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Manchester United One Glorious Team, Two Distinct Cards

For Immediate Release

18 January 2010

Manchester United One Glorious Team, Two Distinct Cards

Good things come in pairs. Public Bank Berhad proved so with the recent launch of the brand new Manchester United Visa Debit Card and the new card design for Manchester United Visa Credit Card. As the tag line aptly describes "One Glorious Team, Two Distinct Cards", the new Manchester United Visa Debit Card and Visa Credit Card will definitely appeal to all Manchester United supporters in Malaysia.

Public Bank understands that Manchester United supporters' passion for their favourite team knows no boundaries, and therefore endeavours to provide greater rewards and privileges to all passionate Manchester United fans. While the Manchester United Visa Credit Card caters to adults age 21 years old and above with a minimum annual income of RM18,000, the Manchester United Visa Debit Card opens the door to younger fans age 12 years old and above with no income requirement.

It is ideal for Manchester United fans who seek further affiliations with the prestigious club, while they enjoy unique privileges which other cards cannot provide. Manchester United supporters who subscribe to the Manchester United Visa Credit Card and/or Manchester United Visa Debit Card will get to enjoy a host of exclusive, money-can't buy Manchester United memorabilias and experiences.

In line with the new card launch, a limited edition Manchester United water bottle awaits new Manchester United Visa Credit Cardholders with minimum RM200 retail purchase within the first month of cardmembership, while Manchester United Visa Debit Cardholders can expect a limited edition Manchester United mouse pad with minimum RM100 retail purchase within the first month of cardmembership. Both offers are on first come first served basis.

During the promotional period from 1 January to 30 June 2010, Manchester United Cardholders stand a chance to own an exclusive piece of Manchester United player signed memorabilia. Public Bank is giving away 10 Manchester United Individual Player Signed Home Jerseys, 20 Player Signed Pennants and 10 action prints every month under its Monthly RedRewards Contest and 10 Manchester United Team Signed Jerseys and Manchester United Individual Player Signed Home Jerseys respectively under its Ultimate RedRewards Contest to Cardmembers with the highest numbers of transactions using the Manchester United Cards.

Show your support of the Club and enjoy the endless cardmember benefits of the Manchester United Visa Credit Card and Manchester United Visa Debit Card. To apply for the card, please approach any Public Bank branches nationwide or online at www.pbebank.com.
 
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Public Bank Launches Chinese Yuan Foreign Currency Accounts

For Immediate Release

15 January 2010

Public Bank Launches Chinese Yuan Foreign Currency Accounts

The Public Bank is pleased to announce that Public Bank has entered into a business arrangement with Bank of China (Malaysia) Berhad to offer Chinese Yuan Fixed Deposits ("CNY FD") and Chinese Yuan Current Accounts ("CNY CA") to the public so as to provide more currency options for customers of Public Bank's foreign currency deposit accounts services.

The CNY FD and CNY CA are offered to individuals aged 18 years and over. All eligible Malaysian and non-resident individuals are allowed to open a CNY FD and/or CNY CA at any of Public Bank's branches nationwide. Interest on the CNY FD currently ranges from 0.70% p.a. to 0.80% p.a. depending on the tenure and 0.40% p.a. on the CNY CA. For the placement of CNY FD, the initial minimum deposit amount is RM10,000 equivalent in CNY for tenures of 1, 3, 6 and 12 months, whilst for the CNY CA, the initial minimum deposit amount is USD1,000 equivalent in CNY.

In conjunction with the launch of the CNY FD and CNY CA, Public Bank will run a promotional campaign until 31 March 2010 to create awareness and publicity for the new CNY FD and CNY CA. During this promotional campaign period, customers are offered additional interest rates of up to 2% p.a. and preferential foreign exchange rates for eligible customers. In addition, a free limited-edition mug will be given to early bird customers.

With the People Republic of China's move to liberalise the use of the Chinese Yuan in the international market, Public Bank anticipates good response from the public for these new products.

For more information on this two new products, customers may visit their nearest Public Bank branch, call free-phone at 1-800-22-9999 during office hours, or visit Public Bank's website at www.pbebank.com.

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Public Bank Achieves 3% Growth In Operating Net Profit And 10.7% Loan Growth In The First Nine Months Of 2009

For Immediate Release

15 October 2009

Public Bank Achieves 3% Growth In Operating Net Profit And 10.7% Loan Growth In The First Nine Months Of 2009

The Public Bank Group today announced a net profit attributable to shareholders of RM1.84 billion for the first nine months of 2009, on the back of a strong 9% growth in net interest and financing income. For the corresponding period in 2008, the Group's net profit of RM1.93 billion included a significant one-off goodwill income in respect of the bancassurance distribution alliance with ING Asia/Pacific Limited ("ING"). Excluding this one-off income, the Group's underlying operating net profit improved by 3% over the same period in 2008.

The higher net interest and financing income, despite the negative impact arising from the reduction in Overnight Policy Rate ("OPR") on three occasions since November 2008, was attributable to the sustained high rate of growth in both quality loans as well as customer deposits whilst asset quality remained stable. Other operating income increased by 10% to stand at RM1.03 billion in the first nine months of 2009 after excluding the RM200 million one-off goodwill income from ING in 2008. The growth was mainly due to higher investment income from securities held, as well as higher foreign exchange profit during the nine months ended 30 September 2009.

The Public Bank Group's quarterly net profit in the first nine months of 2009 has shown a consistently upward trend with net profit of RM589 million in the first quarter, growing by 3.6% to RM611 million in the second quarter, and increasing further by 4.6% to RM639 million in the third quarter.

The Public Bank Group achieved a strong annualized loans growth and core deposit growth of 14.3% and 19.5% respectively, significantly exceeding the banking system's annualized growth of 6.8% for loans and 6.3% for core customer deposits. The Group's non-performing loans ("NPL") ratio remained stable at below 1.0%.

Highlights of the Public Bank Group's Performance

  • Net profit attributable to shareholders was RM1.84 billion for the nine months ended 30 September 2009 as compared to RM1.93 billion in the previous corresponding period. Excluding the one-off goodwill income from ING in 2008, the Group's underlying operating net profit increased by 3% as compared to the corresponding period last year.
  • Annualised net return on equity ("ROE") stood at 25.5%.
  • Cost to income ratio remains efficient at 34.6%.
  • Earnings per share ("EPS") was 53.7 sen, showing an uptrend on a quarter-to-quarter comparison of 17.5 sen in the first quarter, 17.7 sen in the second quarter, and 18.5 sen in the third quarter of 2009.
  • Net profit of RM639 million for the third quarter of 2009 represents a strong growth of 4.6% as compared to RM611 million achieved in the second quarter of 2009.
  • Total assets expanded by RM12.9 billion or 6.6% during the current period to stand at RM209 billion as at the end of September 2009.
  • Total loans and advances increased to RM133.6 billion as at the end of September 2009, representing a growth of 10.7% for the nine-month period to 30 September 2009, with the Group's domestic market share for loans and advances rising to 15.8% as at August 2009, from 14.8% as at the end of 2008.
  • Total customer deposits grew by 12.6% during the first nine months of 2009 to stand at RM182.7 billion as at the end of September 2009.
  • Core customer deposits achieved a strong growth of 14.6% for the first nine months of 2009 to stand at RM128.8 billion as at the end of September 2009, leading to an increase in the Group's market share of core deposits to 15.6% as at August 2009 from 14.7% eight months earlier.
  • Net NPL ratio of the Group remains below 1.0% as at the end of September 2009, significantly lower than the banking industry's net NPL ratio of 2.1% as at August 2009. Loan loss coverage stood at 171% which is almost two times of the banking industry loan loss coverage ratio of 90%.
  • Risk-weighted capital ratio ("RWCR") of the Group remains healthy at 12.7% as at the end of September 2009, despite the early redemption of USD350 million Subordinated Notes in September 2009.

Continued Strong Organic Loan Growth and Increasing Market Share

The Public Bank Group's total loans, advances and financing increased by RM12.9 billion or 10.7% in the nine-month period to RM133.6 billion as at the end of September 2009. This translates to an annualized loan growth rate of 14.3%, which was well above the banking industry's annualized loan growth rate of 6.8%. Consequently, the Group's market share of loans and advances increased further to 15.8% as at the end of August 2009, from 14.8% as at the end of 2008.

"We are on track to achieve the targeted 14% to 15% loan growth for 2009, supported by demand from small- and medium-sized business enterprises and increases in housing loans and motor vehicle hire purchase financing", said Tan Sri Dato' Sri Tay Ah Lek, Managing Director / Chief Executive Officer.

The growth in loans and advances was well distributed, with strong growth in the retail consumer banking sectors for the financing of residential properties and passenger vehicles and commercial lending to small- and medium-sized enterprises ("SMEs"), which collectively accounted for 78% of the Group's loan portfolio as at the end of September 2009. Public Bank's domestic loan approvals and loan applications rose by 17% and 20% respectively in the first nine months of 2009 as compared to the previous corresponding period. Housing loan approvals was particularly strong, recording an increase of 28% during the same period.

In support of the Government's fiscal stimulus efforts and the banking industry's commitment in meeting the needs of SMEs in the more challenging economic environment, particularly in respect of working capital financing, the Public Bank Group actively promoted the Government's Working Capital Guarantee Scheme for its SMEs customers. As a result of these initiatives, a total of RM7.7 billion of new domestic SMEs loans were approved, which accounted for 21% of the Group's total new domestic loans approved of RM36.1 billion for the first nine months of 2009.

Sustained Strong Asset Quality

Public Bank Group's asset quality continued to remain strong. The Group's gross and net NPL ratios stood at below 1% as at the end of September 2009, as compared to the banking industry's gross and net NPL ratio of 3.8% and 2.1% respectively as at August 2009. The Group's annualized credit charge-off rate remained low and stable at 0.29% for the first nine months of 2009.

Public Bank Group's strong asset quality was further complemented by its healthy loan loss coverage ratio of 171% as at the end of September 2009, which was almost twice the coverage ratio of 90% for the banking industry as at the end of August 2009. The increase in the Group's loan loss coverage from 160% as at the end of 2008 was primarily due to additional general allowance set aside for the strong loan growth. The Group's general allowance of RM1.99 billion as at the end of September 2009 was about 2 times of the entire net NPL amount of RM1.09 billion, despite that more than 90% of the NPLs outstanding are secured.

