For Immediate Release
19 March 2012
Public Bank's 46th Annual General Meeting Held on 19 March 2012
In conjunction with Public Bank’s 46th Annual General Meeting held on 19 March 2012, the Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow is pleased to present a review of the Public Bank Group’s performance in 2011.
Tan Sri Teh said, “2011 was another commendable year for the Public Bank Group.The Group delivered another record net profit of RM3.48 billion, 14.3% higher as compared to 2010. The Group’s pre-tax profit grew by 12.8% to RM4.61 billion.
With the improved earnings, the Group delivered a net return on equity of 26.8% for the year. Cost to income ratio was efficient at below 30% whilst gross impaired loan ratio improve further to 0.9%. The Group successfully maintained its leading position amongst Malaysian banking groups in terms of highest return on equity, and the best cost efficiency and asset quality.”
Tan Sri Teh commented that, “The Public Bank Group’s strong performance is a result of its strategy to remain focused on its core retail consumer and commercial banking businesses whilst maintaining its tradition of prudently managing the asset quality of its balance sheet.
Gross loans expanded by 13.5% to stand at RM177.7 billion as at the end of 2011. Domestic loans growth was stronger at 14.1% in 2011. Customer deposits increased by 13.3% to reach RM200.4 billion as at the end of 2011 supported by strong domestic customer deposit growth of 14.7%. ”
Tan Sri Teh added, “In view of Public Bank’s strong profit performance in 2011, a second interim single tier dividend of 28 sen was paid on 27 February 2012. Together with the first interim single tier dividend of 20 sen paid in August 2011, the total dividend for 2011 was 48 sen.” The total dividend paid for 2011 amounted to RM1.68 billion and represented a total payout of 48% of the Group’s net profit for 2011.
Steady momentum in domestic loan growth
The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the total loan portfolio of the Group, comprising mainly loans to mid-market commercial enterprises as well as loans for the financing of residential properties and the purchase of passenger vehicles. Tan Sri Teh highlighted, “Public Bank continued to sustain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 18.1%, 33.0% and 25.9% respectively. The Group’s residential properties and passenger vehicles financing expanded by 17.5% and 9.5% respectively in 2011.”
Tan Sri Teh further added, “Public Bank continued to strongly support the Government’s efforts in promoting small- and medium-sized enterprises (“SMEs”) activities particularly for working capital and investment financing. Loans for working capital financing expanded strongly by 24.0%. In 2011, the Group approved loans to domestic SMEs amounting to RM12.39 billion, an increase of 15% as compared to 2010, which accounted for 26% of the Group’s new domestic retail loans approved.”
Sustained strong asset quality
“The Public Bank Group’s asset quality and loan loss coverage remained the best in the banking industry with the lowest gross impaired loans ratio and highest loan loss coverage amongst domestic banking groups. The Group’s gross impaired loan ratio further improved from 1.1% as at the beginning of the year to 0.9% as at the end of 2011, one-third that of the Malaysian banking industry’s gross impaired loan ratio of 2.7%,” said Tan Sri Teh. The strong asset quality of the Group is a result of a combination of preventive and proactive measures taken such as its prudent lending policies and strong risk management practices as well as the prompt and timely loan recovery efforts undertaken.
“The Public Bank Group’s loan loss coverage ratio increased from 144% in 2010 to 189% in 2011, significantly higher than the coverage ratio for the banking system of less than 100%,” Tan Sri Teh further added. In line with BNM’s guidelines to maintain a minimum of 1.5% collective assessment, the Group’s high loan loss coverage was a result of setting aside additional collective assessment allowance for the Group’s strong loan growth whilst the level of impaired loans remained stable.
Healthy growth of domestic customer deposits
Tan Sri Teh said, “The Public Bank Group’s funding position remained robust supported by the strong PB Brand franchise and the Group’s large domestic depositor base of over 4.5 million customers. Domestic customer deposits expanded at a healthy rate of 14.7% whilst domestic core customer deposits grew by 10.9%” The healthy growth of the domestic core customer deposits was mainly due to steady inflows of demand deposits, fixed deposits and saving deposits which grew by 13.2%, 10.4% and 10.4% respectively.
The Group’s net loan to deposit ratio remained stable and healthy at 87.2% as at the end of 2011.
The Public Bank Group’s overseas operation contributed 6.4% to the Group’s overall pre-tax profit in 2011 as compared to a 7.6% contribution in 2010. The marginally lower contribution was mainly due to the negative effect of foreign exchange differences. Excluding the impact of the foreign exchange differences, Cambodian Public Bank, a wholly-owned subsidiary of Public Bank showed commendable performance with a pre-tax profit growth of 54% to USD29.0 million as compared to USD18.8 million in 2010.
