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 achieved yet another set of commendable financial performance in the first half of 2013 with pre-tax profit and net profit growing by 6.2% to RM2.6 billion and 6.4% to RM2.0 billion respectively, as compared to the corresponding period in 2012.

Against the profits for the first quarter of 2013, the Group’s pre-tax profit and net profit for the second quarter of 2013 grew by 5.6% and 5.7% respectively.”

Tan Sri Teh commented that “Despite the challenging external environment, the Malaysian economy demonstrated resilience in the first half of 2013, supported by strong domestic demand. This had in turn, enabled the Group to record a healthy loan growth of 11.8% on an annualised basis to RM209.4 billion as at the end of June 2013.

The Group’s customer deposits also recorded a strong annualised growth of 13.6% to RM240.4 billion as at the end of June 2013. As a result, the Group maintained a stable and healthy loan-to-deposit ratio of 86.4% as at 30 June 2013.”

Tan Sri Teh commented that “The Public Bank Group continues to be at the forefront amongst its Malaysian banking peers with the highest net return on equity of 22.6%. The Group also excels in sustaining its strong asset quality and cost efficiency with its low gross impaired loan ratio of 0.7% and cost-to-income ratio of 31.4% in the first half of 2013.”

“In view of the Public Bank Group’s commendable performance, I am pleased to announce that the Board of Directors has declared a first interim single-tier dividend of 22%, which will result in a total dividend payout of RM770.5 million” said Tan Sri Teh.

Healthy Growth in Loans and Deposits

In the first half of 2013, the Group recorded an annualised loan growth of 11.8%, driven by its strong annualised domestic loan growth of 12.1%, which outpaced the domestic banking industry’s annualised loan growth rate of 9.0%.

The Group’s loan growth was mainly spurred by the lending activities to the retail banking segment, comprising loans to small- and medium-sized enterprises (“SMEs”), loans for the financing of residential properties and purchase of passenger vehicles. As at 30 June 2013, the Group’s retail loan portfolio collectively accounted for 86% of its total loans.

“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 shares of 19.4%, 33.8% and 26.3% respectively. This achievement will not be possible without the continuous strong support of our valued customers” said Tan Sri Teh.

Tan Sri Teh added that, “The Public Bank Group’s funding and liquidity position remained stable and healthy, supported by its strong retail deposit franchise with a large domestic depositor base of over 5 million customers.

In line with the healthy loan growth, the Group’s total customer deposits grew at an annualised rate of 13.6%. The Group’s domestic customer deposits grew at an annualised rate of 14.2%, higher than the domestic banking industry’s annualised growth rate of 10.1%, resulting in an improved market share of 15.4% as at the end of May 2013.”

The strong domestic deposit growth was mainly attributed to the steady inflows of fixed deposits, low cost savings and current accounts, which grew by an annualised rate of 20.3%, 10.7% and 15.1% respectively.

Steady Growth in Non-Interest Income

Arising from the Public Bank Group’s 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 recorded a steady growth of 9.3% in the first half of 2013 as compared to the corresponding period in 2012. This was mainly attributed to higher income from its unit trust business, foreign-exchange related transactions and transactional banking services.

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 with a commendable pre-tax profit growth of 12.7% as compared to the corresponding period in 2012. To date, Public Mutual manages 102 funds with a total net asset value of RM58.9 billion and remains as the market leader in the private unit trust business, capturing 41.0% of the overall market share, with 59.3% and 53.8% market share in the equity and Islamic unit trust fund sectors respectively. To further drive the Group’s unit trust business, Public Mutual will continue to place strong emphasis on building and nurturing its large force of unit trust consultants which is a highly effective distribution channel, to serve its unit trust customer base that has grown to over 2.85 million accounts as at the end of June 2013.”

Effective Cost Management

The Group’s operating expenses in the first half of 2013 increased by 3.7%, mainly attributable to the increase in personnel costs which were in line with the increased headcounts to support business expansion and nurturing of human capital.

Tan Sri Teh commented that, “The Public Bank Group continues to be the most efficiently managed bank in Malaysia with a cost-to-income ratio of 31.4% in the first half of 2013 as compared to the banking industry’s average cost-to-income ratio of 46.6%. This achievement is due to the prudent cost management discipline adopted by the Group that encourages high productivity performance amongst its staff force; and continuous enhancement and review in processes to ensure high efficiency and optimum utilisation of innovative infrastructure. The Group will continue to place strong emphasis in prudent cost management to ensure cost sustainability, particularly in this challenging and competitive operating environment.”

Sustained Strong Asset Quality

“The Public Bank Group continues to sustain its strong asset quality with gross impaired loan ratio of 0.7% as at the end of June 2013, a significantly stronger benchmark as compared to the banking industry’s ratio of 2.0%. Net credit charge remained low and stable at 0.15% in the first half of 2013. The Group also maintained a higher and more prudent loan loss coverage ratio of 123.2% as compared to the banking industry's coverage ratio of 99.2%.” said Tan Sri Teh.