Strong Growth in Customer Deposits

Total customer deposits of Public Bank Group rose by RM20.4 billion or 12.6% to stand at RM182.7 billion as at the end of September 2009, which was mainly supported by growth in its core customer deposits funding base.

Total core customer deposits of the Public Bank Group increased by RM16.4 billion or 14.6% to RM128.8 billion in the nine-month period to 30 September 2009, which was more than 3 times that of the pace of growth of the banking industry's core customer deposits of 4.2% for the first eight months of 2009. Fixed deposits, savings deposits and demand deposits grew by 14.7%, 14.5% and 14.4% respectively in the first nine months of 2009, which boosted the Group's market share of core customer deposits to 15.6% as at the end of August 2009 as compared to 14.7% as at the end of December 2008.

Tan Sri Dato' Sri Tay Ah Lek said that, "the strong core deposits growth reflects the strength of the Public Bank Group's domestic franchise and underscores a stable base for funding the Group's strong loan growth. The stability of our core deposit base is being sustained even in times of economic and financial distress."

The Public Bank Group's overseas operations also contributed to the deposits growth, in particular Public Financial Holdings Group ("PFHG") in Hong Kong and Cambodian Public Bank Plc ("CAMPU Bank"). PFHG and CAMPU Bank registered deposits growth of 15.6% and 53.6% respectively in the first nine months of 2009 as a result of their extensive efforts in growing their respective deposit bases.

Expansion of Wealth Management Products and Services

Public Mutual, Public Bank Berhad's wholly-owned unit trust and fund management subsidiary, delivered strong performance in the first nine months of 2009. Public Mutual's net asset value ("NAV") of funds under management stood at RM33.8 billion as at the end of September 2009, 45% higher than the NAV of RM23.3 billion as at the end of 2008. Consequently, Public Mutual's overall market share of the private sector unit trust management business rose to 44% as at the end of September 2009 from 39% as at the end of 2008. Public Mutual's total unit trust sales of RM6.1 billion during the period showed a rising trend, with sales achievement of RM3.7 billion in the third quarter of 2009, as compared to RM0.7 billion and RM1.7 billion in the first and second quarters of 2009 respectively. The number of account holders in Public Mutual has grown to 2.2 million. Public Mutual's large agency force of over 40,000 unit trust consultants represents a highly potent distribution channel to drive the business of Public Mutual when the market for unit trusts improves further.

The Public Bank Group continued to develop its bancassurance business through significant investment in the infrastructure and continued offerings of new products. The sales of bancassurance products increased by 64% in the nine months to 30 September 2009 as compared to the previous corresponding period. In particular, the sales of the Group's flagship regular premium product, namely the "One Solution Plan", grew by 12 folds during the period. The bancassurance and wealth management sales force currently number 589. In order to provide wider investment options to its customers, Public Bank launched 3 principal protected structured investment products, namely the "PB USA Recovery", the "PB Templeton Global Asian Focus" and the "PB Templeton BRIC" funds in the first nine months of 2009. Despite the difficult market condition, all these new products generated good customer response.

Capital Position Remains Strong

On 22 September 2009, Public Bank fully redeemed its issue of USD350 million 5.625% Subordinated Notes. After the redemption, the Public Bank Group's risk-weighted capital ratio continued to remain strong at 12.7% as at the end of September 2009. At the parent Bank level, the risk-weighted capital ratio and core capital ratio stood at 11.0% and 12.1% respectively.

The adoption of FRS 139 with effect from 1 January 2010 and the adoption of the Basel II Internal Rating Based approach will further strengthen the parent Bank's and the Group's capital ratios going forward.

Group Prospects

Tan Sri Dato' Sri Tay Ah Lek also said that, "as the global recession begins to recede and with recovery on the horizon, the outlook for the banking industry is expected to improve. However, margins continue to be under pressure due to continued intense competition."

The Public Bank Group will continue to pursue its strategy of strong organic business growth, as well as maintain its superior quality loan portfolio and improved productivity. At the same time, the Group will enhance its risk management capabilities and continue to uphold its strong corporate governance culture and practices.

Barring unforeseen circumstances, the Public Bank Group is expected to maintain its earnings momentum and continue to record satisfactory performance for the rest of 2009.

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Public Bank Gives IJN Child Heart Patients Reason to Smile With RM38,000 in Hampers and Cash

For Immediate Release

9 October 2009

Public Bank Gives IJN Child Heart Patients Reason to Smile With RM38,000 in Hampers and Cash

In the spirit of sharing and caring, Public Bank as a socially responsible corporate citizen donated RM30,000 to the Institut Jantung Negara (IJN) Foundation in support of the Foundation's new children's wear line called "Heartthrob Biri", the proceeds from the sales of which would go towards helping poor and needy children undergoing treatment at the Institute.

The cheque amount, being part of the sales proceeds of Public Bank Founder and Chairman Tan Sri Dato' Sri Dr. Teh Hong Piow's biography entitled Teh Hong Piow - A Banking Thoroughbred, was presented by Public Bank's General Manager of Public Affairs Division, En. Razak Dali, to Datin Julini Mohd Ali, Chairman of IJN Foundation's Fundraising and member of the Board of Trustees of IJN Foundation, yesterday at the IJN Hospital.

Public Bank also gave 60 child heart patients a reason to smile in this festive season by sponsoring a hamper and RM50 duit raya for each of these children who are presently undergoing surgical procedures or are recuperating in the intensive care units. Staff from the Bank were on hand to present these goodies to the children at the IJN Paediatric Ward.

The IJN has been a CSR partner of the Bank since 2007, with the Bank donating RM100,000 each year to the IJN Foundation in the past two years to assist financially needy heart patients requiring treatment at the Institute.

The "Heartthrob Biri" children's wear line consists of more than 20 designs of clothes and hand-painted shoes for children ranging from two to 12 years old. The clothes and shoes are sold at an outlet in the IJN Hospital, with prices ranging from RM16-90 to RM50-90.

Public Bank had also hosted a two-day sale from 14 to 15 September 2009 at Menara Public Bank, Jalan Ampang, to promote this line of children's wear to its 2,000-strong staff based at the Bank's headquarters.

As a bank for the public that is committed to excellence, Public Bank aspires to continue playing its nation-building role to enhance the welfare of the community in which it operates in the years to come.
 
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Bringing cheer to the children: Datin Julini and En. Razak presenting a goody bag and duit raya to one of the children at IJN's paediatric ward

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En. Razak presenting the cheque to Datin Julini, accompanied by staff of Public Bank and IJN Foundation

Public Bank Posts 3% Growth In Operating Net Profit And 7.2% Loan Growth In First Half Of 2009

For Immediate Release

20 July 2009

Public Bank Posts 3% Growth In Operating Net Profit And 7.2% Loan Growth In First Half Of 2009

I am pleased to announce that the Public Bank Group achieved a net profit of RM1.2 billion in the first half of 2009 as compared to RM1.3 billion in the corresponding period of 2008 which included a one-off goodwill payment of RM200 million from ING Asia/Pacific Limited ("ING") in January 2008 in respect of the Group's regional bancassurance distribution alliance with ING. Excluding the non-recurring one-off goodwill payment, the Group's underlying operating net profit improved by 3% over the same period in 2008 despite the more challenging operating environment and the negative impact on net interest margin arising from the Overnight Policy Rate ("OPR") reductions between November 2008 and February 2009 totalling 1.50%.

On a quarter-to-quarter comparison, the Group turned in a profit before taxation of RM820 million in the second quarter of 2009, a healthy 10% growth from RM745 million in the first quarter of 2009.

The growth in the Group's half-year profit was mainly due to continued healthy growth in net interest and financing income by RM180 million or 9%, driven by the Group's expanding loan and deposits businesses and sustained strong asset quality, despite the negative impact of the OPR reductions on net interest margin and the lagging effect of deposits re-pricing. The improved net profit performance translates into an annualized net return on equity of 26.0% and earnings per share of 35.1 sen for the first half of 2009.

The Public Bank Group's total gross loans increased by a healthy 7.2% in the first half of 2009, whilst asset quality remained strong with the Group's net NPL ratio capped at below 1%.

In view of the sustained strong performance of the Public Bank Group, the Board of Directors is pleased to declare an interim dividend of 30% less 25% taxation, which will result in a total payout of RM777 million.

Highlights of the Public Bank Group's Performance in the First Half of 2009

  • Net profit attributable to shareholders was RM1.2 billion as compared to RM1.3 billion in the previous corresponding period. Excluding the one-off RM200 million goodwill payment received in January 2008, the Group's underlying operating net profit increased by RM34 million or 3% as compared to the corresponding period last year.
  • Annualised net return on equity ("ROE") stood at 26.0%.
  • Earnings per share ("EPS") was 35.1 sen, with EPS showing an uptrend on a quarter-to-quarter comparison of 17.4 sen in the first quarter of 2009 and 17.7 sen in the second quarter of 2009.
  • Total assets crossed the RM200 billion mark for the first time, standing at RM204.0 billion as at the end of June 2009.
  • Total loans and advances grew by RM8.7 billion or 7.2% in the first six months of 2009, to reach RM129.4 billion as at the end of June 2009, significantly above the banking industry's loan growth of 1.2% for the first five months of 2009.
  • Core customer deposits grew strongly by 11.5% in the first six months of 2009 to stand at RM125.3 billion as at the end of June 2009 as compared to the banking industry's growth rate of 2.9% during the first five months of 2009.
  • As at the end of May 2009, Public Bank's domestic market share of total loans and core customer deposits rose to 15.5% and 15.2% respectively as compared to 14.8% and 14.7% respectively as at 31 December 2008.
  • Net non-performing loans ("NPL") ratio of the Group remained below 1% as at the end of June 2009, significantly lower than the banking industry's net NPL ratio of 2.2% in May 2009. The Group's loan loss coverage of 173% is about twice the banking industry's ratio of 87%, and continues to be the highest and most prudent in the Malaysian banking industry.
  • The Group's risk-weighted capital ratio ("RWCR") rose to 13.9% as at the end of June 2009 from 13.1% as at the end of 2008, after deducting the interim dividend for 2009.
Highlights of the Public Bank Group's Performance for the Second Quarter as compared to the First Quarter of 2009.
  • Profit before taxation grew by 10% or RM75 million to RM820 million from RM745 million in the first quarter of 2009.
  • Other operating income grew by 25% or RM73 million, mainly attributed to the increase in unit trust management fees as well as net brokerage and commission from stockbroking activities.
  • Net interest and financing income expanded by 4% or RM44 million to RM1.1 billion due to continued healthy loan and deposits growth.
  • Cost to income ratio improved to 34.1% as compared to 35.6% in the first quarter of 2009, reflecting continued improvement in productivity and efficiency.
  • Credit charge-off ratio remains low and stable at 0.29%.
  • The quantum of NPLs decreased by RM24 million from the end of previous quarter to stand at RM1.2 billion as at the end of June 2009, despite a RM3.7 billion loan growth in the second quarter of 2009.

