Chairman’s Review

The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow is pleased to announce that, “The Public Bank Group registered a favourable performance in the third quarter of 2014, achieving a pre-tax profit of RM1.55 billion that translated to a 14.3% growth as compared to the corresponding quarter in 2013. Net profit attributable to shareholders also recorded an increase of 13.8% to RM1.19 billion over the same period.

On year-on-year basis, the Public Bank Group’s pre-tax profit grew by 7.0% to RM4.25 billion for the nine-month period ended September 2014. The Group’s net profit attributable to shareholders increased by 7.4% to RM3.26 billion over the same period.

The favourable achievements in the third quarter 2014 performance of the Public Bank Group were mainly due to the increase in operating revenue as a result of net interest income growth and steady non-interest income growth, coupled with stable credit costs. The increase in net interest income in the current quarter was attributable to the commendable loan and deposit growth as well as the positive impact arising from the hike in the overnight policy rate and the recently completed rights issue."

Tan Sri Teh commented that, “While the Malaysian economy was relatively stable and resilient for the first nine months of 2014, the growth sentiment has been moderating especially towards the third quarter of 2014. Despite facing the challenging operating environment, the Public Bank Group continued to perform well, particularly in its domestic commercial banking operations with a commendable double-digit annualised loan growth of 10.2%, outpacing the banking system’s annualised loan growth of 6.9%. The Group’s annualised customer deposits growth in respect of its domestic commercial banking operations was also strong at 11.0%, significantly surpassing the banking system’s annualised deposit growth of 4.0%. The positive results reinforce the Group’s steadfast commitment in its pursuit of organic growth strategy in the core retail banking business."

Tan Sri Teh further added that, “The Public Bank Group continues to deliver the best in return on equity, cost efficiency and asset quality when compared to its Malaysian banking peers. For the nine-month period ended September 2014, the Group recorded an efficient cost-to-income ratio of 30.7% and maintained its low gross impaired loans ratio of 0.7%. The Group also continued to record the highest net return on equity of 20.0%.”

Commendable Growth in Loans and Deposits
 
The Public Bank Group maintained commendable loan growth with an annualised growth rate of 9.8% in the first nine months of 2014 despite a subdued operating environment, supported by its commendable annualised domestic commercial banking loan growth of 10.2%.

The Public Bank Group’s loan growth was mainly attributed to the lending growth in its retail banking segment, comprising extension of financing for the purchase of residential properties, commercial properties and passenger vehicles. As at 30 September 2014, the Group’s retail loan portfolio collectively accounted for 87% of its total loans.

“Despite operating in a moderating business environment thus far this year, where competition for market share remained intense, the Public Bank Group has continued to sustain its market leadership position in the retail banking segment. Lending to small and medium enterprises had been particularly strong, recording an annualised growth of 21% in the first nine months of 2014,” remarked Tan Sri Teh.

Tan Sri Teh added that, “On the funding side, the Public Bank Group’s total customer deposits grew at an annualised rate of 9.3%, supported mainly from the Group’s strong growth in the domestic commercial banking customer deposits of 11.0%, which was more than 2.7 times of the domestic banking industry’s annualised growth of 4.0%.”

Steady Growth in Non-Interest Income

The Public Bank Group’s non-interest income increased steadily by 7.8% for the period ended September 2014 as compared to the corresponding period in 2013. This was mainly attributed to higher income from its unit trust business, investment income and fee income from banking operations.

The Public Bank Group will continue to focus on implementing various initiatives aimed at further improving the non-interest income contribution to the Group in order to sustain its high return on equity.

Tan Sri Teh commented that, “The Public Bank Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual Berhad (“Public Mutual”), continued to contribute favourably to the Group’s overall profit by registering a consistent double-digit pre-tax profit growth of 16.3% as compared to the corresponding period in 2013. As at the end of September 2014, Public Mutual manages 107 funds with a total net asset value of RM62.3 billion and remains as the market leader with an overall market share of 40% in the private unit trusts business. Public Mutual also commands market leader position in the equity and Islamic unit trust fund sectors with 58% and 52% market share respectively as at the end of August 2014.”

