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Public Bank Group Achieved Pre-Tax Profit of RM3.55 Billion for the First Half of 2019 and Declared 33 sen First Interim Dividend

For Immediate Release

14 August 2019

Public Bank Group Achieved Pre-Tax Profit of RM3.55 Billion for the First Half of 2019 and Declared 33 sen First Interim Dividend
 
For the first half year ended 30 June 2019, the Public Bank Group recorded pre-tax profit of RM3.55 billion. Net profit attributable to shareholders stood at RM2.74 billion, as compared to RM2.80 billion recorded in the previous corresponding period.
 
Tan Sri Dato’ Sri Dr. Teh Hong Piow, the Founder, Chairman Emeritus, Director and Adviser of Public Bank said, “The economic and banking environment was increasingly challenging. In addition to this, arising from the reduction of Overnight Policy Rate (“OPR”) in May 2019, domestic banks were faced with a decline in net interest margins which affected the profit for the half year ended 30 June 2019. However, excluding the negative effect of the OPR reduction, the Public Bank Group was able to sustain stable profitability underpinned by its healthy loans and deposits growth, stable asset quality and prudent cost management.”
 
Tan Sri Teh further added, “In the face of increasing challenges from the moderating growth of the domestic banking sector and continued interest margin compression, the Group is of the view that maintaining cost efficiency and preserving strong asset quality is key to long term business sustainability.”  With this strategic focus, the Group continued to sustain a stable gross impaired loans ratio of 0.5% and efficient cost-to-income ratio of 34.2%, leading to continued resilient net return on equity of 13.6% for the first half of 2019.
 
In view of the Public Bank Group’s stable performance, Tan Sri Teh announced that, “For 2019, the Board of Directors has declared a first interim dividend of 33 sen per share, translating into a total dividend payout of RM1.28 billion. The first interim dividend will be paid on 10 September 2019 based on the dividend entitlement date of 29 August 2019.”
 
Sustained Growth in Loans and Deposits
 
In the first half of 2019, the Public Bank Group’s total loans grew favourably by an annualised rate of 4.0% to RM323.7 billion. Domestic loans, which covered more than 90% of the Group’s loan portfolio, grew by an annualised rate of 4.3%, which was higher than the banking system’s annualised loan growth of 2.7%. The expansion in the Group’s loan portfolio was mainly attributed to the healthy growth in its core financing business in residential and commercial properties.
 
On funding side, the Public Bank Group achieved a healthy deposit growth, registering an annualised growth rate of 5.9% to RM349.1 billion. Domestic deposits grew favourably by an annualised rate of 5.7% in the first half of 2019, as compared to the banking system’s annualised deposit growth of 1.6%.
 
Tan Sri Teh said, “In expanding its deposit base, the Public Bank Group will continue to balance between deposit growth and funding cost. As at end of June 2019, the Group’s funding position remained stable with a healthy gross loan to fund and equity ratio of 78.9%.”
 
Continued Growth in Non-interest Income
 
In the first half of 2019, the Public Bank Group achieved 8.1% growth in non-interest income, mainly arising from higher investment income and higher banking fee income.
 
Tan Sri Teh added, “The Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual, continued to be the largest contributor, making up 35% of the Group’s total non-interest income. In the first half of 2019, despite the volatility and uncertainties in the financial market, Public Mutual continued to lead the domestic private unit trust industry with a retail market share of 36.4%. As at the end of June 2019, Public Mutual managed a total of 151 funds, with its total net asset value increasing to RM84.4 billion from RM78.7 billion as at the end of 2018.”
 
Prudent Cost Management
 
In the first half of 2019, despite the challenges stemming from revenue growth pressure and margin compression, the Public Bank Group was able to sustain a low cost-to-income ratio of 34.2%, as compared to the banking industry’s average cost-to-income ratio of 44.6%.
 
Tan Sri Teh highlighted, “The Public Bank Group’s effective management of cost efficiency has helped to cushion the impact of interest margin pressure. The Group’s long term track record of prudent cost management will also continue to be its competitive advantage when rising cost pressure is expected to persist.”
 
Upholding Strong Asset Quality
 
As at end-June 2019, the Public Bank Group continued to achieve a low gross impaired loan ratio of 0.5%, well below the banking industry’s gross impaired loan ratio of 1.6%.   
 
Tan Sri Teh highlighted, “The Public Bank Group’s strong asset quality continued to retain public confidence amid the challenging economic environment. Notwithstanding this, the Group sustained a high loan loss coverage of 116.0%, which was well above the banking industry’s loan loss coverage of 91.1%. Including additional regulatory reserves set aside of RM1.9 billion, the Group’s loan loss coverage would be higher at 226.5%.”
 
Overseas Operations
 
For the first half of 2019, overseas operations contributed 10.5% to the Public Bank Group’s pre-tax profit, mainly contributed by Public Financial Holdings Limited Group in Hong Kong and Cambodia Public Bank Plc (“Campu Bank”).
 
Tan Sri Teh added, “For the overseas business, the Public Bank Group will continue to focus on growing its retail banking business particularly tapping on the growing opportunities in Indo-China. Besides Cambodia, the Group is actively expanding its branch network in Vietnam. For the past two years, the Group had opened 11 new branches in Vietnam, and the Group is targeting to further expand its foothold in the country to 40 branches in the next three years.”
 
Healthy Capital Position
 
As at the end of June 2019, the Public Bank Group’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio were at 13.2%, 13.6% and 16.0% respectively.
 
Tan Sri Teh said, “The Public Bank Group’s capital base stayed resilient. The Group has continued to place great emphasis on sustaining solid capital position and balance sheet strength, to support its continued business growth.”

Group’s Prospects
 
Going forward, while the Malaysian economy is expected to remain on a steady path supported by domestic demand, downside pressure including the moderating global economic growth and considerable headwinds, mainly from the external front, will continue to negatively impact business and financial market sentiment.

Tan Sri Teh concluded, “Against this backdrop, the Public Bank Group will remain on a cautious stance in growing its business. While the strong PB Brand will continue to place the Group in good stead to seize business opportunities, the Group will continue to closely monitor the changes in the operating environment, and undertake appropriate measure to fine-tune its operational strategies for continued business growth. In addition, as the Group continues to sustain its fundamental strength, it will proactively seek to develop new initiatives, such as banking digitalisation as well as innovative and distinctive financial products, for long term business growth.”

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

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