Continued Strong Growth in Quality Loans

Over the six-month period, the Public Bank Group's loans and advances to customers grew by RM8.7 billion or 7.2% to reach RM129.4 billion as at the end of June 2009. This rate of growth significantly exceeded the 1.2% loan growth rate recorded by the banking industry for the first five months of 2009. As a result, the Group's domestic market share of loans and advances rose to 15.5% as at the end of May 2009 from 14.8% as at the end of 2008.

The Public Bank Group's retail banking franchise remained strong, with loans for the financing of residential properties and passenger vehicles and lending to mid-market commercial enterprises accounting for 77% of the Group's total loan portfolio as at the end of June 2009. The Group continued to record strong loan approvals during the period. Total loans approved and loan applications for the first half of 2009 increased by 17% and 18% respectively as compared to the corresponding period in 2008. Comparing the second quarter of 2009 against the first quarter of 2009, loan approvals and loan applications recorded a much higher growth of 25% and 21% respectively.

In support of the Government's efforts to ensure accessibility to bank credit by small- and medium-sized enterprises ("SMEs") as these SMEs meet the challenges of the slowing economy, Public Bank and Public Islamic Bank have been actively promoting the Government's Working Capital Guarantee Scheme for their SME customers to finance their working capital needs. In the first six months of 2009, the Group approved a total of RM5.0 billion of domestic SMEs loans, which accounted for 21% of the Group's total new domestic loans approved of RM24.4 billion for the same period.

Sustained Strong Asset Quality

Amidst the more challenging operating environment, the Public Bank Group's asset quality had remained strong. Over the six-month period, the amount of NPLs decreased by RM2 million to stand at RM1.2 billion as at the end of June 2009, despite a RM8.7 billion growth in the total loan base. The Group's gross and net NPL ratios stood at below 1% as at the end of June 2009, as compared to the banking industry's gross and net NPL ratios of 4.0% and 2.2% respectively as at the end of May 2009.

The sustained low NPL position of the Public Bank Group is due to its prudent lending policies and quality customer base as well as various proactive initiatives taken to assist borrowers to meet their repayment obligations.

On a quarter-to-quarter comparison, the Public Bank Group's stable level of new net NPL formation was reflected by the ratio of net new NPL to gross loans of 0.13% in the second quarter of 2009 as compared to 0.14% in the preceding quarter. Over the three-month period, the quantum of NPLs has decreased by RM24 million despite a RM3.7 billion growth in the total loan base in the second quarter of 2009. The Public Bank Group's credit charge-off rate remained low at 0.29% in the first half of 2009.

The NPLs of the Public Bank Group is well-covered, with loan loss coverage ratio further increasing to 173% as at the end of June 2009, as compared to the banking industry's coverage ratio of 87% as at the end of May 2009. The increase in the Group's loan loss coverage from 160% as at the end of 2008 was mainly contributed by additional general allowance set aside for the strong loan growth rate during the period. The Group's general allowance of RM1.9 billion as at the end of June 2009 was almost two times that of the entire net NPL amount of RM1 billion, despite that more than 90% of the NPLs outstanding are secured.

Strong Expansion in Core Customer Deposits

The Public Bank Group also achieved a healthy growth of 7% in its total customer deposits during the first half of 2009 to RM173.8 billion, mainly attributed to the strong growth in core customer deposits.

The Public Bank Group's core customer deposits increased by RM12.9 billion or 11.5%, which was more than three times the pace of the banking industry's core deposit growth of 2.9% for the first five months of 2009. Fixed deposits, savings deposits and demand deposits of the Group registered strong growth of 12%, 10% and 9% respectively which resulted in the Group's domestic market share of core customer deposits increasing to 15.2 % as at the end of May 2009 as compared to 14.7% as at the end of 2008.

The Public Bank Group's overseas operations also contributed to the deposits growth, in particular Public Financial Holdings Group ("PFHG") in Hong Kong and Cambodian Public Bank Plc ("Campu Bank"). PFHG and CAMPU Bank registered deposits growth of 9% and 20% respectively during the first half of 2009 as a result of their extensive efforts in growing their respective deposit bases. Presently, PFHG has 72 branches in Hong Kong and 3 branches in Shenzhen in the People's Republic of China with another 2 branches scheduled to be opened before the end of 2009. CAMPU Bank is currently the largest bank in Cambodia by balance sheet size, operating with 13 branches as at the end of June 2009 and with a further 5 branches scheduled to be opened in the second half of 2009.

As a result of the healthy customer deposits growth, the Public Bank Group's liquidity position remained strong with net loans to deposits ratio standing at 73.2% as at the end of June 2009.

Wealth Management Products and Services

The Public Bank Group's unit trust and fund management business, carried on by its wholly-owned subsidiary, Public Mutual Berhad, continued to maintain its market leadership in the private unit trust industry despite the weaker market conditions which prevailed in the first quarter of 2009. Public Mutual's market share of the Malaysian private sector unit trust management industry increased from 39% at the end of 2008 to 44% as at the end of June 2009. The number of Public Mutual unit trust consultants currently stands at over 40,000 while the number of investors in Public Mutual unit trusts has grown to 2.15 million. In the second quarter of 2009, Public Mutual achieved an improved unit trusts sales of RM1.7 billion as compared to RM727 million in the first quarter of 2009. Public Mutual's net assets under management stood at a record RM30.6 billion as at the end of June 2009, an increase of RM7.3 billion or 31% over the six-month period to June 2009.

The Public Bank Group is quickly building its bancassurance and wealth management businesses and continues to expand its sales force which currently number 529. In the second quarter of 2009, Public Bank launched a new principal protected structured investment product called the PB USA Recovery, which generated good response from customers.

Capital Position Remains Strong

On 5 June 2009, Public Bank issued RM1.2 billion of Stapled Securities to enhance its capital adequacy ratios. The Stapled Securities comprised Non-Cumulative Perpetual Capital Securities ("NCPCS") of RM1.2 billion issued by Public Bank, and an equivalent nominal value of Subordinated Notes issued by a wholly-owned subsidiary, PBFIN Berhad. The tenor of the NCPCS is perpetual whilst the Subordinated Notes have a maturity of fifty years due on 5 June 2059, with the first optional redemption date of the NCPCS of 5 June 2019. The issuance of the Stapled Securities had strengthened Public Bank's RWCR and core capital ratio ("CCR") by 1.2% and 1.4% respectively.

The Public Bank Group's RWCR improved to 13.9% as at the end of June 2009 from 13.1% at the beginning of the year, after accounting for the interim dividend for 2009 and was well above the statutory minimum requirement of 8%. As at the end of June 2009, Public Bank's RWCR and CCR rose to 13.6% and 11.2% respectively from 12.8% and 10.1% as at the end of 2008.

The forthcoming adoption of FRS 139 with effect from 1 January 2010 and the adoption of the Basel II Internal Rating Based approach will result in further enhancement of Public Bank's and the Public Bank Group's core capital ratios and risk-weighted capital ratios.

Group Prospects

Despite the slowing economy, the banking industry in Malaysia remained resilient, supported by its strong capitalization, stable asset quality and improved risk management practices.

The Public Bank Group will continue to pursue its strategy of strong organic business growth, as well as maintain a high quality loan portfolio and improved productivity. Barring unforeseen circumstances, the Group is expected to continue to record satisfactory performance for the rest of 2009.

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman
 

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

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Public Bank Supports Research Excellence and Management Accounting With RM1.34 Million Sponsorship

For Immediate Release

14 May 2009

Public Bank Supports Research Excellence and Management Accounting With RM1.34 Million Sponsorship

Public Bank, being a firm believer in the importance of quality education, contributed RM1.25 million to Universiti Tunku Abdul Rahman (UTAR) for the establishment of the Tan Sri Dato' Sri Dr. Teh Hong Piow Chair in Banking and Finance.

This contribution will be spread out over a period of five years, with the Bank contributing RM250,000 per year for this purpose which would see the appointment of a distinguished professor to hold the Chair and conduct applied research in the fields of banking and finance.

Public Bank Managing Director Tan Sri Tay Ah Lek presented the Bank's cheque to UTAR President Ir. Professor Dato' Dr. Chuah Hean Teik at Menara Public Bank today.

The Tan Sri Dato' Sri Dr. Teh Hong Piow Chair in Banking and Finance will be established at the Faculty of Business and Finance in UTAR Perak Campus in Kampar to promote exchange of technical expertise between industry and academia; develop and achieve excellence in the research, development, education and training relating to banking and financial products and services; facilitate and organise a range of activities in advancing the banking and finance industry as well as establish a strong pool of experts consisting of both academia and industrial representatives to provide financial consultancy.

Public Bank is also committed to upholding the highest ethical and professional standards and promoting management accounting excellence with its contribution of RM60,000 to the National Award for Management Accounting ("NAfMA") 2009, making it the main sponsor of the Award for the sixth consecutive year.

In addition, Public Bank sponsored RM30,000 in support of the Chartered Institute of Management Accountants (CIMA) World Conference 2009, making the Bank an Official Partner of the said conference that will showcase organisations and individuals who have successfully transcended global barriers to emerge as leaders in their respective industries.

The cheques for these sponsorships were presented by Public Bank Founder and Chairman Tan Sri Dato' Sri Dr. Teh Hong Piow to NAfMA Organising Committee Chairman Mr. Yeo Tek Ling, and Chartered Institute of Management Accounting World Conference Committee Chairman Mr. Lee Soon Chee.

