Malaysia: RAM Ratings assigns ratings to Public Islamic's RM5b Sukuk

KUALA LUMPUR: RAM Rating Services Bhd has assigned its ratings to Public Islamic Bank Bhd's proposal to issue up to RM5bil Sukuk Murabahah.

It said on Wednesday it had assigned AAA/Stable and AA1/Stable ratings to the senior Sukuk and subordinated Sukuk to be issued under the programme.

It also reaffirmed Public Islamic's AAA/Stable/P1 financial institution ratings.

"The financial institution ratings reflect Public Islamic's strategic importance as the Islamic banking arm of its parent, Public Bank Bhd (the group, rated AAA/Stable/P1 by RAM)," it said.

RAM Ratings pointed out the bank's operations were highly integrated with those of its parent, leveraging on the latter's risk-management systems, branch network, back-room operations and IT infrastructure.

We believe that the group will readily extend support to Public Islamic should the need arise," it said.

The ratings agency said based on the group's prudent credit culture, Public Islamic's asset quality remains robust.

"Although we have observed some loan-quality slippage in its vehicle-financing portfolio, any further deterioration should be contained given the bank's proactive credit-tightening measures back in 2011," it said.

As at end-December 2013, Public Islamic's capitalisation was sound relative to its risk profile, with a common-equity tier-1 capital ratio of 11.7%.

The subordinated Sukuk is Basel III-compliant and will be treated as tier-2 regulatory capital. The subordinated Sukuk has a non-viability loss-absorption feature linked to the occurrence of a non-viability event.

"In line with RAM's rating approach for Basel III tier-2 securities, the subordinated Sukuk is rated 1 notch below Public Islamic's long-term financial institution rating, underlining the lower ranking of these sukuk in the priority of claims upon bankruptcy or liquidation, relative to the Bank's senior unsecured creditors," it said.

(The Star Online / 23 April 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com