Sustainable Cost

The Public Bank Group’s operating expenses for the period ended September 2014 increased by 5.2%, mainly attributable to the increase in personnel costs which were in tandem with the increased headcount to support business expansion.

Tan Sri Teh highlighted that, “The Public Bank Group continues to be the most efficiently managed bank in Malaysia with a low cost-to-income ratio of 30.7% as compared to the banking industry’s average cost-to-income ratio of 45.6%.

The Group will continue to emphasise on high productivity and efficiency in ensuring cost sustainability without compromising on compliance and service quality.”

Strong Asset Quality

“Relative to the banking industry’s gross impaired loans ratio of 1.7%, the Public Bank Group recorded a significantly lower impaired loans ratio of 0.7% as at the end of September 2014. The Group also maintained a higher and more prudent loan loss coverage ratio of 117.1% as compared to the banking industry's coverage ratio of 104.8%.

To ensure its competitive edge is well preserved, the Public Bank Group will continue to adopt a prudent approach in its credit risk management. This will be achieved through consistent and effective implementation of both preventive and proactive measures in its lending activities, such as establishing strict and prudent credit policies as well as putting in place efficient and effective approval and recovery processes,” said Tan Sri Teh.

Overseas Operations

The Public Bank Group’s overseas operations contributed 7.5% of the Group’s overall pre-tax profit for the nine-month period ended September 2014.

Tan Sri Teh commented that “Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank, registered a strong double-digit pre-tax profit growth of 48.7% to USD40.0 million as compared to the corresponding period in 2013 and is amongst the top three largest banks in Cambodia.”

In July 2014, Public Bank has entered into a conditional agreement with its joint venture partner to acquire the remaining 50% equity interest in VID Public Bank (VPB) not held by the Group. Upon completion of the exercise, VPB will become a wholly-owned subsidiary of the Group.

Healthy Capital Position

The Bank has successfully completed the renounceable rights issue exercise in August 2014 which raised RM4.8 billion equity capital. The rights issue exercise is part of the Group’s capital management strategy aimed to further strengthen the Group’s capital position to support its continuous business growth as well as to prepare for the forthcoming regulatory requirements under the Basel III framework.

With the completion of the rights issue exercise, the Public Bank Group’s capital position has been further enhanced with its common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio standing at 10.4%, 11.9% and 15.8% respectively as at the end of September 2014, and became the second highest capitalised banking group in Malaysia in terms of Tier 1 capital ratio.

Group’s Prospect

“Our strategies for the Public Bank Group remain unchanged. The Group will continue to focus on its core retail banking and financing business, whilst maintaining its prudent credit policies, as well as upholding strong corporate governance. The Group will leverage on its strong PB brand and its efficiently-run and wide-reach branch network as well as its delivery of excellent customer service to provide sustainable long term growth.

The Malaysian economy is expected to remain on a steady growth path, supported by moderating domestic demand but improving exports. On the banking industry front, we expect the net interest margin compression to persist as the competition for both loans and deposits market share remains intense. Despite facing these challenges,  the Public Bank Group is expected to maintain its earnings momentum for the rest of 2014,” concluded Tan Sri Teh.

Public Bank Berhad (PBB) is pleased to announce the launch of ‘PB Bonus Fortune’ Campaign which offers EXTRA 1.00% p.a. interest on the incremental savings. This Campaign is open to all new and existing individual customers of PBB and will run for 3 months from 1 September to 30 November 2014.

This Bonus Interest or additional interest of 1.00% p.a. is on top of the prevailing interest rates of the respective Eligible Account. The Eligible Accounts for the Campaign are Basic Savings Account, PLUS Savings Account, 50 PLUS Savings Account and ACE Account. Bonus Interest is payable on a minimum Incremental Average Daily Balance (ADB) of RM3,000 up to maximum Incremental ADB of RM300,000 for each Eligible Account.

Basic Savings Account offers you basic banking services at minimal cost with an initial deposit of just RM20 while PLUS Savings Account is an all-purpose savings account with an initial deposit of RM250. 50 PLUS Savings Account is specially designed for senior citizens aged 50 years and above with an initial deposit of RM2,000 and it offers greater security, comfort as well as returns. As for ACE Account, it is a hybrid account that offers the convenience of a checking account while letting you enjoy the attractive interest rates provided by a savings account.