Tan Sri Teh, in his speech at the presentation ceremony said, "Public Bank has always viewed accountability and transparency as integral to creating sustainable value for our stakeholders. We believe that to achieve world-class business performance, we need to build a strong framework of core ethical behaviours that include consistent compliance to accounting standards and best practices in management accounting.

"Public Bank is thus fully committed to the success of the NAfMA awards by pledging for the sixth year RM60,000 to the Malaysian Institute of Accountants. It is also with pleasure that we contribute RM30,000 to CIMA in support of its World Conference 2009. This Conference will showcase organisations and people who have successfully overcome global barriers to emerge as leaders in their respective industries."

The NAfMA is organised by the Malaysian Institute of Accountants (MIA) and CIMA, with the National Productivity Centre and the Asian Management Accounting Research Centre as partners. The Award has received the official support of the Accountant-General's Department of Malaysia, the British Malaysian Chamber of Commerce, the Federation of Malaysian Manufacturers, the Malaysian International Chamber of Commerce and Industry, and the SMI Association of Malaysia.

The CIMA World Conference 2009 is expected to attract a crowd of 600, comprising local and international companies' CEOs, CFOs, CIOs, COOs, managing directors, finance directors, and other key corporate decision makers. The Conference aims to impress that the usage of management accountancy, good leadership and enterprise governance to shape business practices and management will lead to organisational success.

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Tan Sri Teh (centre), accompanied by Public Bank Executive Director Dato' Lee Kong Lam (leftmost) and Managing Director Tan Sri Tay Ah Lek (third from left), posing with recipients of the Bank's contributions, who were NAfMA Organising Committee Chairman Mr. Yeo Tek Ling (second from left), UTAR President Ir. Professor Dato' Dr. Chuah Hean Teik (third from right), UTAR Registrar Dr. Tan Kee Kong, and Chartered Institute of Management Accounting World Conference Committee Chairman Mr. Lee Soon Chee

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Public Bank Achieves 3% Growth In Underlying Operating Net Profit And 4% Loan Growth In First Quarter Of 2009

For Immediate Release

14 April 2009

Public Bank Achieves 3% Growth In Underlying Operating Net Profit And 4% Loan Growth In First Quarter Of 2009

I am pleased to announce that the Public Bank Group continued to record satisfactory performance in the first quarter of 2009, with a 3% increase in underlying operating net profit despite the squeeze in net interest margin arising from the three consecutive reductions in Overnight Policy Rate ("OPR") between November 2008 and February 2009. Loan growth remained strong at 4% in the first quarter of 2009, whilst the Group's strong asset quality was sustained and net NPL ratio continued to be capped at below 1%.

In the first quarter of 2009, the Public Bank Group recorded net profit attributable to shareholders of RM589 million as compared to RM717 million for the corresponding period of 2008 which included a one-time goodwill payment of RM200 million from ING Asia/Pacific Limited ("ING") for Public Bank's bancassurance distribution alliance with ING. Excluding the one-time goodwill payment in the previous corresponding quarter, the Group's underlying operating net profit improved by 3% over the same period in 2008. The Group's results translate into an annualized net return on equity of 25.5% and earnings per share of 17.4 sen for the first quarter of 2009.

The growth in the Public Bank Group's underlying operating net profit was mainly contributed by an expansion in net interest and financing income as well as stable loan loss allowances. Despite the more challenging operating environment and the negative impact of the OPR reductions on the net interest margin, the Group's net interest and financing income grew by RM84 million or 8% in the first quarter of 2009 as compared to the corresponding quarter in 2008, as a result of strong loans and deposits growth, coupled with sustained strong asset quality.

Highlights of the Public Bank Group's Performance

  • Net profit attributable to shareholders was RM589 million in the first quarter of 2009 as compared to RM717 million in the previous corresponding period. Excluding the one-time goodwill payment received in the first quarter of 2008, the underlying operating net profit of the Group increased by 3% as compared to the corresponding period last year.
  • Annualised net return on equity for the first quarter of 2009 stood at 25.5%.
  • Earnings per share for the first quarter of 2009 was 17.4 sen.
  • Total assets increased by 2% to stand at RM199.2 billion as at the end of March 2009.
  • Total loans and advances grew by RM5.1 billion or 4% to reach RM125.4 billion as at the end of March 2009, significantly above the banking industry's loans growth rate of 0.4% for the first two months of 2009.
  • Core customer deposits increased by 8% in the first quarter of 2009 to reach RM120.8 billion as at the end of March 2009 as compared to the banking industry's growth rate of 2% during the first two months of 2009. Public Bank's domestic market share of core customer deposits rose to 15.3% as at the end of February 2009 from 14.7% as at the end of 2008.
  • Net non-performing loans ("NPL") ratio of the Group remained below 1% as at the end of March 2009, as compared to the banking industry's net NPL ratio of 2.2% as at the end of February 2009. The Group's loan loss coverage of 164% continues to be the highest and most prudent in the Malaysian banking industry.
  • Risk-weighted capital ratio of the Group remains strong at 13.3% as at the end of March 2009, showing an improvement from 13.1% as at the end of December 2008.


Continued Healthy Loan Growth Despite Challenging Market Environment

Despite the challenging market environment, the Public Bank Group continued to record healthy loan growth of RM5.1 billion or 4% in the first quarter of 2009 to reach RM125.4 billion as at the end of March 2009, significantly higher than the banking industry's loan growth rate of 0.4% for the first two months of 2009. The Group's domestic loan market share remained high at 14.9% as at the end of February 2009.

In the first quarter of 2009, loan applications received by Public Bank increased by 9% as compared to the corresponding period of 2008, whilst loan approvals grew by 11% to RM10.9 billion over the same period. The lending activities of the Public Bank Group remained focused on the retail sector, particularly in loans to mid-market commercial enterprises and loans for the financing of residential properties and purchase of passenger vehicles, which accounted for 78% of the total loan portfolio of the Group as at the end of March 2009.

In line with the Government's fiscal stimulus efforts to counter the effects of global recessionary pressures on the Malaysian economy, small- and medium-sized enterprises ("SMEs") have been promoted as a major driver of the domestic economy. Responding to this, the Public Bank Group continued to provide financing to SMEs for their working capital and business expansion needs. For the first quarter of 2009, the Group approved a total of RM2.4 billion of loans to domestic SMEs which accounted for 22% of the Group's total new domestic loans approved of RM10.9 billion for the same period. Public Bank and Public Islamic Bank have been actively promoting the Government's Working Capital Guarantee Scheme for its SME customers.

Notwithstanding the still very challenging market environment, a healthy loan growth rate was achieved in the first quarter. This was due to the extensive sales and marketing efforts of the Group, whilst continuing to maintain the Group's stringent lending policies, with the aim of expanding the Group's high quality loan portfolio to generate long-term returns.


Sustained Strong Asset Quality

The Public Bank Group's asset quality remained strong as at the end of March 2009. The Group's gross and net NPL ratios remained stable at below 1% as at the end of March 2009, as compared to the banking industry's gross and net NPL ratios of 4.10% and 2.20% respectively as at the end of February 2009.

The level of new net NPL formation of the Public Bank Group also remained stable as reflected by the ratio of net new NPL to gross loans of 0.14% in the first three months of 2009 as compared to 0.16% in the preceding quarter. The Group's credit charge-off rate was also low at 0.29% in the first quarter of 2009.

The stable NPL position of the Public Bank Group is due to, inter alia, its prudent lending policies and strong risk management practices, its affluent customer base, and the prompt and timely loan recovery and loan restructuring efforts undertaken by the Group.

As at the end of March 2009, the Public Bank Group's loan loss coverage ratio increased to 164%, almost two times that of the banking industry's coverage ratio of 87% as at the end of February 2009. The increase in the Group's loan loss coverage from 160% as at the end of 2008 was mainly attributable to additional general allowance set aside for the strong loan growth during the period. As at the end of March 2009, the Group's general allowance of RM1.83 billion significantly exceeded the entire net NPL amount of RM1.05 billion, despite that more than 90% of the NPLs outstanding are secured.


Healthy Expansion in Core Customer Deposits

Total customer deposits of the Public Bank Group grew by RM5.9 billion or 4% during the quarter to reach RM168.1 billion as at the end of March 2009, far exceeding the growth rate of the banking industry of 0.4% for the first two months of 2009.

The growth in the Public Bank Group's total deposits was mainly contributed by its core customer deposits, which recorded an impressive growth of 8% to RM120.8 billion in the first quarter of 2009 as compared to the banking industry growth rate of only 2% for the first two months of this year. This is a result of the Group's extensive efforts in growing its depositor base. In particular, the Group's fixed deposits and savings deposits increased by 9% and 5% respectively. Consequently, Public Bank's domestic market share of core customer deposits rose to 15.3% as at the end of February 2009 from 14.7% as at the end of 2008.

The Public Bank Group's overseas' operations, in particular Public Financial Holdings Group in Hong Kong and Cambodian Public Bank Plc ("Campu Bank") also delivered strong deposit growth of 7% and 3% respectively in the first quarter of 2009, as part of their continuous efforts to build up their respective deposit base. The Public Bank Group currently has a network of 74 branches in Hong Kong and Shenzhen with plans to open 3 more branches in Hong Kong by the end of 2009. Campu Bank, a wholly-owned subsidiary of Public Bank, is the largest bank in Cambodia with 12 branches. There are plans to open another 6 branches before the end of 2009.

The Group's liquidity position remains strong with net loans to deposits ratio standing at 73.4% as at the end of March 2009.

Wealth Management Products and Services

While the current economic climate is less supportive of the wealth management business, the Public Bank Group will continue to tap on its large deposits customer base for the development of its wealth management business to enhance the Group's return on equity and profitability.

Public Mutual, the wholly-owned unit trust and fund management subsidiary of Public Bank, maintained its market leadership in the private unit trust industry with an improved overall market share of 40% and over 1 million account-holders as at the end of March 2009. The Group's net assets under management grew by RM854 million or 4% in the first quarter of 2009 to stand at RM24.2 billion as at the end of March 2009. Public Mutual continues to build and nurture its agency force which currently stands at over 43,000, a highly effective distribution channel to drive the business of Public Mutual when the market for unit trusts improves.

