I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM1.75 billion for the nine months ended 30 September 2006, an increase of 17% compared to the corresponding period in 2005. The Group’s net profit attributable to shareholders rose by RM213 million or 20% to RM1.27 billion over the same period last year.

The higher profit was mainly attributable to the increase in net interest income and net income from Islamic Banking operations as well as higher other operating income, partially offset by the increase in other operating expenses and higher loan loss allowances. 

The Group’s net interest income and net financing income from Islamic Banking operations grew by RM333 million or 16% compared to the previous corresponding period, on the back of continued strong loan and deposit growth, coupled with a further improvement in asset quality. Other operating income increased by RM122 million or 18%, mainly contributed by higher gains on sales of trust units due to launch of new trust funds, increase in management fees from higher net asset value of unit trust funds under management and higher fees and transaction income from retail banking operations.

The higher loan loss allowances during the period by RM65 million as compared to the previous corresponding period was mainly due to higher general allowance on loans as a result of higher loan growth achieved. In addition, the Group adopted more stringent provisioning for its non-performing loans in the quarter ended 30 September 2006 by making a 20% specific allowance on non-performing loans which are 3 to less than 6 months-in-arrears. Previously, specific allowance was only made when a non-performing loan was in arrears for 6 months and above. This had resulted in an additional specific allowance of RM12 million being recognised in the third quarter.

Financial Highlights of the Public Bank Group

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman, Public Bank
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I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM1.75 billion for the nine months ended 30 September 2006, an increase of 17% compared to the corresponding period in 2005. The Group’s net profit attributable to shareholders rose by RM213 million or 20% to RM1.27 billion over the same period last year.

The higher profit was mainly attributable to the increase in net interest income and net income from Islamic Banking operations as well as higher other operating income, partially offset by the increase in other operating expenses and higher loan loss allowances. 

The Group’s net interest income and net financing income from Islamic Banking operations grew by RM333 million or 16% compared to the previous corresponding period, on the back of continued strong loan and deposit growth, coupled with a further improvement in asset quality. Other operating income increased by RM122 million or 18%, mainly contributed by higher gains on sales of trust units due to launch of new trust funds, increase in management fees from higher net asset value of unit trust funds under management and higher fees and transaction income from retail banking operations.

The higher loan loss allowances during the period by RM65 million as compared to the previous corresponding period was mainly due to higher general allowance on loans as a result of higher loan growth achieved. In addition, the Group adopted more stringent provisioning for its non-performing loans in the quarter ended 30 September 2006 by making a 20% specific allowance on non-performing loans which are 3 to less than 6 months-in-arrears. Previously, specific allowance was only made when a non-performing loan was in arrears for 6 months and above. This had resulted in an additional specific allowance of RM12 million being recognised in the third quarter.

Financial Highlights of the Public Bank Group

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman, Public Bank

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I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM1.15 billion for the first six months of 2006, an increase of 15% compared to the corresponding period in 2005. The Group’s profit attributable to shareholders rose by RM128 million or 18% to RM839 million over the same period last year. The improved profit was mainly contributed by the increase in net interest income, net income from Islamic Banking operations as well as higher other operating income, partially offset by the increase in other operating expenses and higher general allowance on loans.

The Group’s net interest income and net income from Islamic Banking operations rose by RM208 million or 15% compared to the previous corresponding period. This was driven by continued strong growth in both quality loans and deposits, as well as further improvement in asset quality. Other operating income increased by RM85 million or 20%, mainly attributable to higher gains on sales of trust units, increase in management fees from higher net asset value of unit trust funds under management and higher fees and transaction income from retail banking operations.

The increase of 9.5% equity interest in Public Financial Holdings Limited (formerly known as JCG Holdings Limited) (“PFHL”) during the period, as a result of the underwriting and subscription of PFHL’s rights issue had also contributed favourably to the Group’s result.

The Board of Directors is pleased to declare an interim dividend of 20% less 28% taxation, which will result in a payout totalling RM477 million. The Group’s risk-weighted capital adequacy ratio would continue to remain strong at 12.7% after the payment of the interim dividend.