The strong asset quality is a result of the Group 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.

Stable and Healthy Capital Position

The Public Bank Group’s capital position remained healthy and supportive of its business growth strategies despite the redemption of its RM1.4 billion subordinated notes in May 2013. As at the end of June 2013, the Group’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio stood at 8.5%, 10.4% and 12.8% respectively, after provision for first interim dividend.

Tan Sri Teh reiterated that, “We will continue to assess the Group’s capital requirements to ensure that it is well positioned to support the Group’s business growth strategies by balancing the need for higher capital retention in view of the more stringent requirements under the Basel III capital regime whilst maximising our shareholders’ return.”

Group’s Prospect

Tan Sri Teh viewed that “The Malaysian economy is expected to remain resilient backed by strong domestic demand despite headwinds from external vulnerabilities. On the banking industry front, we expect the net interest margin compression to persist as competition for both loans and deposits market share remain intense.

In the second half of 2013, the Public Bank Group is expected to maintain its earnings momentum by continuing to focus on its core retail banking and financing business, whilst maintaining its prudent credit policies, as well as upholding strong corporate governance.”

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder and Chairman of Public Bank
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Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow has been awarded ‘The BrandLaureate Banker of the Year Award 2013’ by The Asia Pacific Brands Foundation (APBF), a world leading branding foundation.

Dr. KK Johan, President of The Asia Pacific Brands Foundation presented the award to Tan Sri Teh at the Bank’s Anniversary held at the MINES International Exhibition & Convention Centre on 6 July 2013.

In his citation Dr. KK Johan said, “Tan Sri Dato’ Sri Dr. Teh Hong Piow, the Founder and Chairman of Public Bank is indeed most deserving of the title and accolade, The BrandLaureate Banker of the Year Award 2013. Recognised for his foresight, dexterity and business acumen, Tan Sri Teh stands tall as a man in control of his destiny. 

He continued, “In 1966, Tan Sri Teh set his aims up high – to start his own bank.  Since its founding on that historic day, Public Bank has seen many decades of remarkable achievements which were made possible by its Founder’s strategic leadership and his ability to inspire and motivate his staff”.

According to him, the success of Public Bank lies in its brand champion and brand leader, Tan Sri Teh, who lives and breathes the brand. He said, “Tan Sri Teh’s leadership has been notable, not just because he embodied the highest standards of professional expertise, but also because he never shied away from making difficult decisions and taking good cognizance of economic realities. He implemented best banking practices in Public Bank that would enable it to overcome one financial crisis after another. Even in the worst of the global financial downturn, Public Bank continues to stand tall and strong, much to the envy of many local and foreign banks”.

Tan Sri Teh had received four personal awards from Asia Pacific Brands Foundation which include The BrandLaureate Brand Personality Award 2007, The BrandLaureate Premier Icon Leadership Award 2011 and The BrandLaureate Tun Dr. Mahathir Mohamad Man of the Year Award 2011.  Tan Sri Teh was also the recipient of many accolades from various international publications, amongst them were Asia’s Best CEO, Asia’s Banking Grandmaster, Asian Banker Par Excellence and ASEAN Most Astute Banker.

At the same event, Public Bank was also awarded ‘The BrandLaureate Signature Brand Awards 2013’ by the APBF. Managing Director, Tan Sri Dato’ Sri Tay Ah Lek, in his acknowledgement speech said, “Winning these two prestigious awards is indeed an honour that doubles the joy of celebrating the Bank’s 47th Anniversary tonight.  Although Public Bank has been bestowed countless awards over the years, every award continues to fill us with a sense of achievement and pride.  In fact we are inspired to further raise the bar of excellence as each milestone is accomplished.”

He added, “The BrandLaureate Signature Brand Award is a recognition and reaffirmation of Public Bank’s solid stature in Malaysia’s banking industry.”

The BrandLaureate Signature Brand Awards 2012 -2013 are for selected brands that are established and have successfully stamped their mark in their field of expertise and are market leaders. It is higher than the Corporate and Product Branding Awards categories.

Public Bank has been selected as the inaugural recipient of The BrandLaureate Signature Brand Awards 2012-2013 in the category of Finance - Banking. Prior to this award, Public Bank had in the past six consecutive years from 2007 to 2012, being crowned the BrandLaureate Awards for Best Brands in Financial Services – Banking Category. In addition, Public Bank was also the winner of The BrandLaureate – SME Best Brands Awards 2011.

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Tan Sri Dato' Sri Dr. Teh Hong Piow, Founder and Chairman, receiving The BrandLaureate Banker of the Year Award 2013 from Dr. KK Johan
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Following the overwhelming response to the earlier “PB FD Fortune” campaign which ended on 31 March 2013, Public Bank has launched its second fixed deposit (FD) campaign for Year 2013 themed as “PB Super FD Rates”.

The campaign is to cater to individual customers who are looking for long-term FD placement with higher step-up interest and yet receive regular monthly interest payment.