“PB Bonus Fortune” Campaign is part of our initiatives to encourage savings by rewarding our customers when they increase their savings with PBB during the Campaign Period.

To enjoy the Bonus Interest, customers are required to register their participation via ONE (1) Short Message Service (SMS) during the Campaign Period. All you need to do is just key in “PBBF <space> 12-digit NRIC number” and send to 66300 and you are one step closer to be rewarded.

To find out more about this Campaign, customers are invited to meet our customer service representatives at any of our branches, log on to PBB website at www.pbebank.com or call free phone at 1-800-22-9999 during normal working hours. Terms and conditions apply.

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To better reward our customers, Public Bank Berhad (PBB) and Public Islamic Bank Berhad (PIBB) have jointly launched the ‘PB Step Up FD’ Campaign which offers promotional interest / profit rates of up to 3.80% p.a. This Campaign is open to all new and existing individual and non-individual customers of PBB / PIBB and will run for 3 months from 1 July to 30 September 2014.

This Campaign provides customers the flexibility to make short term fixed deposit / investment placement and to rollover their fixed deposit / investment placement in order to earn higher interest / expected profit rates.

To enjoy higher interest / expected profit rates, customers are required to place 3-month fixed deposit / investment placement into PLUS Fixed Deposit Account (Conventional deposit account) or Istismar Account-i (Islamic investment account) during the Campaign period. Individual customers only need to deposit a minimum of RM20,000 to participate in the Campaign, subject to a maximum placement of RM10 Million. A higher minimum and maximum placement amount of RM50,000 and RM20 Million respectively is applicable to the non-individual customers.

Customers will enjoy a promotional interest / expected profit rate of 3.40% p.a. for the first 3 months. Should they rollover their placements for another 3 months, they will enjoy higher interest / expected profit rate of 3.60% p.a. (first rollover) and 3.80% p.a. (second rollover).

‘PB Step Up FD’ Campaign is part of our ongoing initiatives to reward our customers for their continued support and loyal patronage. We will continue to launch more campaigns to excite our existing customers and attract new customers to bank with us.

To find out more about this Campaign, customers are invited to meet our customer service representatives at any of our branches, log on to PBB website at www.pbebank.com or call free phone at 1-800-22-9999 during normal working hours. Terms and conditions apply.

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Public Bank and BonusLink have once again collaborated to launch a new campaign namely ‘Public Bank Welcome Offer’ (Offer) to reward our loyal customers and encourage savings. This Offer is open to all new and existing Public Bank customers who do not own a PB SaveLink (SALink) or PB CurrentLink (CALink) account. The offer period is from 21 July to 31 October 2014.

This special offer allows customers to collect a guaranteed 200 BonusLink Points (BLP) for SALink or 300 BLP for CALink account opened with Public Bank using fresh funds during the offer period. Only a minimum deposit of RM500 for SALink or RM3,000 for CALink is required to open the respective accounts.

In addition to the guaranteed BLP, a total of RM30,000 cash prizes awaits the lucky customers who open SALink or CALink. Ten (10) lucky winners will be awarded with RM3,000 cash prize each.

Both SALink and CALink are the only Savings and Current accounts in the country that offer BLP. Just save enough with Public Bank and you will be able to redeem exclusive gifts for yourself with the BLP you have collected.

SALink provides customers with both interest and BLP. Customers are entitled to BLP with every ringgit they have in their accounts provided that they keep a Monthly Average Credit Balance (MACB) of RM500 and above per month. Multi-tiered interests are calculated daily and credited at the end of each month.

As for CALink, customers are entitled to 0.06 BLP for every RM 1 of MACB when their MACB is maintained at RM500 and above every month. In addition, customers will be provided with a monthly statement to keep track of their expenditure.

To find out more about this Offer, customers are invited to meet our customer service representatives at any of our branches, log on to Public Bank’s website at www.pbebank.com or call free phone at 1-800-22-9999 during normal working hours. Terms and conditions apply.