The Public Bank Group remains committed to expand its overseas operations, particularly in Hong Kong and Indo-China as the Group takes a long-term view of the future potential market reach and opportunities in the region. The Group currently has a network of 83 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China. Cambodian Public Bank Plc expanded its branch network in 2011 to 23, with additional branches targeted to be opened in 2012.
Growing fee-based income
The Public Bank Group continued to develop its fee-based income from unit trusts, bancassurance and wealth management products, in order to further enhance the Group’s profitability and return on equity. Non-interest income of the Group grew by 7.2% compared to 2010, mainly due to higher banking transactional income and income from Public Mutual’s unit trust business as well as higher investment income.
Tan Sri Teh explained, “Public Mutual, the Group’s wholly-owned unit trust fund management subsidiary, registered a 17.5% increase in pre-tax profit and continued to maintain its market leadership position. Ten new unit trust funds were launched during the year, bringing the total number of funds managed to 91. Total net asset value of funds under management stood at RM44.8 billion as at the end of 2011. Public Mutual’s overall market share remained high at 44% whilst the market share of equity funds and Islamic funds stood at 60% and 58% respectively.”
2011 marked the fourth year of the strategic bancassurance alliance between the Public Bank Group and the ING Group. The PB-ING bancassurance business alliance moved up to 1st place in the third quarter of 2011, from 2nd place in the first quarter of 2011 based on the volume of new business generated in each quarter by bancassurance providers in Malaysia.
ING PUBLIC Takaful Ehsan Berhad, the joint venture family takaful business between ING Management Holdings (Malaysia) Sdn Bhd and the Public Bank Group is also expected to contribute positively to the Group’s bancassurance business and further enhance the Group’s long-term fee-based revenue.
The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio improving to 10.1% and 15.3% respectively as at the end of 2011, after taking account of the payment of the 2nd interim dividend, as compared to 10.0% and 13.7% respectively as at the end of 2010. The issuance of RM3 billion subordinated notes under the existing Subordinated Medium Term Note Programme contributed to the improvement in the risk-weighted capital ratio of the Group during the year.
Based on the latest guidelines on the implementation of Basel III capital regime issued by Bank Negara Malaysia, the Public Bank Group is well-positioned to meet the minimum requirements of Basel III, with the phased implementation of Basel III coming into effect on 1 January 2013. Tan Sri Teh further added, “In meeting the requirements of the regulatory capital regime reforms, the Group will continue to effectively manage its capital structure and maintain maximum financial flexibility to pursue strategic objectives whilst maximising shareholder value.”
Largest non government-linked listed company by market capitalisation
“Public Bank’s market capitalisation has increased by 78% from RM26.9 billion as at the end of 2006 to RM48.0 billion today, and remains the largest non-government-linked company listed on Bursa Malaysia by market capitalisation,” Tan Sri Teh highlighted.
Superior returns to shareholders
As a blue-chip stock, the Public Bank Group’s ability to deliver superior returns to shareholders, both over the medium-term and the long-term, demonstrates the creation of shareholders value.
Tan Sri Teh commented, “If a shareholder of Public Bank had bought 1,000 shares in Public Bank when it was listed in 1967, and assuming the shareholder had subscribed for all rights issues to date and had not sold any of the Public Bank shares, he would now have 135,398 Public Bank shares worth RM1.84 million based on the current share price of RM13.60 per Public Bank (Local) share. In addition, he would have received a total gross dividend of RM776, 137. This translates into a total value of RM2.6 million representing a remarkable compounded annual rate of return of 20% for each of the 44 years since 1967.”
“Over the medium-term of 5 years from 2007 to 2011, an investor would have enjoyed a total return of 118% or an annual rate of return of 19% over the 5 year period,” said Tan Sri Teh.
Tan Sri Teh remarked that, “Public Bank remained the clear leader in terms of return on equity, cost efficiency and asset quality as compared to the other 5 largest banking groups in Malaysia. The Group’s net return on equity of 26.8% is the highest amongst the 5 largest domestic banking groups and is well above the average net return on equity of 15.7%.”
The Group’s cost to income ratio of 29.8% is the lowest in the industry, significantly lower than the average of 48.3% reported by the other 5 largest Malaysian banking groups. The Group’s asset quality remained the best in the industry with the lowest gross impaired loans ratio of 0.9% and highest loan loss coverage of 189%. When benchmarked against leading regional banks, Public Bank also ranks top in terms of cost efficiency and return on equity.”
Tan Sri Teh commented, “Over the medium term, the Group aims to sustain its net return on equity of more than 26%, cost to income ratio of below 30% whilst maintaining a low gross impaired loans ratio of below 1%.”