The “PB Super FD Rates” offer high fixed deposit rates step-up to 6.88% p.a. to individual customers. To participate in the campaign, individual customers are required to place a minimum of RM10,000 new funds. From the total placement amount, 80% would be placed under 1-Month PLUS Fixed Deposit (PLUS FD) auto-renewable for 12 consecutive months at a step-up rate whilst 20% of the funds would be deposited into the PLUS Savings Account earning interest at the current prevailing rate. Each individual customer is allowed to place up to a maximum of RM3 million under the campaign.

In addition, customers will also be given the flexibility to withdraw the fixed deposit at any time and still be entitled to the prevailing 1-month PLUS FD counter rate without any penalty. This flexibility will give the customer peace of mind in case they require the funds urgently before the 12-month lock-in period.

The “PB Super FD Rates” campaign period is from 3 June 2013 to 30 September 2013.

Public Bank will continue to launch more attractive deposit campaigns and products to enable the customers to enjoy more benefits while saving with the Bank.

To find out more about this Campaign, 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 working hours. Terms and conditions apply.

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Public Bank’s signing of a Memorandum of Understanding with Institut Bank-Bank Malaysia (IBBM) to impart training and education through the Chartered Banker Education Pathway for its employees, constitutes a partnership in excellence.

Ms. Koay Seok Khim, General Manager, Knowledge and Learning signed the MOU on behalf of Public Bank, witnessed by En. Sulaiman Manap, Chief Operating Officer, while IBBM was represented by Mr. Tay Kay Luan, Chief Executive Officer.

With this launch, Public Bank once again demonstrates the value that it places on the needs of their human asset by ensuring that their knowledge and skills remain relevant and contemporary.  In her welcome address, Koay said “Our Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow has often said that banking is about people as it is a business for the people and by the people.  Investing in our people is therefore a necessity as they need to continuously enhance their skills to meet the evolving market requirements and increasingly sophisticated customer demands.”

She further added that Tan Sri Teh is a firm believer that learning is the foundation of progress and that good corporate governance and best practices are integral to the health of the financial services industry.

Meanwhile, IBBM’s CEO, Tay Kay Luan commented that it was heartening to note that Public Bank’s strong culture of learning also extends beyond Malaysia.  Sharing his experience on his recent visit to Phnom Penh, Tay indicated that “the Cambodian Public Bank or otherwise known as Campu Bank, did express an interest in IBBM’s qualifications too.  We are looking forward to working with them to see how best to fit their requirements to our suite of products”.

The Malaysian banking industry is fortunate that Bank Negara Malaysia, under the able stewardship of Yang Berbahagia Tan Sri Zeti, has always prioritized talent development as key driver in advancing national competitiveness.  Public Bank is confident that with the Governor's continued support, Malaysia will have a competitive and thriving financial workforce for the country’s transition to being a high income growth economy.

The Chartered Banker qualification, which is recognized as the gold standard for professionals working in the banking sector is aimed at embedding high ethical, professional and technical standards in the workplace. 

The dissemination of knowledge online will also benefit both the Bank and its potential candidates.  Not only is it cost effective but the methodology used is uniquely appropriate to the younger generation of employees who are tech savvy and who value flexibility.

Public Bank therefore lauds IBBM’s endeavour to instill a culture of professionalism and integrity within the banking industry in Malaysia.  Koay further indicated that Public Bank has always been supportive of the many accreditated and certified programmes offered under the umbrella of IBBM; not least the CCP qualification where they have currently a pool of about 900 CCP qualified personnel. 

The Bank is certain that their people will see opportunities in acquiring The Chartered Banker qualification which is backed by The Chartered Institute of Bankers, Scotland.   The Chartered Banker Programme which is relevant, up to date and of high quality will enable banking professionals to really get a good grip on the nuts and bolts of the industry.

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MOU signed: Tay (Left) exchanging the MOU documents with Koay (Right), witnessed by En. Sulaiman Manap, Public Bank Chief Operating Officer.
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Public Bank Berhad and Resona Bank, Ltd. had recently entered into a Memorandum of Understanding (“MOU”) to further strengthen the business collaboration between the two banks in various strategic areas of cooperation on the basis of equality and mutual benefit.

The primary objective of the business collaboration is intended to leverage upon the respective strengths and expertise of Public Bank and Resona Bank and enable the two banks as well as their respective affiliates to establish and promote to their respective customers appropriate banking products and services in Malaysia and Japan, particularly cross border banking transactions and services, which include amongst others, cross border trade settlements, remittance clearance services, credit verification and referrals.

The number of Japanese corporations commencing operations in the ASEAN countries is increasing. The business collaboration between the two banks will strengthen the banking services support to the customers of Resona Bank, particularly in the markets where Public Bank has strong network presence namely Malaysia, Cambodia, Vietnam and Laos. The business relationship between Public Bank and Resona Bank (established through merger of former Asahi Bank and Daiwa Bank) has already commenced since 1967, this MOU further strengthen the business collaboration between both Public Bank and Resona Bank.