In the second year of its strategic alliance with ING on bancassurance distribution, and with a total bancasurance sales force of over 300 currently, the Public Bank Group will continue with its efforts to build the infrastructure to drive the expansion of the Group's bancassurance business to increase its fee-based commission income in the long run. The customers' response to the Group's bancassurance products had been encouraging. For example, the sale of the One Solution Plan, which is the traditional regular premium life insurance product, has shown an impressive monthly growth of over 30%.

Capital Position Remains Strong

The Public Bank Group has always maintained a healthy and efficient level of capital to support the Group's business and to optimize returns to its shareholders.

As at the end of March 2009, Public Bank's risk-weighted capital ratio and core capital ratio improved to 13.2% and 10.2% respectively from 12.8% and 10.1% as at the end of 2008. The Bank's risk-weighted capital ratio of 13.2% was well above the statutory minimum requirement of 8%.

Public Bank has received the approval of Bank Negara Malaysia, subject to approval from Securities Commission, for its RM5.0 billion Non-Innovative Tier-1 Capital Securities Programme, which is available for issuance over a 7-year period. Based on an estimated initial issue size of approximately RM1.0 billion of Non-Innovative Tier-1 Capital Securities under this programme, the Bank's and Group's core capital ratios and risk-weighted capital ratios are expected to strengthen by approximately 1%. The adoption of FRS 139 with effect from 1 January 2010 and the adoption of the Basel II Internal Rating Based approach will also result in further enhancement of the Bank's and Group's core capital ratios and risk-weighted capital ratios.

Group Prospects

On the international front, global economies continue to be mired in recession and financial crises even as measures are being taken to tackle the global downturn. Malaysia, while not as badly affected, is experiencing an economic slowdown and weaker market sentiments. All sectors, including the financial services sector, can expect to face a more challenging operating environment for the current year.

In such challenging conditions, the Public Bank Group will continue to focus on its niche in the retail banking and financing business whilst maintaining its prudent credit policies, and further improve on its cost efficiency. The Group expects its strong asset quality to be sustained, and will continue to leverage on its wide and efficient branch network to deliver balance sheet and revenue growth. The Group remains steadfast in its commitment to uphold strong corporate governance and implement sound risk management policies to support long-term growth.

Barring unforeseen circumstances, the Group is expected to continue to record satisfactory performance for the rest of 2009.

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman

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

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Public Bank Achieves Another Record Year Of Performance With An Increase Of 22% In Net Profit To RM2.58 Billion And Pays Net Dividends Of RM2.22 Billion

For Immediate Release

20 January 2009

Public Bank Achieves Another Record Year Of Performance With An Increase Of 22% In Net Profit To RM2.58 Billion And Pays Net Dividends Of RM2.22 Billion

 I am pleased to announce that Public Bank, the largest bank in Malaysia in terms of market capitalisation, achieved 22% increase in its Group net profit to reach a record RM2.58 billion in 2008.
 
The Public Bank Group’s pre-tax profit rose by RM376 million or 13% to RM3.38 billion in 2008, on the back of strong growth of 16% in operating profit. With the improved results in 2008, the Group’s net return on equity increased further to 30.4% in 2008 against 26.3% in 2007 while earnings per share increased to 76.9 sen from 63.3 sen in 2007.
 
The Public Bank Group’s strong profit performance was contributed by healthy growth in net interest and financing income and other operating income.
 
Net interest and Islamic banking income increased by RM564 million or 15% to RM4.29 billion in 2008, driven by the sustained high rate of growth in both quality loans as well as customer deposits and continued improvement in asset quality. Other operating income increased by 5% to RM1.45 billion, mainly attributed to initial contribution from bancassurance distribution and the upfront goodwill income pursuant to the regional strategic alliance with ING Asia/ Pacific Limited (“ING”) and higher unit trust fund management fees, partially offset by a decrease in investment income, fee income from sales of trust units and commissions from stockbroking activities. Included in the previous year’s other operating income were non-recurring gains from the sale of certain equity investments and debt-converted investments amounting to RM85 million.
 
In view of the Public Bank Group’s strong performance, the Board of Directors is pleased to propose a final cash dividend of 25 sen less 25% tax and a share dividend to be distributed from the treasury shares of the Bank, on the basis of 1 Public Bank share for every 35 existing shares held. Based on the share price of Public Bank Berhad (Local) share of RM8.85 as at 31 December 2008, the value of the share dividend distributed per share is equivalent to a gross cash dividend of 33.7 sen. Together with the interim dividend of 30 sen less 26% tax, which was paid in August 2008, the total dividend paid and proposed for 2008, inclusive of the share dividend, is equivalent to a gross cash dividend per share of 88.7 sen as compared to the gross dividend of 75 sen in 2007. This translates to a total gross dividend yield of 10% to the shareholders based on  the market value of  PBB share as at  31 December 2008. The total net dividend for 2008, including the share dividend, amounts to RM2,223 million and represents a total payout of 86% of the Group’s net profit for 2008.
 
Highlights of the Public Bank Group’s Performance
  • Net profit attributable to shareholders rose by 22% to RM2.58 billion as compared to RM2.12 billion in 2007.
  • Net return on equity for 2008 improved to 30.4% as compared to 26.3% in 2007 and is more than double the net return on equity of 13.3% five years ago.
  • Earnings per share increased by 21% to 76.9 sen in 2008 from 63.3 sen in 2007.
  • Cost to income ratio continued to improve to 31.2% from 33.1% in 2007, and was significantly lower than the industry average of 43.9%.
  • Total assets stood at RM196.2 billion as at the end of 2008, up by 13% from 2007, and was more than three times the Group’s total asset size of RM64.6 billion as at the end of 2003.
  • Total loans and advances expanded by 19% or RM19.3 billion to stand at RM120.3 billion as at the end of 2008, with loan market share rising to 14.9% from 14.4% as at the end of 2007.
  • Total customer deposits expanded by RM23.5 billion or 17% to reach RM162.3 billion as at the end of 2008, leading to a higher market share of core deposits of 15.2% as compared to 13.7% as at the end of 2007.
  • Non-performing loans (“NPL”) continued to trend downwards with net NPL ratio declining to 0.86% as at the end of 2008 from 0.93% as at the end of June 2008 and 1.23% a year ago. Loan loss coverage stood at 160% which is about two times of the banking industry’s loan loss coverage ratio of 85%.
  • Risk-weighted capital ratio remains strong at 13.1% as at the end of 2008, after deducting the proposed dividends.
Healthy Organic Loans Growth and Increasing Market Share
 
The Public Bank Group achieved a loan growth rate of 19% in 2008, well above the banking industry’s November 2008 year-on-year growth rate of 11%, with total loans, advances and financing increasing by RM19.3 billion to RM120.3 billion as at 31 December 2008. The Group’s domestic market share of loans and advances increased to 14.9% as at the end of November 2008 from 14.4% as at the end of 2007 and 13.2% as at the end of 2006, as a result of the strong loan growth in the last few years.  
 
In 2008, the Public Bank Group’s lending activities remained focused on the retail sector, in particular loans to mid-market commercial enterprises and loans for the financing of residential properties and passenger vehicles. Total loans for financing the retail sectors and mid-market commercial enterprises grew by 16% during the year, accounting for 79% of the Public Bank Group’s loan portfolio as at 31 December 2008. During the year, loan approval rates remained high with housing loan approvals and hire purchase loan approvals growing by 20% and 14% respectively as compared to 2007.
 
The Public Bank Group continued to meet small- and medium-sized enterprises (“SMEs”) financing needs in support of the Government’s on-going efforts to develop and strengthen SMEs as a major driver of domestic economy by providing ready access to financing of their working capital and business expansion needs. In 2008, the Group approved a total of RM10.5 billion of domestic SMEs loans, thus benefiting a wide cross-section of about 43,000 SMEs, significantly exceeding the target set by Bank Negara Malaysia for this important sector. This translates to 18% of the total industry’s year-to-date September 2008 annualized loans approval to SMEs.   
 
The Public Bank Group’s banking and finance subsidiaries in Hong Kong, namely Public Bank (Hong Kong) Limited and Public Finance Limited, registered strong loan growth of 30% and 17% respectively in 2008, backed by the active expansion of branch network and sales and marketing resources, on top of the active promotion of the “PUBLIC BANK” brand name in Hong Kong.  Presently, Public Finance Limited has 42 branches whereas Public Bank (Hong Kong) Limited has 28 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China. Public Bank (Hong Kong) Limited plans to further expand its branch network with the opening of 3 branches in Hong Kong in 2009.
 
Cambodian Public Bank Plc (“CAMPU Bank”), the Public Bank Group’s wholly-owned subsidiary in Cambodia, continued its impressive track record of strong business growth in 2008. Loans of CAMPU Bank stood at USD644 million as at the end of 2008, representing a growth of 77% as compared to the end of 2007. CAMPU Bank presently has 12 branches, with another 7 branches scheduled to be opened in 2009.
 
Sustained Strong Asset Quality
 
The Public Bank Group maintained its prudent appetite for credit risk whilst pursuing strong lending growth in 2008. The Group’s asset quality and loan loss coverage has remained the best in the industry.
 
The Public Bank Group’s asset quality measures continued to improve, both in terms of gross and net NPL ratios, as well as in the actual reduction in the quantum of gross NPL in 2008. The amount of gross NPL decreased by RM194 million or 14% during the year to RM1.21 billion as at the end of 2008, despite a strong loan growth of RM19.3 billion during the year. This had led to further improvement in the Group’s gross NPL and net NPL ratios to 1.00% and 0.86% respectively as at the end of 2008 from 1.38% and 1.23% a year ago. The net NPL ratio of 0.86% was about one third that of the banking industry’s net NPL ratio of 2.40% as at the end of November 2008. The level of new net NPL formation had also declined as reflected by the improvement in the ratio of net new NPL to gross loans of 0.37% in 2008 as compared to 0.44% in 2007. The Public Bank Group’s credit charge-off rate remained low at 0.29% in 2008.
 