Financial Highlights of the Public Bank Group

• For the second quarter of 2006, net profit attributable to shareholders increased by 17% to RM453 million compared to the first quarter of 2006. Consequently, earnings per share improved to 13.7 sen in the second quarter of 2006 compared to 11.7 sen in the preceding quarter.
• Net profit attributable to shareholders for the first half of 2006 increased by 18% to RM839 million compared to the same period in 2005, leading to an improved earnings per share of 25.4 sen in 2006 compared to 21.7 sen in the previous corresponding period.
• Annualised net return on equity was higher at 21.6% compared to 19.2% in 2005.
• Efficiency continued to rise with the cost to income ratio improving to 35.8% from 36.7% in 2005.
• Public Bank Group’s total assets expanded by 21% to stand at RM134.6 billion as at the end of June 2006.
• Public Bank Group’s total loans increased by RM10.1 billion or 15% to reach RM78.2 billion as at the end of June 2006, of which RM4.3 billion arose from the acquisition of Public Bank (Hong Kong) Limited (formerly known as Asia Commercial Bank Limited) (“PB(HK)”).
• Excluding loans from PB(HK), the Group’s total loans grew by 8.6% for the first half of 2006, almost 2.5 times that of the loan growth rate recorded by the banking industry.
• Net non-performing loan ratio improved to 1.6% in June 2006 as compared to 1.7% in December 2005, and was significantly lower than the banking industry’s ratio of 5.6% as at the end of May 2006.

Continued Strong Growth in Retail Loans

The Public Bank Group’s domestic loans and advances increased by 8.4% or RM5.5 billion to stand at RM70.7 billion at the end of June 2006, increasing its market share to 12.6% compared to 12.0% at the end of 2005. The Group’s lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and transport vehicles as well as commercial lending to SMEs accounting for 71% of the Group’s total loan portfolio as at the end of June 2006.

The strong growth of domestic loans coupled with the acquisition of PB(HK) led to loans for residential properties growing by 18% to RM21.2 billion in first six months of 2006. Meanwhile, loans for the purchase of transport vehicles increased by 8% to RM21.4 billion.

Further Improvement in Asset Quality

The Public Bank Group’s gross non-performing loans (“NPL”) and net NPL ratios as at the end of June 2006 had improved to 1.9% and 1.6% respectively from 2.1% and 1.7% respectively as at the end of December 2005. The level of new NPL formation remained relatively stable, as reflected by the ratio of net new NPL to gross loans of 0.3% in the first half of 2006 compared to 0.4% for the preceding six months period. The consistently low NPL ratios of the Group reflect the Group’s prudent lending policies and practices which were complemented by strong credit management and proactive credit recovery process.

The Group’s loan loss coverage ratio continued to increase to 98% as at the end of June 2006 from 92% as at the end of December 2005 with additional general allowance set aside while the level of NPL remained relatively unchanged. The Group’s loan loss coverage ratio was also significantly above the 54% coverage for the banking industry at the end of May 2006.

Higher Growth in Customer Deposits

Excluding customer deposits of PB(HK), the Group’s total deposits from customers grew by 12% for the first half of 2006, compared to the 3.5% growth recorded by the banking industry for the first five months of 2006. The Group’s liquidity improved with the strong deposit growth, with loans to deposits ratio standing at 76% as at the end of June 2006 as compared to 79% as at the end of 2005.

Improved Net Interest Income

The Public Bank Group’s net interest income improved by 8% in the current quarter compared to the preceding quarter on the back of improved interest margins. The Group’s average lending rate increased from 6.03% in the first three months of 2006 to 6.40% in the second quarter of 2006 while average deposit rate increased marginally from 2.29% to 2.34% in the respective periods. In addition, the net interest margin on wholesale deposits on-lent to the interbank market increased from 0.13% in the first quarter of 2006 to 0.18% in the current quarter.

Capital Position Remains Strong

The Public Bank Group’s capital base stood at RM10.4 billion as at 30 June 2006 compared to RM11.6 billion at the end of 2005. With the consolidation of PB(HK), the Group’s risk-weighted capital ratio still remained strong at 12.7% as at 30 June 2006, after the payment of the interim dividend, and is well above the statutory minimum requirement of 8%.

