessment, the likelihood of government support for the bank, if needed, remains high.
“We believe these strengths position Public Bank well to withstand the challenging operating environment resulting from the ongoing conflict in the Middle East,” S&P said in a statement. The rating agency said Public Bank’s asset quality is expected to remain robust, supported by strong risk management and prudent underwriting standards.
It noted that the bank’s asset quality is likely to remain superior to that of other Asian banks, given its highly diversified portfolio, with about two-thirds of exposures comprising retail borrowers, mainly for residential and commercial property purchases.
“We anticipate a modest rise in Public Bank's nonperforming loans to 0.6%-0.7% of total loans over the next 18-24 months, from 0.5% as of March 31,” S&P said, adding that the likely uptick is primarily attributable to potential vulnerabilities from small and midsize enterprises and low-income households. These segments typically have thinner financial buffers and are more vulnerable to weaker economic conditions, inflation and cost pressures arising from a prolonged Middle East conflict.
Despite higher NPLs, S&P expects Public Bank Bhd’s credit costs to stay below 10 basis points over the next two years, supported by strong provision buffers, sizeable management overlays and solid collateral coverage.
“We forecast the bank's risk-adjusted capital ratio will decline to 9.4%-9.8% over the next two years, down from 10.1% as of Dec. 31, 2025,” it said. The projected decline is mainly due to the bank’s RM3.5bil shareholder return plan through special dividends over the next three years, on top of its 60% ordinary dividend payout.
S&P said it has revised its assessment of Public Bank’s capital and earnings to “adequate” from “strong”, while removing the one-notch downward adjustment previously applied for the bank’s relatively higher property sector concentration risks. The rating agency said Public Bank’s capital return plan follows an expected 100 basis points improvement in its regulatory Tier-1 ratio, which stood at 13.7% as at March 31, following the implementation of Basel 3 reforms on the standardised approach to credit risk in July 2026.
It added that the bank plans to lower its Tier-1 ratio to its target range of 13.0% to 13.5% by end-2028 through special dividend payouts. S&P expects Public Bank Bhd’s return on average assets to ease slightly to about 1.3% from 1.4% in FY25, mainly due to margin compression amid heightened competition and a likely increase in credit costs from a low base of two basis points in FY25.
However, the rating agency said profitability could improve if credit costs come in lower than expected. It said Public Bank’s funding profile remains supported by a stable customer deposit base, with customer deposits accounting for more than 90% of total funding, including about 49% from retail household deposits. It noted that the bank’s rising loan-to-deposit ratio reflects efforts to reduce higher-cost bulk deposits while maintaining strong fund-raising capabilities through customer channels.
S&P added that sizeable deposits from government and government-linked corporations pose some concentration risk, although their long-term stability helps mitigate concerns. The rating agency said the stable outlook on Public Bank mirrors Malaysia’s sovereign rating, with the bank’s ratings expected to move in tandem with the sovereign.
“In our view, Public Bank will maintain its strong market position, resilient asset quality, and superior funding and liquidity metrics over the next 18-24 months. We believe the bank has sufficient provisioning and capital buffers to absorb a moderate rise in credit stress. S&P said it could lower Public Bank’s stand-alone credit profile if asset quality deteriorates significantly.
However, it noted the bank’s ratings have room to absorb several-notch SACP downgrades due to the high likelihood of extraordinary government support.
Public Bank Bhd S&P Global Ratings Long-Term Issuer Credit Ratings Short-Term Issuer Credit Ratings Stable Outlook Healthy Capitalisation Earnings Robust Asset Quality Funding Profile Middle East Conflict Nonperforming Loans Risk-Adjusted Capital Collateral Coverage
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