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Chairman’s Review

The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow is pleased to announce that, “The Public Bank Group recorded a net profit attributable to shareholders of RM2.1 billion for the half year ended 30 June 2014, representing a growth of 4.1% as compared to the corresponding period in 2013 and exceeding the RM2 billion mark for the first time. The Group’s pre-tax profit grew by 3.2% to RM2.7 billion during the same period.”

Tan Sri Teh commented that, “Although there are signs of moderation in the growth of certain sectors and concerns on inflation, the overall Malaysian economy continues to demonstrate resilience in the first half of 2014, supported by strong domestic demand. On that accord, I am delighted that the Public Bank Group is able to maintain its momentum by recording a commendable domestic loan growth of 10.6% on an annualised basis during the six-month period ended June 2014. The Group’s domestic customer deposits also registered a strong annualised growth of 11.4% during the same period.”

Tan Sri Teh added that “The Public Bank Group continues to be the leader amongst its Malaysian banking peers by  achieving the highest net return on equity of 20.8% and sustaining its strong asset quality and cost efficiency by continuously maintaining its low gross impaired loan ratio of 0.7% and cost-to-income ratio of 31.8% in the first half of 2014.”

“In view of the steady performance of the Group, I am pleased to announce that the Board of Directors has declared a first interim single-tier dividend of 23 sen, which will result in a total dividend payout of RM886 million. The new shares to be issued under the current rights issue exercise will also be entitled to the first interim dividend,” said Tan Sri Teh.

Commendable Growth in Loans and Deposits
 
The Public Bank Group continued to maintain traction in its loan growth with an annualised growth rate of 10% in the first half of 2014. This was driven by its commendable annualised domestic loan growth of 10.6%, which outpaced the domestic banking industry’s annualised loan growth rate of 6.9%.

The Group’s loan growth was mainly supported by lending to the retail banking segment, comprising extension of credit mainly to small and medium enterprises as well as for purchasing of residential properties and passenger vehicles. As at 30 June 2014, the Group’s retail loan portfolio collectively accounted for 87% of its total loans, while the lending to small and medium enterprises recorded a strong annualised growth of 23% in the first half of 2014.

 “Despite operating in a more subdued and regulated business environment as well as facing intense competition for market share, the Public Bank Group continues to maintain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market share of 19.5%, 33.4% and 27.2% respectively,” commented Tan Sri Teh.

Tan Sri Teh added that, “The Public Bank Group’s funding and liquidity position remained stable and healthy with loan-to-deposit ratio of 87.1%, supported by its strong retail deposit franchise with a large domestic depositor base of over 5 million customers. The Group’s total customer deposits grew at an annualised rate of 11%, mainly contributed by the Group’s strong domestic customer deposits annualised growth of 11.4%, which surpassed the domestic banking industry’s annualised growth of 4.5%.”

The strong deposit growth was mainly attributed to the steady inflow of fixed deposits, savings and current accounts, which grew by an annualised rate of 12.8%, 10.0% and 7.1% respectively.

Steady Growth in Non-Interest Income

The Public Bank Group remains focused in putting in place various initiatives to drive the growth of its non-interest income in order to sustain its high return on equity. The Group’s non-interest income improved by 6.9% in the first half of 2014 as compared to the corresponding period in 2013. This was mainly attributed to higher income from its unit trust business.

Tan Sri Teh remarked that, “The Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual Berhad (“Public Mutual”), continued to contribute positively to the Group’s overall profit by achieving a strong double-digit pre-tax profit growth of 16.8% as compared to the corresponding period in 2013. As at the end of June 2014, Public Mutual manages 105 funds with a total net asset value of RM64.2 billion and remains as the market leader in the private unit trust business, capturing 41.1% of the overall market share, with 58.5% and 53.7% market share in the equity and Islamic unit trust fund sectors respectively.”

Sustainable Cost

The Group’s operating expenses in the first half of 2014 increased by 4.8%, mainly attributable to the increase in personnel costs which were in line with the increased headcount to support business expansion and nurturing of talent.