Expansion in Hong Kong and Greater China

The acquisition of Asia Commercial Bank Limited by Public Financial Holdings Limited, a 73.5% subsidiary of Public Bank, was completed on 30 May 2006. Asia Commercial Bank Limited changed its name to Public Bank (Hong Kong) Limited on 30 June 2006. The acquisition of Public Bank (Hong Kong) Limited provides the Public Bank Group with the opportunity for an immediate expansion of its banking business in Hong Kong, as well as an entry to the banking business in Greater China.

Group Prospects

The Malaysian economy is expected to maintain its growth momentum in 2006 despite the increasing challenges of high oil prices, wide global imbalances and high global interest rates. Public Bank Group will continue to build on the momentum of its strong loans growth, whilst maintaining strong asset quality by keeping to the Group’s uncompromising prudent credit standards and practices. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance for 2006.

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman, Public Bank
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I am pleased to announce that the Public Bank Group posted a pre-tax profit of RM544 million for the first three months of 2006, an increase of 13% compared to the corresponding period in 2005. The Group’s net profit attributable to shareholders rose to RM387 million, an increase of RM41 million or 12% over the same period last year. The higher profit was contributed by growth in net interest income, net income from Islamic Banking business and higher other operating income.

The Public Bank Group’s net interest income grew by 12% to RM672 million compared to the same period last year due to continued strong loans growth and sustained strong asset quality.

Net income from Islamic Banking business rose 9% to RM105 million from the corresponding period in 2005 on the back of strong deposit and financing growth.

Other operating income posted a 16% growth compared to the corresponding period in 2005 to reach RM230 million, mainly due to higher foreign exchange gains, higher fees and transaction income from retail banking operations.

The Group’s commercial bank, Public Bank, registered a 25% increase in pre-tax profit compared to the first three months of 2005, and accounted for 80% of the Group’s pre-tax profit.

Key Highlights of the Public Bank Group’s Results

Continued Robust Loans Growth

In the first 3 months of 2006, the Public Bank Group’s loans and advances grew by RM3 billion or 4.4% to stand at RM71 billion as at the end of March 2006. As a result, the Group’s market share for loans and advances improved to 12.4% from 12.0 % in December 2005. The Group’s lending business continued to be directed at the retail sector, in particular loans for the financing of residential mortgages, purchase of passenger vehicles, and SMEs. Together, these sectors accounted for 73% of the total loan portfolio as at the end of March 2006.

Loans for residential mortgages expanded by 5.9%, while loans for the purchase of passenger vehicles and SMEs grew by 2.7% and 6.4% respectively in the first 3 months of 2006. The Group was able to sustain its growth momentum despite the intense competition in the retail credit and SME lending market due to Public Bank’s strong brand name, wide range of innovative and competitively priced products and services, and efficient extensive service delivery network.

Sustained Asset Quality

The Public Bank Group’s gross non-performing loans (“NPL”) and net NPL ratios as at the end of March 2006 were well-sustained from the position as at the end of December 2005. The NPL ratios on loans for residential mortgages and purchase of passenger vehicles remained generally stable as compared to the end of December 2005.

The Group’s low NPL ratios is a reflection of its continued prudent lending policies and practices complemented by strong credit management and proactive recovery processes. This is evident when compared to the past 5 years with the Group’s NPL dropping by 20% to RM1.4 billion despite a significant increase in the loan base to almost 3 times that of 5 years ago.

The Group maintained a high level of provisioning with its ratio of general allowance to net loans of 1.6% and a loan loss coverage of 98% at the end of March 2006 as compared to 55% coverage as at the end of 2001. The Group’s loan loss coverage was almost double the 51% coverage for the banking industry at the end of February 2006.

Strong Capital Position Sustained

The Public Bank Group’s capital base stood at RM10.9 billion as at 31 March 2006. The Group’s risk-weighted capital ratio of 15.4% was almost two times the minimum requirement of 8% and higher than the banking system’s risk-weighted capital ratio of 13.4% as at the end of February 2006.