Resona Bank, is a wholly-owned subsidiary of Resona Holdings, the fourth-largest banking group in Japan and has strong business presence in the greater Tokyo metropolitan area and the Kansai region, where Japan’s economic activities and population are concentrated. Resona Bank is endeavoring to accomplish wide variety of banking service as a “Metropolitan Area-based Super Regional Bank” in Japan and is also reinforcing its alliances with financial institutions overseas namely Singapore, Thailand, Philippines, Vietnam, India, China, Hong Kong, Taiwan and Korea.  The business collaboration will facilitate Public Bank’s customers to benefit from the wide regional alliances of Resona Bank.  This business collaboration is set to bring about business synergies and value-added service propositions to customers of both Banking Groups.  

Outline of Resona Bank, Ltd.

(1 Malaysian Ringgit = 30.039 yen)

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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 remains resilient and recorded a pre-tax profit of RM1.3 billion and net profit of RM968.3 million for the first quarter of 2013. Against the profits for the corresponding quarter in the prior year, the Group’s pre-tax profit and net profit growth for the first quarter of 2013 were 3.1% and 4.1% respectively.”

Tan Sri Teh highlighted that “Having started the year with a positive momentum, the Public Bank Group recorded a healthy loan growth in the first quarter of 2013, with gross loans increasing by 11.8% on an annualised basis to RM203.6 billion. The loan growth was largely funded by customer deposits, which also recorded a steady growth of 12.9% on an annualised basis. This resulted in the Group sustaining a stable and healthy loan-to-deposit ratio of 86.9% as at the end of March 2013.”

Tan Sri Teh said that “The Public Bank Group continues to be at the forefront amongst the Malaysian banking groups with the highest net return on equity of 22.2%. The Group is also leading in terms of asset quality and cost efficiency in the banking industry with notably low gross impaired loan ratio of 0.7% and cost-to-income ratio of 31.9% in the first quarter of 2013.”

Steady Growth Momentum in Loans and Deposits

The Public Bank Group sustained its steady loan growth momentum at an annualised rate of 11.8%, with domestic loans growing at a stronger pace of 12.5% over the same period.

The lending activities to the retail banking segment remained the main strategic focus of the Public Bank Group, driven mainly by loans to small- and medium-sized enterprises (“SMEs”), as well as loans for the financing of residential properties and purchase of passenger vehicles. As at the end of March 2013, the Group’s retail loan portfolio collectively accounted for 86% of its total loans.

“I am deeply encouraged by the unwavering support given by our valued customers which had enabled the Public Bank Group to maintain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 19.2%, 33.8% and 26.4% respectively.”  Tan Sri Teh shared.

For the first quarter of 2013, the Public Bank Group’s domestic loan approvals continued to record stable trend with an increase of 12% compared to the corresponding period in 2012. A total of RM4.9 billion of loans were approved to domestic SMEs, accounting for 33% of the Group’s total domestic loans approved in the first quarter of 2013.

Tan Sri Teh added that, “The Public Bank Group’s funding and liquidity position remained healthy and robust, supported by its strong retail deposit franchise with a large domestic depositor base of over 5 million customers. In tandem with the overall loan growth, the Group’s total customer deposits grew at an annualised rate of 12.9%, with domestic customer deposits growing at a stronger annualised rate of 13.3%.”

The strong domestic deposit growth was mainly backed by the steady inflows of fixed deposits, low cost savings and current accounts, which grew by an annualised rate of 16.8%, 14.2% and 8.0% respectively.

Growth in Non-Interest Income

Non-interest income of the Public Bank Group grew by 8.7% in the first quarter of 2013 as compared to the corresponding quarter in 2012, mainly driven by income from higher transactional banking services and unit trust business.

Tan Sri Teh said that, “The Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual Berhad (“Public Mutual”), continued to register commendable performance during the quarter under review with a pre-tax profit growth of 9.8% compared to the corresponding quarter in 2012. With a total net asset value of RM55.5 billion and 101 funds under its management, Public Mutual remained as the market leader in the private unit trust business, capturing 40.5% of the overall market share as at the end of February 2013, with 59.7% and 53.5% market share in the equity and Islamic unit trust fund sectors respectively. To further drive the Group’s unit trust business, Public Mutual will continue to place strong emphasis on building and nurturing its large force of unit trust consultants which is a highly effective distribution channel, to serve its unit trust customer base that has grown to over 2.8 million accounts as at the end of March 2013.” 

Prudent Cost Management

The increase in operating expenses in the first quarter of 2013 was mainly attributed to the increase in personnel costs which were in line with the investment in human resources and larger headcount to support business expansion.