“The Public Bank Group, in fulfilling its corporate responsibility, seeks to conduct its business activities responsibly, ethically and prudently whilst engaging the community and caring for the environment in which it operates,” said Tan Sri Teh. These include creating long-term value for the Group’s customers, employees, shareholders and the community it serves.
Public Bank provided financial assistance to the Institute Jantung Negara Foundation for the setup of a dormitory to house families of needy patients undergoing treatment and continued to support Universiti Tunku Abdul Rahman in its research studies in the field of banking and finance.
Tan Sri Teh explained, “In support of the economic growth of the country, Public Bank has been actively channelling low cost funds under various funds initiated by the Malaysian Government and Bank Negara Malaysia to assist SMEs and micro enterprises. With its strong and rising profitability, the Public Bank Group is also a major contributor to the fiscal revenue of the country with total tax payments of RM3.72 billion since 2007.”
An award winning bank
Tan Sri Teh highlighted that, “A total of 53 awards and recognition of excellence were conferred on Public Bank in 2011.” The Group continued to be accorded best bank or best managed company awards by various international organisations and publications in 2011, which include:
- Best Bank in Malaysia by FinanceAsia (13th time)
- Best Managed Company by FinanceAsia (5th time)
- Best Asian Bank by FinanceAsia (3rd time)
- Best Domestic Bank in Malaysia by The Asset (10th time)
- Best Bank in Malaysia by Alpha Southeast Asia (4th time)
- Best SME Bank in Malaysia by Alpha Southeast Asia (2nd time)
- Best Banking Group in Malaysia by World Finance (3rd time)
Tan Sri Teh further added, “For the ninth consecutive year, Public Mutual again emerged as the biggest recipient of The Edge-Lipper Malaysia Fund Awards with a total of 8 awards won in 2012.”
Some of the other awards, which Public Mutual received in 2011, are:
- 2010 Asia Asset Management Awards for the Best House for Offshore Funds- Malaysia
- Morningstar 2010 Fund Awards (Malaysia) for the Malaysian Ringgit Islamic Bond category for PB Islamic Bond Fund.
- 4 awards at the Failaka Islamic Fund Awards 2010
- The Asset Triple A Islamic Finance Awards 2011 for the Best Islamic Asset Management House (Retail)
- Reader’s Digest Trusted Brand Platinum Award for Investment Fund Company category in Malaysia 2011 (2nd time)
- The BrandLaureate Award 2010-2011 for the Best Brand in the Financial Services - Unit Trust Category (5th time)
Tan Sri Teh said, “Public Bank’s publicly recognised record of excellence in corporate governance continued to be validated in 2011 by several corporate governance awards and recognition by international publications and surveys.”
Tan Sri Teh further added, “In recognition of Public Bank’s top performance on the Malaysian Corporate Governance Index 2011, the Bank was awarded the Top Overall Award, Best Conduct of AGM Award, the Distinction Award and the Industry Excellence Award for the Finance Sector by the Minority Shareholder Watchdog Group”
Public Bank was also awarded the Malaysian Business-CIMA Enterprise Governance Awards 2011 by Malaysian Business as the Overall Winner for the fourth consecutive year as well as Best Returns to Shareholders Award and the Corporate Social Responsibility Award.
Public Bank was awarded the Corporate Governance Asia’s 1st Asian Excellence Recognition Awards 2011 for Best Corporate Social Responsibility, Best Investor Relations by a Malaysian company and the Corporate Governance Asia Recognition Award 2011.
Public Bank was also ranked top for Best Corporate Governance and Best Corporate Social Responsibility in FinanceAsia’s Asia’s Best Managed Companies 2011 Poll, as well as ranked top 3 in the Alpha Southeast Asia’s Institutional Investor Corporate Awards 2011 for Strongest Adherence to Corporate Governance and Most Organised Investor Relations.
Tan Sri Teh commented, “The Public Bank Group will continue to focus on its core retail banking and financing business whilst maintaining its prudent credit policies, and further improve on its cost efficiency by enhancing productivity. In the light of the uncertainties in the global economy, the Group remains, more than ever, committed to its tradition of prudence and belief in strong corporate governance. While it is clearly a time to be cautious, the Group is also aware of the importance of balancing challenges with the need to continue to invest in creating long-term value for shareholders. The Group will continue to leverage on its wide branch network, superior PB Brand and service standards. The Group’s solid performance in 2011 reaffirms the continued soundness of its proven business strategies and the Group is confident that it is well placed to grasp opportunities when they arise.
The outlook of the Malaysian banking sector, in which the Group largely operates, continues to be stable and supportive of growth. Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2012.”
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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman of Public Bank
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