Marching into 2006, the Public Bank Group expects the banking industry to be more challenging and competitive in an increasingly liberalised environment. The Group will continue to build on its strong loans growth momentum, and is well positioned to meet the challenges with its profitability track record, strong branding, superior asset quality and prudent credit management. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance for the rest of 2006.

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman, Public Bank
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• Earnings per share improved by 12% to 44.2 sen from 39.5 sen in 2004.
• Net return on equity improved to 21.4% compared to 18.2% in 2004
• Productivity continued to rise with the cost income ratio improving to 36.7% from 37.9% in 2004.
• Total assets surpassed the RM100 billion mark to stand at a record RM111.6 billion, which was two and a half times the Group’s asset size of RM45.3 billion at the end of 2000.
• Return on assets stood at 2% as at end of 2005.
• Loans grew by 20% to RM68.1 billion in 2005 compared to the 8% increase recorded by the banking industry for the first eleven months of 2005.
• Net non-performing loan ratio improved to 1.7% in December 2005 as compared to 2.1% a year ago, and was 72% lower than the banking industry’s ratio of 6.0% as at November 2005.
• Demand deposits grew by 10% and savings deposits increased by 9%.

I am pleased to announce that the Public Bank Group posted a record pre-tax profit of RM1.0 billion for the first six months of 2005, an increase of 14% from RM881 million achieved for the first half of 2004. The Group’s profit attributable to shareholders rose by RM98 million or 16% to RM711 million over the same period. Notwithstanding the pressure on lending margin due to intense competition, the Group managed to grow its net interest income and net financing income from Islamic banking operations by RM91 million or 7% as a result of sustained strong loan growth and continued improvement in asset quality. The focused and efficient execution of marketing strategies contributed to the continued strong growth in loans and deposits. The improved pre-tax profit was also attributable to higher non-interest income, in particular from increase in gains on sale of trust units and income from investment securities.

The Public Bank Group’s overseas operations, based predominantly in Hong Kong, achieved a 51% improvement in pre-tax profit on the back of lower loan loss provisioning. Public Bank’s domestic operations registered a 9% increase in profit before taxation, and accounted for 86% of the Group’s pre-tax profit.

The Board of Directors has declared an interim dividend of 20% less 28% taxation, which will result in a payout totalling RM471 million. The Group’s risk-weighted capital ratio would continue to remain strong at 17.0% after payment of the interim dividend.

Financial Review

Continued strong growth in retail loans

The Public Bank Group’s loans and advances recorded strong growth of RM5.4 billion or 9.4% in the first six months of 2005. The Group approved a total of RM13.7 billion new loans during the same period, which was an increase of 14% compared to loan approvals in the first half of 2004. The Group’s lending operations continued to be retail focused, with loans for residential mortgages, financing of passenger vehicles, and loans to small- and medium-sized enterprises accounting for 73% of total loans outstanding and 77% of new loans approved. Loan approvals for residential mortgages grew by 27% from RM2.6 billion in the second half of 2004 to RM3.3 billion in the first six months of 2005. Meanwhile, Public Bank’s outstanding housing loans increased by 13% from RM14 billion in December 2004 to RM15.9 billion in June 2005, compared to the 3.4% growth rate registered by the industry for residential mortgages in the first five months of 2005.

Asset quality improves further

The Public Bank Group’s non-performing loans (“NPL”) fell by 5% or RM73 million during the six months ended 30 June 2005. As a result, the Group’s gross NPL ratio, based on 3-month classification, improved from 2.7% at the end of 2004 to 2.3%. The Group’s net NPL ratio also improved to 1.9% at the end of June 2005 from 2.1% six months earlier. The Group’s net credit charge-off ratio declined to 0.31% in the first half of 2005 compared to 0.34% in the corresponding period in 2004. Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality. The Group maintained a comfortable level of provisioning with its ratio of general allowance to net loans standing at 1.6% and its loan loss coverage ratio of 87%.

Capital position remains strong

Public Bank Group’s capital base stood at RM11.11 billion as at 30 June 2005, an increase of 10% from the end of 2004. The Group’s capital base comprised mainly shareholders’ funds of RM8.15 billion and Subordinated Notes of USD750 million, of which USD400 million was issued in June 2005. The risk-weighted capital ratio of the Group, at 17.0%, was more than twice the minimum requirement of 8% and significantly higher than the banking system’s risk-weighted capital ratio of 13.3% at the end of May 2005.