Tan Sri Teh commented that, “Being appreciative of the importance of ensuring cost efficiency in enhancing shareholders’ return, the Public Bank Group adopted prudent cost management discipline by actively promoting higher levels of productivity in its resources, enhancing efficiency in processes and ensuring optimum utilisation of infrastructures. This has resulted in the Group being able to maintain an efficient cost-to-income ratio of 31.9% as compared to the banking industry’s average cost-to-income ratio of 46.6%.”

Uphold Asset Quality

“Despite the consistent double-digit growth in its loan portfolio year after year, the Public Bank Group continued to sustain its strong asset quality with gross impaired loan ratio of 0.7% as at the end of March 2013, significantly lower than the Malaysian banking industry’s gross impaired loan ratio of 2.0%.” said Tan Sri Teh.

The strong asset quality is a result of the Group 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.

Tan Sri Teh added that, “The Public Bank Group's loan loss coverage ratio stood at 123.9%, which was higher and more prudent than the banking industry's coverage ratio of 98.5%.”

Stable and Healthy Capital Position

The Public Bank Group’s capital position remained healthy, with its common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio standing at 8.2%, 10.1% and 13.0% respectively as at the end of March 2013.

Tan Sri Teh emphasised that, “We will continue to assess the Group’s capital requirements to ensure that it is well positioned to support the Group’s business growth strategies by balancing the need for higher capital retention in view of the requirements under the Basel III capital regime whilst maximising our shareholders’ return.”

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.

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder and Chairman of Public Bank
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In conjunction with Public Bank’s 47th Annual General Meeting held on 18 March 2013, 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 2012.

Performance Review

Tan Sri Teh said, “The Public Bank Group achieved another new milestone in 2012 with a record pre-tax profit of RM5.10 billion, crossing the RM5 billion mark for the first time. The Group’s net profit for the full year amounted to RM3.87 billion.”

Tan Sri Teh highlighted that, “As a result of the retrospective application of MFRS 139, the comparative pre-tax profit and net profit for 2011 were restated upwards by  RM267 million and RM200 million respectively to RM4.88 billion and RM3.68 billion respectively. The Group’s pre-tax profit and net profit for 2012 were 4.6% and 5.0% higher than the restated corresponding profits in 2011. Excluding the effects of these restatements, the Group’s pre-tax profit and net profit for 2012 increased by 10.7% and 11.1% respectively.”  

Tan Sri Teh further added, “In 2012, the Public Bank Group’s gross loans grew by 11.3% to RM197.8 billion as at the end of 2012, with domestic loans growing at a faster pace of 12.5%. The loan growth was funded mainly by customer deposits which also reported a steady growth of 12.3%, with domestic customer deposits increasing by 13.0% in 2012.”

Tan Sri Teh highlighted, “As a result of the Group’s consistently strong performance, a second interim single-tier dividend of 30 sen was paid on 5 March 2013. Together with the first interim single-tier dividend of 20 sen which was paid in August 2012, the total dividend for 2012 was 50 sen.” The total dividend paid for 2012 amounted to RM1.75 billion and represented a total payout of 45.3% of the Group’s net profit for 2012.

Healthy Loan Growth

Lending to the retail banking segment remained the main strategic focus of the Public Bank Group with concentration in lending to small- and medium-sized enterprises (“SMEs”), financing of residential properties and purchase of passenger vehicles. As at the end of 2012, the Group’s retail loan portfolio collectively accounted for 85.9% of its total loans.

Tan Sri Teh said, “The Public Bank Group sustained its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 19.1%, 33.7% and 26.4% respectively as at the end of 2012.”

Excellent Asset Quality

“The Public Bank Group continued to maintain its top ranking position in terms of asset quality amongst its domestic peers with gross impaired loan ratio of 0.7% as at the end of 2012, from 0.9% a year ago, which was approximately one-third that of the industry average of 2.0%.” commented Tan Sri Teh. The Group’s asset quality has consistently remained the best in the banking industry, a testimony to the Group’s prudent credit policies and effective credit assessment, approval, monitoring as well as prompt and timely recovery efforts.

“The Public Bank Group's loan loss coverage ratio stood at 126.0%, which was higher and more prudent than the banking industry's coverage ratio of 100.9% despite the write-back of excess collective assessment allowances due to the full adoption of MFRS 139.” Tan Sri Teh further added.

Steady Customer Deposit Growth

Tan Sri Teh said, “The Public Bank Group’s funding position remained robust, supported by its strong retail franchise and large domestic depositor base of over five million customers. Domestic customer deposits grew by 13.0%, higher than the domestic banking industry’s growth of 8.4%.” The strong domestic deposit growth was mainly due to healthy expansion of fixed deposits and low cost demand and savings deposits of 14.4%, 14.0% and 8.2% respectively, outperforming the banking industry’s growth rates of 8.8%, 12.1% and 7.0% respectively.

The Group’s net loan to deposit ratio remained stable and healthy at 87.1% as at the end of 2012.

