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Public Bank Group Posted Pre-tax Profit of RM1.73 Billion in the First Quarter of 2020

For Immediate Release

22 May 2020

Public Bank Group Posted Pre-tax Profit of RM1.73 Billion in the First Quarter of 2020
The Public Bank Group recorded a pre-tax profit of RM 1.73 billion in the first quarter of 2020, representing a 5.1% decline as compared to RM1.82 billion achieved in the corresponding period last year. Net profit attributable to shareholders was 5.7% lower at RM 1.33 billion. As a result, the Group posted a lower net return-on-equity of 12.5%.
Tan Sri Dato’ Sri Dr. Teh Hong Piow, the Founder, Chairman Emeritus, Director and Adviser of Public Bank, said today, “The global economy started 2020 with major challenges stemming from the Covid-19 pandemic. Downside pressure on the economy was further compounded with the steep fall in global oil prices. Coupled with the reductions in Overnight Policy Rate which have weighed on net interest margins, domestic banks faced heightened earnings pressure in the first quarter of 2020.”
Tan Sri Teh added, “However, the Public Bank Group maintained its resilient fundamentals, as reflected in the Group’s stable gross impaired loan ratio of 0.5% and efficient cost-to-income ratio of 35.7% in the first quarter of 2020.”
Continued Growth in Loans and Deposits
Although economic activities were affected by the outbreak and its containment measures, the Public Bank Group was able to achieve continued loan and deposit growth in the first quarter of 2020, albeit at more moderate growth rates.
The Group has always been proactively supporting the financing needs of consumers and businesses. In the first quarter of 2020, the Group recorded an annualised rate of 2.9% growth in total loans, supported by residential properties financing, commercial property financing, and passenger vehicle financing.
On deposit-taking, the Public Bank Group’s total customer deposits posted an annualised growth rate of 2.0%. 
Sustained Growth in Non-interest Income
In the first quarter of 2020, the Public Bank Group’s non-interest income continued to be supported by its unit trust related income, banking fee income, investment income and brokerage income.
Tan Sri Teh added, “The Public Bank Group’s unit trust business, managed by its wholly-owned subsidiary, Public Mutual, remained the major contributor of the Group’s non-interest income. As at 31 March 2020, Public Mutual maintained its market leadership in the retail private unit trust industry, with a market share of 34.3%. It managed a total of 158 unit trust funds with a net asset value of RM78.4 billion.” 
Prudent Cost Management
Despite that the net interest margins were under pressure, the Public Bank Group continued to record an efficient cost-to-income ratio. In the first quarter of 2020, the Group’s cost-to-income ratio stood at 35.7%, which was significantly better than the domestic banking industry’s cost-to-income ratio of 44.7%.
Tan Sri Teh highlighted, “Rising costs are increasingly putting pressure on profitability.  However, the Public Bank Group continues to stand out amongst its peers in cost efficiency. With the current economic challenges and the moderating revenue growth, the Group has placed greater focus on broad-based cost efficiency to protect its profitability.”  
Sustained Strong Asset Quality
The Public Bank Group’s gross impaired loan ratio stood at 0.5% as at the end of March 2020, reflecting its stable asset quality despite the significant challenges in the operating environment.
Tan Sri Teh commented, “The Public Bank Group’s stable asset quality was underpinned by its prudent risk management as well as lending policies and practices, along with its proactive efforts to engage with borrowers on loan recoveries.”
Tan Sri Teh further added, “In the face of the current extremely difficult economic condition, the Group has been actively engaging and assisting customers who encounter constraints in cash flows. In line with Bank Negara Malaysia’s directive, the Group has been offering 6-month loan moratorium as well as loan restructuring and rescheduling for borrowers who face cash flow difficulties. These relief measures, coupled with the Group’s prudent lending policy and strong credit risk profile, are expected to continue underpin the Group’s resilient asset quality.”
Further, the Public Bank Group has been maintaining a high loan loss coverage ratio which stood at 131.9% as at the end of March 2020. Including the RM2.0 billion regulatory reserves that the Group had set aside, its loan loss coverage was higher at 261.7%. 
Healthy Capital and Liquidity Position
As at the end of March 2020, the Public Bank Group’s common equity Tier 1 capital ratio stood at 13.3%, Tier 1 capital ratio at 13.3% and total capital ratio at 16.5%.
Tan Sri Teh highlighted, “2020 will be exceptionally challenging and earnings will be under pressure for banks. Nonetheless, the Public Bank Group’s resilient capital position, as well as its strong asset quality and large loan loss reserves, continue to provide a strong buffer to the Group in navigating any challenges.”
Tan Sri Teh further highlighted, “In terms of liquidity management, the Public Bank Group has been constantly managing its funding and liquidity profile diligently to ensure sufficient liquidity buffer is maintained at all times. The Group’s liquidity coverage ratio stood at a healthy level of 135.1% as at the end of March 2020.” 
Group’s Prospect
In 2020, the Covid-19 pandemic and its impact on world economies, as well as the uncertainty in global oil prices are likely to continue to pose downside risks to the economy. However, proactive relief measures taken by the Government as announced in the Prihatin Rakyat Economic Stimulus Package and Bank Negara Malaysia’s financial and monetary measures will certainly mitigate the pressures on the country’s economic growth.
Tan Sri Teh concluded, “The operating environment for the banking industry is poised to be more challenging this year. With the extremely difficult economic conditions in 2020 and the reductions in Overnight Policy Rate, banks will face higher earnings pressure this year. Under the prevailing weaknesses of the current economy and the uncertainties arising from the still evolving economic landscape, the Public Bank Group will focus on enhancing its core strengths in terms of risk management and productivity. The Group’s strong fundamental and resilience will position the Group in good stead to overcome any challenges, and to pursue further business growth when the economy recovers from the outbreak.”
Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder, Chairman Emeritus, Director and Adviser of Public Bank

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