Moody's rates Berhad notes

Moody's Investors Service said it has assigned a rating of Baa1 to Public Bank Berhad's proposed $300 million to $350 million 10-year callable subordinated notes issuance. The proposed issue, with a step-up fixed interest rate feature, is due in 2014 and callable (with Bank Negara's approval) in 2009.

The outlook is stable.

Public Bank's deposit and bank financial strength ratings incorporate the healthy state of its earnings, its capitalization and asset quality, which are in turn underpinned by its conservatism, good understanding of its clients and the stability of the economy. In Moody's view, these factors mitigate the risk arising from operating on lower capital as it continues growing and meeting shareholders' demands for higher returns.

However, the ratings also reflect various challenges faced by Public Bank. The bank's efforts to meet the evolving financial needs of its more sophisticated customers may test its traditionally conservative strategy. Moreover, rising competition - as the banking system undergoes disintermediation and liberalization - may test its market position.

Other ratings of the bank include a long-term deposit rating of Baa1, short-term deposit rating of Prime-2, and bank financial strength rating of C.

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