International Operations

In 2012, the Public Bank Group’s overseas operations contributed 6.4% of the Group’s overall pre-tax profit. Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank, reported a strong pre-tax profit growth of 22.2% from RM88.9 million in 2011 to RM108.5 million in 2012. Campu Bank achieved loans and deposit growth of 11.1% and 17.6% respectively in 2012 and continued to be one of the top three largest banks in Cambodia.

The Public Bank Group remains committed to expand its overseas business. As at the end of 2012, the Group has 122 overseas branches, with 83 branches in Hong Kong, 3 branches in Shenzhen in the People’s Republic of China, 24 branches in Cambodia, 7 branches in Vietnam, 4 branches in Laos, a branch in Sri Lanka and 3 representative offices in Shanghai, Shenyang and Taipei.

Sustaining Growth in Fee-based Income

The Public Bank Group continued to grow its fee-based income from unit trust, bancassurance and transactional banking services to further enhance the Group’s revenue stream.

“The Group’s unit trust management business, which is undertaken by its wholly-owned subsidiary, Public Mutual, achieved a pre-tax profit growth of 15.6% in 2012. Public Mutual remained the market leader in the private unit trust business with 100 funds under its management. Total net asset value of funds under management grew strongly by 22.0% from RM44.8 billion as at the end of 2011 to RM54.6 billion as at the end of 2012. Public Mutual captured 40.8% of the overall market share, with 60.1% and 53.2% market share in the equity and Islamic unit trust fund sectors respectively.” Tan Sri Teh commented.

On the bancassurance front, ING reached an agreement with AIA Group Ltd (“AIA”) for the sale of ING’s insurance operations in Malaysia to AIA on 11 October 2012. With the completion of the sale, the Public Bank Group’s strategic bancassurance tie-up with the enlarged AIA will continue and is expected to contribute positively to the Group’s long-term fee-based revenue.

Healthy Capital Position

The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.8% and 14.1% respectively as at the end of 2012. The Group’s Common Equity Tier 1 capital ratio calculated based on Basel III requirements stood at 8.5% as at the end of 2012.

Tan Sri Teh further commented, “The Group is well positioned to meet the new regulatory requirements under Basel III. The Group will continue to assess its capital requirements to ensure that it is sufficient to support the Group’s business growth strategies by balancing the need for higher capital retention in view of the implementation of Basel III standards and maximising its shareholders’ return.”

Second Largest Listed Company by Market Capitalisation

Tan Sri Teh highlighted, “Since the end of 2008, Public Bank’s market capitalisation has increased by 85% to RM57.52 billion as at the end of 2012. Public Bank is currently the 2nd largest listed company on Bursa Malaysia and remains the largest non-government-linked company by market capitalisation.”

Superior Returns to Shareholders

The Public Bank Group continues to deliver superior returns to its shareholders, both over the medium-term and the long-term.

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 have 135,398 Public Bank shares worth RM2.17 million based on the current share price of Public Bank (Local) shares of RM16.00. In addition, he would have received a total gross dividend of RM843,836. This translates into a total value of RM3.0 million representing remarkable compounded annual rate of return of 19.5% for each of the 45 years since 1967.”

“Over the medium-term of 5 years since the beginning 2008, an investor would have enjoyed a total return of 79.3% or an annual rate of return of 13.3% over the 5-year period."

Over the 12-month period from 1 March 2012 to 1 March 2013, a Public Bank shareholder would have enjoyed a total return of 21.3% taking into account the 50 sen dividend declared for 2012 and the share price appreciation during the period.” said Tan Sri Teh.

Outstanding KPIs

Tan Sri Teh commented, “Public Bank continued to be in the forefront amongst the 5 largest banking groups in Malaysia in terms of profitability, cost efficiency and asset quality with the highest net return on equity of 24.5% and lowest gross impaired loan ratio of 0.7% as well as lowest cost to income ratio of 30.5%.”

When benchmarked against leading banks in the Asia Pacific region, Public Bank also ranks amongst the top in terms of return on equity and cost efficiency.

Tan Sri Teh said, “For 2013, the Group targets to sustain net return on equity of more than 20% and cost to income ratio of below 32% whilst maintaining gross impaired loan ratio of below 1%.”

Corporate Responsibility

To further contribute to the environment’s sustainability, the Public Bank Group adopted the “green” concept in the construction of Public Mutual Berhad’s new head office building in Kuala Lumpur, which incorporates a host of green features in the design and layout of the building.

Other key corporate responsibilities initiatives undertaken included providing continued financial assistance for the setup of a dormitory to house families of needy patients undergoing treatment at Institute Jantung Negara, the continued support of the Universiti Tunku Abdul Rahman in its research studies in the field of banking and finance and the contribution of two mobile police stations to the Royal Malaysian Police.

Tan Sri Teh explained, “The Public Bank Group continued to support SMEs, which play a crucial role in the economic growth of the country by 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 tax payments totalling RM4.22 billion for the past 5 years.”