Public Bank’s Subordinated Notes provide the Group with the capacity to expand its business and balance sheet without burdening shareholders for more equity capital, thus improving the return on equity.

Public Bank has to date spent RM785 million to buy back a total of 111.7 million Public Bank (Local) shares and 12.5 million Public Bank (Foreign) shares, representing in total 3.7% of the issued and paid-up capital of Public Bank. The share buy-back had resulted in an improvement of the Group’s return on equity by 1.8% to 21.0%.

Group prospects

The Public Bank Group continues to see opportunities for revenue and profit growth given the overall healthy macro-economic outlook and low interest rate environment which are supportive of business expansion, in particular for the consumer and small and medium-sized enterprises, markets which the Group is focused on. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance for the rest of 2005.

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Tan Sri Dato' Sri Dr. Teh Hong Piow , Chairman of Public Bank

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I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM480 million for the first three months of 2005, an increase of 11% compared to the corresponding period in 2004. The Group's profit attributable to shareholders rose by RM41 million or 14% to RM345 million over the same period. Despite competitive pressures on lending rates, the Group's net interest income and net financing income from Islamic banking operations increased by RM43 million or 7% as a result of sustained strong loan growth, continued mobilisation of lower-cost customer deposits and strong asset quality. The higher pre-tax profit was also attributable to higher fee income and improved cost-efficiency and staff productivity.

The Public Bank Group's overseas operations, based predominantly in Hong Kong, achieved a 43% improvement in pre-tax profit on the back of higher recoveries. Public Bank's domestic operations registered a 7% increase in profit before taxation, and accounted for 86% of the Group's pre-tax profit.

Financial Highlights

Continued strong growth in retail loans

The Public Bank Group's loans and advances recorded strong growth of RM2.7 billion or 4.8% in the first three months of 2005. The retail focus of the Group's lending operations is reflected by the composition of its loan book, with residential mortgages and financing of passenger vehicles, and loans to small-and medium-sized enterprises accounting for 72% of the total loan portfolio. During the first three months of 2005, new loan approvals to these sectors made up 76% of the RM6.7 billion of new loans approved.

Asset quality improves further

The Public Bank Group's gross non-performing loans ("NPL") ratio, based on 3-month classification, improved from 2.7% at the end of 2004 to 2.6% at the end of March 2005. The gross NPL ratios for the Group's key lending sectors stood at 3.5% for residential mortgages, 1.3% for vehicle financing and 2.3% for SME loans. In comparison, the banking industry registered gross NPL ratios of 8.5%, 3.8% and 12.0% respectively for residential mortgages, vehicle financing and SME loans at the end of 2004.

The Public Bank Group's net NPL ratio improved to 2.07% at the end of March 2005, and its credit charge-off ratio has declined to 0.35% in the first quarter of 2005 compared to 0.41% in the previous quarter. Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality. The Group maintained a comfortable level of provisioning with its ratio of general allowance to net loans standing at 1.6% and its loan loss coverage ratio of 81.1%.

Capital position remains strong

As at 31 March 2005, the Public Bank Group's risk-weighted capital ratio stood at 15.2%, above the statutory minimum requirement of 8% and the banking system's risk-weighted capital ratio of 14.2% at the end of February 2005.

As a measure to improve capital efficiency, Public Bank has to date bought back a total of 111.7 million Public Bank (Local) shares and 12.5 million Public Bank (Foreign) shares, representing in total 3.7% of the issued and paid-up capital of Public Bank, at an average price of RM6.27 and RM6.61 per share respectively. Public Bank (Local) shares and Public Bank (Foreign) shares closed at RM6.95 and RM7.05 on 12 April 2005.

Group prospects

The Malaysian economy is expected to remain strong with GDP growth of 5% to 6% in 2005. The Public Bank Group will capitalise on the positive economic conditions to expand its core business activities, and will also continue to enhance its customer services and pursue greater cost-efficiency. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance for the rest of 2005.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman, Public Bank

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