Tan Sri Teh highlighted that, “The Public Bank Group continues to be the most efficiently managed bank in Malaysia with a cost-to-income ratio of 31.8% in the first half of 2014 as compared to the banking industry’s average cost-to-income ratio of 45.6%. The Group will continue to place strong emphasis in prudent cost management to ensure cost sustainability by leveraging on existing resources to further enhance efficiency, particularly in this challenging and competitive operating environment, but without compromising on service quality and compliance.”

Strong Asset Quality

“The Public Bank Group continues to adopt a prudent approach in managing its credit risks. This is achieved by consistently carrying out a combination of both preventive and proactive measures in its lending activities, such as establishing strict and prudent credit policies, and putting in place efficient and effective approval and recovery processes.  As a result, the Group is able to maintain its strong asset quality. The Group’s gross impaired loan ratio of 0.7% as at the end of June 2014 is significantly lower than the banking industry’s ratio of 1.8%. The Group also maintained a higher and more prudent loan loss coverage ratio of 117.6% as compared to the banking industry's coverage ratio of 104.9%,” said Tan Sri Teh.

Overseas Operations

For the half year ended June 2014, the Public Bank Group’s overseas operations contributed 7.4% of the Group’s overall pre-tax profit. Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank, reported another set of strong pre-tax profit growth of 36.2% to USD22.9 million as compared to the corresponding period in 2013, amid the challenging business environment. Campu Bank remains as one of the top three largest banks in Cambodia.

Stable and Healthy Capital Position

The Public Bank Group’s capital position remained healthy and supportive of its business growth strategies. As at the end of June 2014, the Group’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio stood at 8.9%, 10.4% and 13.8%  respectively, after taking into account the provision for first interim dividend.

As part of the capital management strategy to further strengthen its capital position to support the continuous business growth of the Public Bank Group as well as to prepare for the forthcoming regulatory requirements under the Basel III framework, the Bank is currently undertaking a renounceable rights issue exercise which is expected to raise RM4.8 billion in equity capital. The exercise is targeted to be completed soon in the third quarter of 2014.

Group’s Prospect

“Our strategies for the Public Bank Group remain unchanged. The Group will continue to focus on its core retail banking and financing business, whilst maintaining its prudent credit policies, as well as upholding strong corporate governance. The Group will continue to leverage on its strong PB brand and its wide and efficient branch network as well as its excellent customer service to support long term sustainable growth.

With the expectation that the Malaysian economy will remain on a steady growth path of  between 4.5% to 5.5%, supported by improving external sector amid moderation in the domestic demand, the Public Bank Group is expected to maintain its earnings momentum for the rest of 2014,” remarked Tan Sri Teh.

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder and Chairman of Public Bank
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PBB is pleased to announce that the shareholders of PBB had at the Extraordinary General Meeting (“EGM”) held this morning, 6 June 2014, approved the proposed PBB Rights Issue.

The Board of PBB had at a Board meeting held immediately after the EGM, resolved the following:

• The issue price of the Rights Shares is fixed at RM13.80 per Rights Share, representing a discount of approximately 33% to the theoretical ex-rights price of RM20.64 per PBB Share, calculated based on the five (5)-day volume weighted average market price of PBB Shares up to and including 5 June 2014 of RM21.32 per PBB Share

• The entitlement basis for the Rights Issue is one (1) Rights Share for every ten (10) existing PBB Shares held by shareholders of PBB at an entitlement date to be determined and announced later

• The PBB Rights Issue will entail the issuance of 350,212,513 new PBB shares and raise gross proceeds of RM4,832,932,679

The Abridged Prospectus together with the Notice of Provisional Allotment and Rights Subscription Form (collectively referred to as the “Documents”) will be despatched to entitled shareholders of PBB whose addresses in the Record of Depositors maintained by Bursa Malaysia Depository Sdn Bhd is an address in Malaysia, or they have provided an address in Malaysia for purposes of receiving the Documents.

Tan Sri Dato’ Sri Dr. Teh Hong Piow and his related companies, who collectively hold 24.08% shareholdings in PBB, have provided irrevocable undertaking letters to subscribe in full for their respective entitlements for the Rights Shares.

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder and Chairman of Public Bank

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