On a quarter-to-quarter comparison, the Public Bank Group’s net NPL ratio had shown a consistently improving trend from 1.23% in December 2007 to 1.09%, 0.93%, 0.87% and 0.86% as at the end of March 2008, June 2008, September 2008 and December 2008 respectively.
 
The Public Bank Group’s strong asset quality was complemented by its healthy loan loss coverage ratio of 160% as at the end of 2008, which was significantly higher than the banking industry’s coverage of 85% as at the end of November 2008.  The increase in the Group’s loan loss coverage from 120% as at the end of 2007 was contributed by additional general allowance set aside for the strong loan growth in the year and the declining level of NPL. As at the end of 2008, the Group’s general allowance of RM1.76 billion significantly exceeded the entire net NPL amount of RM1.04 billion, despite that more than 90% of the NPLs outstanding are secured.
 
Public Bank has taken various proactive initiatives during the year to assist borrowers to meet their repayment obligations, including extension of loan tenor and EPF withdrawals for housing loans to ease the increased financial burden of the customers as well as actively engaging with customers to restructure their loans. These pre-emptive measures, coupled with Public Bank’s prudent lending policies and the affluent customer base, will help to sustain the Group’s low NPL ratios moving forward.
 
Healthy Growth in Customer Deposits
 
Total customer deposits of the Public Bank Group rose by 17% or RM23.5 billion to stand at RM162.3 billion as at the end of December 2008, almost twice the banking industry’s annualized growth rate of 9.3% as at end of November 2008. The Group’s market share of domestic deposits stood at 14.8% as at the end of November 2008.
 
In 2008, the Public Bank Group’s wholesale deposits in the form of money market deposits and negotiable instruments of deposits expanded by 14% to RM48.6 billion whilst the core customer deposits of the Group expanded by 18%, with savings accounts, current accounts and fixed deposit accounts growing at 12%, 13% and 20% respectively. The Group’s core customer deposits grew at almost four times the pace of the domestic banking industry’s annualized growth rate of 4.7% as at the end of November 2008. This resulted in the Group’s market share of core deposits increasing to 15.2% as compared to 13.7% at the end of 2007. In particular, the strong PB Brand and the strong financial standing of the Group in times of financial turmoil have translated to a strong 17% growth in deposits from retail individual customers in 2008.
 
As the rate of growth of customer deposits had kept pace with the growth in the Group’s lending business, the Group maintained its strong liquidity position with net loans to deposits ratio standing at 73.0% as at the end of December 2008.
 
Wealth Management Products and Services
 
The Public Bank Group continued to develop its wealth management products and services with the aim to enhance the Group’s return on equity and profitability.
 
Despite the weak market conditions with the inevitable sharp decline in the equity market, the Public Bank Group’s unit trust and fund management business undertaken by its wholly-owned subsidiary, Public Mutual, continued to maintain its market leadership in the private unit trust industry due to the strong confidence of the fund unitholders on the management of the funds. The overall market share remained high at 39% with equity funds and Islamic funds market share stood at 54% and 52% respectively as at the end of 2008. Despite the weak market sentiments, Public Mutual had launched 12 new unit trust funds and achieved total new sales of RM7.64 billion in 2008. The net asset value of the Group’s 67 funds under management stood at RM23.3 billion as at 31 December 2008. In addition, Public Mutual achieved a significant milestone in 2008 with the total number of investors in its Public Mutual unit trusts increasing by 24% to 2.05 million as at the end of December 2008, breaching the 2 million accountholder mark. Public Mutual continued to expand its agency force from 30,000 unit trust consultants as at the end of 2007 to over 42,000 unit trust consultants as at the end of 2008, a very potent distribution channel to drive the business of Public Mutual when the market for unit trust improves. With the continued strong support and confidence of unitholders, coupled with the further expansion of agency force, Public Mutual continued to achieve a marginal increase in profitability in 2008.
 
In January 2008, Public Bank Group commenced its 10-year strategic alliance with ING, an exclusive bancassurance distribution arrangement to provide life, health and investment-linked insurance products in Malaysia and Hong Kong to customers of the Group and the public. In the first year of the tie-up with ING, the Group had launched 10 and 19 bancassurance products in Malaysia and Hong Kong respectively, covering investment-linked plans, mortgage life/ term life plans, endowment plans, medical plans and universal plans and achieved a total of RM466 million in annual premium equivalent earned.
 
The Public Bank Group has also recruited a total of 229 bancassurance sales executives in 2008 and plans to expand its bancassurance sales force to 600 over the medium-term to support its bancassurance business. 
 
In order to meet the demands of its customers seeking wider investment options, Public Bank launched 3 principal protected structured investment products as well as a Gold Investment Account in 2008. All these new products received good customer response.
 
Setting Up of Public Islamic Bank
 
On 1 November 2008, the Islamic banking business of the Public Bank Group, which had been carried out as an Islamic banking window, was vested to Public Islamic Bank Berhad, a wholly-owned subsidiary of Public Bank. Public Islamic Bank is one of the largest Islamic banks in Malaysia with total Islamic banking assets of RM16.6 billion, financing of RM12.6 billion and deposits of RM13.8 billion. By conducting its Islamic banking business via an Islamic banking subsidiary, the Group has the opportunity to expand its present focus on serving retail consumers and mid-market commercial enterprise customers to the Islamic capital market over the longer term, besides contributing towards strengthening the institutional infrastructure of the Malaysian Islamic banking system, in line with the objective of Bank Negara Malaysia to position Malaysia as a major international Islamic financial hub.
 
 
Share Dividend Distribution and Capital Management
 
The Public Bank Group has always sought to maintain a healthy level of capital to support the growth of the Group’s business. With the recent trend of re-capitalisation by the world’s largest banks in both the US and Europe, there is increasing expectation by investors, depositors as well as regulators for a higher level of capital to weather the uncertainties in the global economy.
 
Despite the positive macroeconomic conditions of the Malaysian economy and the strong asset quality of the Public Bank Group, a more prudent capital management strategy is being pursued by the Group.
 
In order to retain a higher level of equity capital for future business expansion and to meet the current expectation of stakeholders and regulators, the directors have proposed a share dividend of 1 Public Bank treasury share for every 35 existing Public Bank shares held in place of cash dividend. This has effectively resulted in an increase in the equity capital of the Group by RM850 million whilst ensuring a continued high dividend payout of 86% of the Group’s earnings to its shareholders, inclusive of the total cash dividend of 55 sen for the year.
 
The Public Bank Group is proactively monitoring its capital position to ensure that a healthy level of capital with a sustaining return to shareholders. The capital position of the Group is expected to be further enhanced in the coming years with further issuance of debt capital, particularly non-innovative Tier-1 capital securities and subordinated debt securities. The forthcoming adoption of FRS139 and the Basel II Internal Ratings Based approach will also result in further enhancement of the Group’s core capital ratio and risk-weighted capital ratio.
 
As at the end of 2008, the Public Bank Group’s and Public Bank’s risk-weighted capital ratios increased to 13.1% and 12.8% respectively, after deducting the proposed final cash and share dividend for 2008, as compared to 12.4% and 11.9% respectively as at 31 December 2007, significantly above the statutory minimum requirement of 8%. The core capital ratio of the Group and the Bank had also been strengthened to 7.7% and 10.1% respectively as compared to 7.6% and 9.5% respectively as at 31 December 2007. The Group’s capital base stood at RM15.8 billion as at the end of December 2008 as compared to RM13.5 billion as at the end of 2007.
 
Group Prospects
 
As the risk of global recession threatens the pace of economic growth in Malaysia, the banking industry is faced with the twin challenges of an economy that is expected to slow and a still intensely competitive marketplace.
 
The past several years of building size and market share by the Public Bank Group with continued strengthening of the asset quality of its balance sheet provides the Group with the resilience to face up to the challenges in 2009. The Group will continue to focus on its strategy of building long-term sustainable core businesses, particularly in the expansion of its core business of lending to consumers and SMEs as well as expanding the depositor base by leveraging on its wide branch network, superior service standards and efficient multiple delivery channels. The Group will also step up efforts to reinforce the PB Brand and to pursue opportunities to improve its operational efficiency through increasing the productivity of its employees and maintaining cost efficiency in the running of the Group’s business. The Group will also continue to allocate significant resources to continue building its broad retail-based fee income structure.
 
In these challenging times, the Public Bank Group remains, more than ever, committed to its tradition of prudence and its belief in strong corporate governance.
 
Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and to continue to record satisfactory performance in 2009.
 
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Public Bank's Net Profit Surged 25% To RM1.93 Billion In First Nine Months of 2008

For Immediate Release

14 October 2008

Public Bank's Net Profit Surged 25% To RM1.93 Billion In First Nine Months of 2008

I am pleased to announce that the Public Bank Group achieved a 25% growth in net profit attributable to shareholders to RM1.93 billion for the nine months ended 30 September 2008 as compared to the corresponding period in 2007. The Group's pre-tax profit improved by 18% to RM2.57 billion over the same period despite an increase of RM41 million in general allowance made due to the higher loan growth in the current period. With the higher profit recorded, the Group's earnings per share improved to 57.4 sen for the first nine months of 2008 as compared to 46.0 sen in the corresponding period of 2007 whilst annualized net return on equity rose to 29.7% in the current period from 26.3% in 2007.

The strong financial performance was attributed mainly to healthy growth in net interest and financing income and other operating income, as well as continued improvement in asset quality to a new low net NPL ratio of 0.87%.

Net interest and financing income increased by 16% or RM447 million to RM3.16 billion for the first nine months of 2008, driven by the Group's expanded loan and deposit businesses and sustained strong asset quality. Other operating income grew by 14% to RM1.14 billion, mainly contributed by higher fee income as well as initial contribution from bancassurance distribution pursuant to the Group's 10-year regional strategic alliance with ING Asia/ Pacific Limited ("ING"), partially offset by a decrease in investment income.

Loan loss allowances increased by RM95 million mainly due to higher general allowance of RM41 million arising from loan growth as well as additional specific allowance made for certain old non-performing loan accounts secured by properties which are more than seven years in arrears. These accounts are fully provided for with no value assigned to the collateral.

