Fitch affirms Public Bank

Fitch Ratings said it affirmed Malaysian-based Public Bank Bhd.'s B/C individual rating and 2 support rating.

The affirmation follows the announced acquisition of Asia Commercial Bank (C individual and 4 support) by Public Bank's 64% owned subsidiary, Hong Kong-based JCG Holdings, in a deal worth HK$4.5 billion. The acquisition will be funded through a combination of new equity to be raised by JCG through a rights issue and a medium-term loan.

Fitch said the estimated effect on Public Bank's capital adequacy ratios is expected to be quite pronounced: assuming the acquisition is successfully completed and using end-2005 CAR as the basis, Public Bank's Tier 1 CAR could decline to 7% to 8% and total CAR to 13% to 14%.

The agency noted, however, that as Asia Commercial Bank's balance sheet appears quite clean with gross impaired advances equivalent to 2.6% of total advances at mid-2005, and with total CAR at 16.8%, Public Bank's record of strong asset quality should generally be preserved and capitalization is still considered reasonably adequate.

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