An Award Winning Bank

Tan Sri Teh highlighted that, “In 2012, the Public Bank Group was recognised with a total of 36 awards and recognition of excellence from various international organisations and publications.” The awards received include:

Corporate Governance Awards

Tan Sri Teh said, “Public Bank Group’s pursuit of excellence in good corporate governance and its long entrenched culture of transparency and integrity continued to be recognised with the receipt of awards from respected international publications.”

Public Bank was awarded the Corporate Governance Asia’s 2nd Asian Excellence Recognition Awards 2012 for Best Corporate Social Responsibility, Best Investor Relations by a Malaysian company and the Corporate Governance Asia Recognition Award 2012.

Public Bank was also awarded the Alpha Southeast Asia’s Institutional Investor Corporate Awards 2012 for Strongest Adherence to Corporate Governance.

Outlook

On the outlook for 2013, Tan Sri Teh viewed, “We are optimistic that the domestic economy, in which the Group largely operates, will continue to be stable and supportive of growth that will mainly be spurred by domestic demands. However, intense competition for both loans and deposits market share is expected to continue to erode net interest margin.”

On the strategic directions for the Public Bank Group, Tan Sri Teh remarked that, “The Public Bank 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 to support long term sustainable growth. 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 deliver continuous revenue growth. The Group is expected to maintain its earnings momentum and record satisfactory performance in 2013.”

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder and Chairman of Public Bank
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This campaign is open to individual customers for both personal and joint accounts.  With a minimum placement amount of RM10,000, customers will be eligible to participate in the campaign and enjoy the campaign benefits.  Of the total placement amount, 80% will be deposited into a 6-Month PLUS Fixed Deposit to enjoy the special interest rates of up to 4.88% p.a. while placing the balance 20% into the PLUS Savings Account.

The special interest rates offered under this campaign is for a limited period only i.e. until 31 March 2013 or upon reaching the overall target limit, whichever is earlier.  The maximum amount of placement per customer is limited at RM500,000 so that more customers will be able to enjoy the special interest rates.

To find out more about this Campaign, 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 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 achieved yet another milestone financial results in 2012 with a record pre-tax profit of RM5.10 billion, surpassing the RM5 billion mark for the first time; and net profit attributable to shareholders of RM3.87 billion.”

Tan Sri Teh highlighted that, “As a result of the retrospective application of MFRS 139, the comparative pre-tax profit and net profit for 2011 were restated upwards by RM267 million and RM200 million to RM4.88 billion and RM3.68 billion respectively. The Group’s pre-tax profit and net profit for 2012 were 4.6% and 5.0% higher than the restated corresponding profits in the prior year. However, excluding the effects of such restatement, the Group’s pre-tax profit and net profit for 2012 increased by 10.7% and 11.1% respectively.”

The Group’s balance sheet position remained strong and continued to be supportive of loans growth. Tan Sri Teh said that “Maintaining upward momentum, the Group’s gross loans grew by 11.3% during the year to RM198 billion as at the end of 2012, with domestic loans growing at a faster pace of 12.5% over the same period. The loan growth were funded mainly by customer deposits which also recorded a steady growth of 12.3%, with domestic customer deposits increasing by 13.0% in 2012, resulting in a stable and healthy loan-to-deposit ratio of 87.1% as at the end of 2012.

Despite the strong loan growth in 2012, the Group’s loan impairment allowance declined by 14.5% with an improved gross impaired loan ratio of 0.7%. The Group’s strong asset quality was attributed to its consistent adoption of stringent credit policies and effectiveness in credit assessment, approval, monitoring and recovery processes.”

Tan Sri Teh reiterated that, “The Public Bank Group continued to be in the forefront amongst its banking peers in Malaysia in terms of recording the highest net return on equity of 24.5% and maintaining the lowest gross impaired loan ratio of 0.7% as well as lowest cost-to-income ratio of 30.5%.”

Tan Sri Teh further added that “In view of the Group’s consistently strong performance in 2012, we are pleased to announce that the Board of Directors has declared a second interim single-tier dividend of 30 sen. Together with the first interim single-tier dividend of 20 sen which was paid in August 2012, the total dividend for 2012 is 50 sen.” The total dividend paid and payable for 2012 amounts to RM1.75 billion and represents a total payout of 45.3% of the Group’s net profit for 2012.

Sustaining Organic Growth in Loans and Customer Deposits

The Public Bank Group sustained its strong loan growth momentum of 11.3% in 2012. In particular, the domestic loans grew at a stronger pace of 12.5% compared to the domestic banking industry’s growth of 10.4%.

Lending to the retail banking segment remained the main strategic focus of the Public Bank Group with concentration in lending to small- and medium-sized enterprises, financing of residential properties and purchase of passenger vehicles. As at the end of 2012, the Group’s retail loan portfolio collectively accounted for 85.9% of its total loans.

Tan Sri Teh commented that, “With the continuous support of our valued customers, the Public Bank Group not only managed to sustain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing, but also recorded increase in market share for these key lending segments to 19.1%, 33.7% and 26.4% respectively. The Group’s lending to small- and medium-sized enterprises also recorded commendable growth of 22.2% in 2012.”