Highlights of the Public Bank Group's First Nine Months' Performance

  • Net profit attributable to shareholders increased by 25% to RM1.93 billion as compared to the corresponding period ended 30 September 2007.
  • Operating profit registered a strong growth of 20%.
  • Annualised net return on equity for the first nine months of 2008 was higher at 29.7% as compared to 26.3% for the financial year ended 31 December 2007.
  • Earnings per share increased by 25% to 57.4 sen from 46.0 sen.
  • Productivity and efficiency improved further as reflected by lower cost to income ratio of 30.7% in the first nine months of 2008 as compared to 33.2% in the previous corresponding period. The Group's cost-to-income ratio of 30.7% was also significantly lower than the banking industry's ratio of 43.9% in 2007.
  • Total assets expanded by RM16.6 billion or 9.5% during the current period to stand at RM190.7 billion as at the end of September 2008.
  • Total loans and advances expanded by RM16.8 billion to stand at RM117.8 billion as at the end of September 2008 with loan market share rising to 14.8% as at August 2008 from 14.4% as at the end of 2007.
  • Total customer deposits increased by RM17.1 billion to reach RM155.8 billion as at the end of September 2008.
  • Net NPL ratio further improved to 0.87% as at the end of September 2008 from 0.93% as at the end of June 2008 and 1.23% as at the end of 2007. The Group's net NPL ratio of 0.87% was about one third that of the banking industry's net NPL ratio of 2.5% as at the end of August 2008. Loan loss coverage stood at 159% which is about two times of the banking industry ratio of 83%.
  • The Group's risk-weighted capital ratio remains strong at 13.2% as at the end of September 2008.

Continued Strong Organic Loan Growth and Further Improvement in Asset Quality

In the first nine months of 2008, the Public Bank Group's loans and advances to customers grew by RM16.8 billion, or an annualized rate of 22% to reach RM117.8 billion as at the end of September 2008. The Group has consistently achieved a high level of annual loan growth since 2001 through competitive pricing, innovative product packaging and high standards of service delivery. As a result, the Group's domestic market share of loans and advances rose to 14.8% as at the end of August 2008 from 14.4% as at the end of 2007, and has more than doubled from the 6.4% market share in 2001.

The Public Bank Group's retail banking franchise remained strong, with loans for the financing of residential properties and passenger vehicles and lending to mid-market commercial enterprises accounting for 87% of the Group's total loan portfolio as at the end of September 2008. In the first nine months of 2008, housing loan approvals and hire purchase loan approvals were higher by 27% and 25% respectively as compared to the same period in 2007.

The Public Bank Group's NPLs continued to trend downwards. In the first nine months of 2008, the amount of NPL decreased by RM237 million or 17%, despite a RM16.8 billion growth in the total loan base. As a result, the Group's gross NPL ratio fell below the 1% mark for the first time, to 0.99% as at the end of September 2008 from 1.38% as at the start of the year. The Group's net NPL ratio improved to 0.87% from 1.23% over the same period, and was about one third that of the banking industry's net NPL ratio of 2.50% as at the end of August 2008. The level of new net NPL formation had also declined as reflected by the improvement in the ratio of net new NPL to gross loans of 0.26% in the first nine months of 2008 as compared to 0.44% for the year ended 31 December 2007.

The Group's asset quality showed consistent improvement on a quarter-to-quarter comparison. The Group's NPL fell continuously from RM1,404 million as at the beginning of 2008 to RM1,318 million in March 2008, RM1,219 million in June 2008 and RM1,167 million in September 2008. Public Bank Group's gross NPL ratio improved from 1.38% as at the end of 2007 to 1.23%, 1.07% and 0.99% respectively as at the end of March 2008, June 2008 and September 2008 whilst its net NPL ratio decreased from 1.23% in December 2007 to 1.09%, 0.93% and 0.87% over the respective quarters of 2008.

The Group's annualized credit charge-off rate was 0.25% for the first nine months of 2008, and registered an improving trend on a quarter-to-quarter comparison. The Group's annualized credit charge-off rate stood at 0.19% in the third quarter of 2008 compared to 0.24% in the preceding quarter and 0.32% in the first quarter of 2008.

The Public Bank Group's asset quality remains the strongest in the industry and is ranked the best amongst all banks in Malaysia. This re-affirms the Group's disciplined and prudent approach to building a quality loan portfolio.

As at the end of September 2008, the Group's loan loss coverage increased to 159%, almost two times of the banking industry coverage ratio of 83% as at the end of August 2008. The increase in the Group's loan loss coverage from 120% as at the end of 2007 was attributed to additional general allowance set aside for the strong loan growth in the year while the amount of NPLs continued to fall. The Group's general allowance of RM1.72 billion as at the end of September 2008 significantly exceeded the entire net NPL amount of RM1.03 billion, despite that about 90% of the NPLs are secured.

Healthy Expansion in Customer Deposits

The Public Bank Group's total customer deposits grew by RM17.1 billion or an annualized rate of 16% to stand at RM155.8 billion as at the end of September 2008. The Group's market share of domestic deposits stood at 14.6% as at the end of August 2008.

The core customer deposits of the Group grew at an annualized rate of 14%, which is more than three times that of the banking industry's annualized growth rate in core deposits of 4.5%. The increase in core customer deposits was broad based, coming from across all product groups, with savings accounts, current accounts and fixed deposit accounts growing at annualized rates of 10%, 14% and 16% respectively. The strong growth in customer deposits was partly due to the Group's concerted efforts to expand its foreign currency deposits as well as the launch of principal guaranteed structured investment products which promote longer term savings.

Wholesale deposits in the form of money market deposits and negotiable instruments of deposit rose by RM6.2 billion during the nine month period ended 30 September 2008.

With the strong growth in customer deposits, the Group's liquidity remains strong with net loans to deposits ratio standing at 74.4% as at the end of September 2008.

Strong Growth of Regional Operations

In the first nine months of 2008, the regional operations of the Public Bank Group achieved an 11% growth in pre-tax profit in their respective local currencies. More than 90% of the Group's profit from overseas operations was contributed by the Public Financial Holdings Group ("PFH Group") in Hong Kong and Cambodian Public Bank Ltd ("CAMPU Bank") in Cambodia.

The PFH Group, which has 68 branches in Hong Kong and 2 branches in Shenzhen in the People's Republic of China, recorded strong organic loans growth of HKD4.4 billion or an annualized rate of 30% for the nine month period ended 30 September 2008, backed by the PFH Group's expanded branch network and active promotion of the "PUBLIC" brand name in Hong Kong.

CAMPU Bank, a wholly-owned subsidiary of Public Bank, is currently the largest bank in Cambodia. CAMPU Bank's profit before taxation of USD29 million for the first nine months of 2008 represents a more than two fold increase from USD14 million for the corresponding period in 2007. The profit growth was underpinned by strong loans and customer deposits growth. CAMPU Bank presently has 11 branches, with another 3 branches scheduled for opening before the end of 2008.

Wealth Management Products and Services

The Public Bank Group continued to invest and build long-term capabilities and infrastructure to support its growing wealth management business, in line with its aim to enhance the Group's return on equity and profitability.

The Public Bank Group's unit trust and fund management business, carried out by its wholly-owned subsidiary, Public Mutual, registered a 19% increase in profit before taxation to RM137 million for the nine months ended 30 September 2008. Unit trust management fees rose by 33% to reach RM262 million during the nine month period, partially offset by lower fee on sale of trust units arising from lower share prices and weaker market sentiment particularly in the third quarter of 2008. As at 30 September 2008, the Group's net asset value of funds under management stood at RM24.2 billion. Public Mutual's market share of the private sector unit trust management business remained high at 38% as at the end of August 2008. Public Mutual continued to expand its agency force aggressively with the number of Public Mutual unit trust agents increasing from 30,000 agents as at the end of 2007 to more than 41,700 agents currently.

The formalization of a 10-year exclusive bancassurance distribution agreement with the ING Group at the end of 2007 provides the Public Bank Group with a long-term source of fee-based income from the distribution of ING Group's life, health and investment-linked insurance products in Malaysia and Hong Kong. In the first nine months of 2008, Public Bank has launched 2 investment linked products, 2 single premium mortgage reducing term assurance products, 4 regular premium products as well as 2 telemarketing insurance products under its bancassurance distribution agreement with ING.

Besides the unit trust and bancassurance businesses, Public Bank has increased its offerings of alternative investment products to meet the needs of its customers. In the first nine months of 2008, Public Bank has launched 3 principal protected structured investment products as well as a Gold Investment Account. All these products received good customer response.

Capital Position Remains Strong

In May 2008, Public Bank issued RM1.4 billion Subordinated Notes under its RM5.0 billion Subordinated Medium Term Note Programme to strengthen Public Bank's capital structure and to support the Group's business expansion in the medium term. The Group's risk-weighted capital ratio remained strong at 13.2% as at the end of September 2008 and was above the statutory requirement of 8.0%.

Group Prospects

The financial crisis that emanated from the US has had widespread impact on global economies and financial markets. This has given rise to greater volatility and slower economic growth in the rest of the world. The Malaysian economy is expected to soften in the last quarter of 2008 and in 2009. The operating environment for the banking industry in Malaysia will thus be more challenging.

Notwithstanding this scenario, the Public Bank Group will remain focused on its strategy of building sustainable business growth, whilst exercising prudent risk management and maintaining strong asset quality in both its domestic and overseas operations.

The Group will continue to pursue strong growth in its deposit business, particularly in the expansion of its core customer deposits, a stable and long-term source of funding of the Group's expanding balance sheet.

The Group will also step up efforts to improve productivity and increase its fee-based revenue.

Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and to continue to record satisfactory performance for the rest of 2008.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

 

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

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Public Bank Achieves A 31% Growth In Net Profit To RM1.31 Billion In The First Half Of 2008

For Immediate Release

17 July 2008

Public Bank Achieves A 31% Growth In Net Profit To RM1.31 Billion In The First Half Of 2008

I am pleased to announce that the Public Bank Group maintained its strong performance in the first six months of 2008. The Group's net profit attributable to shareholders grew 31% to RM1.31 billion for the first half year ended 30 June 2008 as compared to the corresponding period in 2007. Pre-tax profit improved by 25% to RM1.76 billion despite an increase of RM48 million in general allowance made due to the higher loan growth in the current period. The Group's earnings per share rose to 39.1 sen compared to 29.8 sen for the corresponding period of 2007 whilst net return on equity grew strongly from 26.3% in 2007 to 31.3% in the current period.