“The Public Bank Group’s funding position remained robust, supported by its strong retail franchise and large domestic depositor base of over five million customers. Domestic customer deposits grew by 13.0%, higher than the domestic banking industry’s growth of 8.4%.” said Tan Sri Teh. The strong domestic deposit growth was mainly attributed to steady inflows of fixed deposits and low cost savings and current accounts (“CASA”), which grew by 14.4% and 11.6% respectively, outperforming the Malaysian banking industry’s 8.8% growth in fixed deposits and 10.3% growth in CASA.

In order to create greater convenience for its large customer base as well as to tap on new business opportunities, the Group continued to expand its branch network at strategic locations. In 2012, the Group opened 3 new branches and increased its domestic branch network to 255 currently.

Maintaining Growth in Fee-based Income

The Public Bank Group continued to grow its fee-based income, targeting fee income from unit trust, bancassurance and transactional banking services to further enhance the Group’s revenue stream.

“The Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual Berhad (“Public Mutual”), continued to demonstrate resilient performance with a pre-tax profit growth of 15.6% in 2012. Public Mutual remained as the market leader in the private unit trust business with 100 funds and total net asset value of RM54.6 billion under its management. Public Mutual captured 40.8% of the overall market share as at the end of the year, with 60.1% and 53.2% market share in the equity and Islamic unit trust fund sectors respectively. In November 2012, Public Mutual launched six private retirement scheme (PRS) funds comprising three conventional series and three Shariah-based series as one of the approved pioneer providers for the first set of the PRS in Malaysia. This signified another milestone achievement for the Group to participate in an inaugural national initiative.” Tan Sri Teh commented.

Practising cost discipline

Tan Sri Teh highlighted that, “The Public Bank Group remained as the most cost-efficient bank in Malaysia with its cost-to-income ratio of 30.5% in 2012 as compared to the banking industry’s average cost-to-income ratio of 46.0%.

The Public Bank Group places significant emphasis on cost discipline, particularly in this challenging and competitive operating environment. By embracing its belief that cost management can be achieved through efficiency, the Group will continuously review and upgrade the skills of its staff and improve its business processes to further enhance its productivity.”

Upholding Asset Quality

“The Public Bank Group continued to uphold its strong asset quality fortress with further improvement in its gross impaired loan ratio from 0.9% as at beginning of the year to 0.7% as at the end of 2012, significantly lower as compared to the Malaysian banking industry’s gross impaired loan ratio of 2.0%.

The Group takes pride in being the Malaysian banking group with the lowest impaired loan ratio, despite the consistent double-digit growth in its loan portfolio year after year.” commented Tan Sri Teh.

The strong asset quality is a result of the Group’s consistency in embracing a combination of both preventive and proactive measures in its lending activities, such as setting strict and prudent credit policies, advocating strong discipline and “know your customer” culture in the credit assessment and approval process, and ensuring timely collection, efficient restructuring and rescheduling processes, as well as rehabilitation of impaired loans.

New impaired loan formation against average total gross loans remained low at 0.35% in 2012 and the net credit charge improved from 0.20% in 2011 to 0.15% in 2012.

Tan Sri Teh added that, “The Public Bank Group's loan loss coverage ratio stood at 126.0%, which was higher and more prudent than the banking industry's coverage ratio of 100.9% despite the write-back of excess collective assessment allowances due to the full adoption of MFRS 139.”

Overseas Operations

For the year ended 2012, the Public Bank Group’s overseas operations contributed 6.4% of the Group’s overall pre-tax profit. Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank, reported a strong growth in pre-tax profit of 22.2% from RM88.9 million in 2011 to RM108.5 million in 2012 and remains as one of the top three largest banks in Cambodia.

Ensuring Healthy Capital Position

The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.8% and 14.1% respectively as at the end of 2012 despite the redemption of its USD400 million Subordinated Notes in the first half of 2012.

“We will continue to assess the Group’s capital requirements to ensure that it is well positioned to support the Group’s business growth strategies by balancing the need for higher capital retention in view of the implementation of Basel III standards and maximising its shareholders’ return.” Tan Sri Teh emphasised.

Group’s Prospects

“The recovery of the global economy remained slow with the major Asian economies also showing signs of growth moderations. While the Malaysian economy is not insulated from the impact of unfavourable external conditions, we are optimistic that the domestic economy, in which the Group largely operates, will continue to be stable and supportive of growth that will predominantly be spurred by domestic demands. On the Malaysian banking industry landscape, intense competition for both loans and deposits market share is expected to continue to erode net interest margin.”  viewed Tan Sri Teh.

On the strategic directions for the Public Bank Group, Tan Sri Teh remarked that, “Our strategies remain unchanged. The Public Bank 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 to support long term sustainable growth. 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 deliver continuous revenue growth.

The Group is expected to maintain its earnings momentum and record satisfactory performance in 2013.”

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