The record profit performance of the Public Bank Group in the first half of 2008 was contributed by strong growth in net interest and financing income and other operating income, partially offset by an increase in operating expenses and higher loan loss allowances due to higher business volumes.

Net interest and financing income grew by RM296 million or 17% to RM2.06 billion for the first half of 2008. This was achieved on the back of continued strong growth in both the Public Bank Group's lending and deposit-taking businesses, as well as its sustained strong asset quality. Other operating income grew strongly by 36% to RM871 million due to higher fee and foreign exchange income and strong growth in its wealth management business, particularly the fund management business and initial contribution from bancassurance distribution pursuant to the Group's 10-year regional strategic alliance with ING Asia/ Pacific Limited ("ING").

The increase in loan loss allowances during the first six months of 2008 as compared to the previous corresponding period was mainly due to higher general allowance which increased by RM48 million arising from stronger loan growth as well as additional specific allowance made for old non-performing loan accounts secured by properties which are more than seven years in arrears. These accounts are fully provided for with no value assigned to the collateral.

In view of the sustained strong performance of the Group, the Board of Directors is pleased to declare an interim dividend of 30% less 26% taxation, which will result in a payout totalling RM745 million.

Highlights of the Public Bank Group's First Half Year Performance

  • Net profit attributable to shareholders expanded by 31% to RM1.31 billion from RM1.0 billion in the first half of 2007, contributed by strong growth of 30% in operating profit.
  • Annualised net return on equity increased to 31.3% as compared to 26.3% for the financial year ended 31 December 2007.
  • Earnings per share rose by 31% to 39.1 sen from 29.8 sen in the first half of 2007.
  • Cost to income ratio further improved to 29.3% as compared to 33.1% in 2007, reflecting continued improvement in productivity and efficiency.
  • Total assets grew by 6% during the six-month period to RM185.2 billion, which was three and a half times that of the Group's total asset size of RM53.3 billion as at the end of 2001.
  • Total loans and advances grew strongly by RM12.1 billion, or an annualized rate of 24%, in the first half of 2008, double that of the loan growth recorded by the banking industry.
  • Total customer deposits also grew strongly at an annualized rate of 19% to reach RM152.2 billion.
  • Net non-performing loan ("NPL") ratio fell below the 1% mark for the first time. The Group's net NPL ratio of 0.93% as at the end of June 2008 was about one third that of the banking industry's net NPL ratio of 2.8%. Loan loss coverage stood at 150% which remains the highest and most prudent in the Malaysian banking industry.
  • Risk-weighted capital ratio remains strong at 13.6% after deducting the proposed interim dividend.
  • Interim dividend per share increased by 20% to 30 sen as compared to the interim dividend of 25 sen for the first half of 2007.

Sustained Strong Organic Loan Growth and Increasing Market Share

Loans and advances to customers expanded by RM12.1 billion, or an annualized rate of 24%, in the first half of 2008 to RM113.06 billion as at the end of June 2008. The Public Bank Group's domestic market share of loans and advances rose to 14.9% as at the end of May 2008 from 14.4% as at the end of 2007, and has more than doubled from the 6.4% market share in 2001.

The growth in loans and advances was well distributed, with strong growth to the retail sector for the purchase of residential properties and passenger vehicles and commercial lending to small- and medium-sized enterprises ("SMEs"), as well as to large corporate accounts. As at the end of June 2008, 87% of the Public Bank Group's loan portfolio was channeled to finance the retail sector, comprising the consumer sector and mid-market commercial enterprises. Loan approvals in the first six months of 2008 was very strong, registering an increase of 22% compared to the previous corresponding period. In particular, housing loan approvals and hire purchase loan approvals rose by 40% and 35% respectively as compared to the first half of 2007. The strong loan approvals in the first half of 2008 will contribute positively to loans growth and net interest and financing income in the second half of 2008.

Further Improvement in Asset Quality

The Public Bank Group's non-performing loans ("NPL") continued to trend downwards, further strengthening Public Bank's market leadership position for asset quality. In the first six months of 2008, the amount of NPL decreased by RM185 million or 13% to RM1.22 billion, despite a RM12.1 billion growth in the total loan base. As a result, the Group's net NPL fell below the 1% mark to 0.93% as at the end of June 2008 from 1.23% as at the end of 2007.

The level of net new NPL formation also declined in the first half of 2008, as reflected by the ratio of net new NPL to gross loans of 0.18% in the first half of 2008 as compared to 0.44% for the year ended 31 December 2007.

The Public Bank Group's NPL portfolio is well-covered, with loan loss coverage ratio further increased to 150% as at the end of June 2008, almost double the banking industry's coverage ratio of 78% as at the end of May 2008. At the end of June 2008, the Group's general allowance of RM1.66 billion was about 1.58 times that of the total net NPL amount of RM1.05 billion, despite that more than 90% of the NPLs are secured.

The recent petrol price increases and heightened inflationary pressure is not expected to have a significant impact on the Public Bank Group's asset quality. Public Bank has already taken various proactive initiatives to assist borrowers to meet their repayment obligations in the more challenging economic environment, including extension of loan tenor and EPF withdrawals for housing loans to ease customers' increased financial burden and maintain its strong asset quality.

Strong Growth in Customer Deposits

Total customer deposits of the Public Bank Group rose by RM13.4 billion or an annualized rate of 19% to stand at RM152.2 billion as at the end of June 2008.

During the six-month period ended 30 June 2008, the Public Bank Group's wholesale deposits in the form of money market deposits and negotiable instruments of deposits expanded by RM6.5 billion or an annualized rate of 31%. The core customer deposits of the Group continued to register healthy annualized growth of 14%, with lower cost savings deposits, current accounts and fixed deposit accounts, growing at annualized rates of 13%, 16% and 14% respectively in the six-month period.

As a result of the healthy customer deposits growth, the Public Bank Group's liquidity remains strong with loans to deposits ratio standing at 73.1% as at the end of June 2008.

Expansion of Overseas Operations

International operations, which contributed 12% to the Public Bank Group's profit before taxation, registered a 25% growth in profit before taxation for the first six months of 2008 in their respective local currencies.

Public Financial Holdings Group ("PFHG"), with 66 branches in Hong Kong and 2 branches in Shenzhen in the People's Republic of China, delivered strong balance sheet growth and accounted for almost two-thirds of the profits from overseas operations. PFHG's loans and customer deposits grew by an annualized rate of 30% and 22% respectively in the first half of 2008, due to the Group's significant effort in branch expansion and building of its brand name and customer base in Hong Kong.

The Public Bank Group's operations in Cambodia, carried out by its wholly-owned subsidiary, Cambodian Public Bank Ltd ("CAMPU Bank"), continued its impressive track record of strong balance sheet and profit growth in the first half of 2008. CAMPU Bank's profit before taxation of USD19 million represents a 108% increase over the same period in 2007, and accounted for approximately one-third of the Group's profit from international operations. Loans and deposits of CAMPU Bank stood at USD555 million and USD363 million respectively as at the end of June 2008, registering an annualized growth of 106% and 42% during the six-month period ended 30 June 2008. CAMPU Bank is currently the largest bank in Cambodia with total assets of USD758 million and has 11 branches as at the end of June 2008, with a further 3 branches scheduled for opening in the second half of 2008.

Wealth Management Products and Services

The Public Bank Group had taken significant initiatives to expand its wealth management products and services, which is a low capital intensive source of revenue, with the aim of further enhancing its return on equity and profitability.

Public Mutual, the Public Bank Group's wholly-owned unit trust and fund management business, achieved a 30% improvement in profit before taxation to RM92 million in the first six months of 2008. Unit trust management fees grew by 49% in the first half of 2008 due to the growth in net asset value ("NAV") of funds under management by 21% to RM26.7 billion over the past twelve months. This was partially offset by the decline in fee on sale of trust units arising from the lower share prices and weaker market sentiment.

Public Mutual's market share of equity funds for the private sector unit trust management business remained high at 52% as at the end of June 2008 as compared to 40% as at the beginning of 2007.

The Public Bank Group is also focusing on the growth of other wealth management products and services through product innovation and higher levels of customer penetration. In the first quarter of 2008, Public Bank launched a single premium principal protected insurance product, the PB-ING Baraka Commodities Plan through its bancassurance distribution arrangement with ING. During the second quarter of 2008, Public Bank launched the Gold Investment Account and a principal protected structured investment product, PB Asian ACES. These new products received good sales response which was significantly above initial targeted sales. Public Bank will continue to launch more wealth management products and services in the second half of 2008 to boost the Group's fee-based commission income.

Capital Position Remains Strong

On 16 May 2008, Public Bank issued RM1.4 billion Subordinated Notes under its RM5.0 billion Subordinated Medium Term Note Programme to enhance the Public Bank Group's and the Bank's capital structure and support future business expansion. The Group's risk-weighted capital ratio remained strong at 13.6% as at the end of June 2008, after the proposed interim dividend for 2008. This was above the industry's risk-weighted capital ratio of 13.0% and the statutory minimum requirement of 8.0%.

Public Bank remained the largest bank in Malaysia and the third largest listed company on Bursa Securities, by market capitalization, as at 16 July 2008, with a market value of RM36.1 billion.

Group Prospects

The Malaysian economy is expected to sustain a respectable growth in the second half of 2008 despite concerns over increased external uncertainties and high inflation. Under these circumstances, the operating environment for the banking industry in Malaysia will remain challenging and competitive in both retail and corporate lending with increased focus on managing asset quality issues.

The Public Bank Group, with its proven profit generation capabilities, a track record of strong asset quality and healthy liquidity profile, is well positioned to continue growing in this challenging operating environment. The Group will remain focused on its core businesses of lending to consumers and SMEs as well as in deposit-taking by leveraging on its wide branch network, efficient multiple delivery channels and superior service standards. The Group will further reinforce the PB Brand and continue to pursue opportunities to improve productivity and increase its fee-based revenue. The Group also remains committed to its tradition of prudence and its belief in strong corporate governance to ensure a sustainable rate of growth for the Group and to safeguard the interests of all its stakeholders.

Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and to continue to record satisfactory performance for the rest of 2008.

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