It was a dream come true for three Manchester United fans who were given the chance to watch the much anticipated match between Manchester United and Chelsea live at Old Trafford Stadium, courtesy of Public Bank Berhad. The trip was awarded as the "One Red Day' prize exclusively arranged for Public Bank's Manchester United Credit Cardmember. The lucky cardmembers were Encik Malizan Bin Zakaria, Mr. Perry Wee and Dr. Sakathevan Somasundram, who made the Manchester United Credit Card their card of choice.

The prize included a priceless "One Red Day" event which fell on 2 April 2010, comprising a visit to the Carrington Training Centre with a fun football training session conducted by Manchester United Soccer School and Old Trafford Museum and Stadium Tour. The winners also had the privilege of dining in the "International Suite" at Old Trafford Stadium, followed by the highlight of the programme, i.e. to witness Manchester United and Chelsea battle it out on the pitch on 3 April 2010 amongst a capacity vociferous crowd at Old Trafford. Accommodation, return flight to Manchester and on-ground transportation were also fully taken care of.

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From left to right: En. Malizan, Mr. Perry and Dr. Sakathevan holding the Carling Cup and The Barclays Premier League Cup at the Old Trafford Stadium
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I am pleased to announce that the Public Bank Group achieved a commendable start to 2010 with a pre-tax profit of RM923 million for the first quarter of 2010, representing a 24% growth from the corresponding period in 2009. Over the same period, the Group recorded a net profit of RM685 million, 16% higher as compared to RM589 million for the corresponding period in 2009. The Group's domestic loan base grew strongly by 4.4% in the first quarter of 2010. With the continued pursuit of prudent credit policies and effective credit monitoring, the Group continues to sustain its strong asset quality with its gross impaired loans ratio maintained at below 1%.

The Public Bank Group's results translate into an earnings per share of 19.7 sen for the first quarter of 2010 and an annualised net return on equity of 25.3%.

Highlights of the Public Bank Group's Performance

• Pre-tax profit of the Group grew by 24% to RM923 million in the first quarter of 2010 as compared to RM745 million in the previous corresponding quarter.
• Net profit attributable to shareholders grew by 16% to RM685 million in the current quarter as compared to RM589 million in the previous corresponding quarter.
• Annualised net return on equity for the first quarter of 2010 stood at 25.3%.
• Earnings per share for the first quarter of 2010 of 19.7 sen was 13% higher as compared to 17.4 sen in the first quarter of 2009.
• Cost-to-income ratio remains efficient at 35.7%.
• Total assets increased to RM219 billion as at the end of March 2010.
• Total loans and advances of the Group grew by RM4.8 billion or 3.5% in the first quarter of 2010 to reach RM142.4 billion as at the end of March 2010, driven by the strong domestic loan growth of 4.4% for the first quarter.
• The Group's total customer deposits increased by 2.8% in the first quarter of 2010 to reach RM175.6 billion as at the end of March 2010. The Group's domestic customer deposits grew at a stronger 3.8%, against the backdrop of a contraction of the domestic industry's customers deposit of 1.3% for the first two months of 2010.
• The gross impaired loans ratio of the Group remained below 1% as at the end of March 2010, as compared to the banking industry's gross impaired loans ratio of 3.4% as at the end of February 2010.
• The Group's loan loss coverage of 172.3% continues to be the highest and most prudent in the Malaysian banking industry.
• The core capital ratio and risk-weighted capital ratio of the Group remain healthy at 9.6% and 13.7% respectively as at the end of March 2010.

Continued Strong Profit Performance
The improved profit performance of the Public Bank Group for the first quarter of 2010 was mainly attributed to the strong growth in net interest and financing income, higher non-interest income and lower loan impairment allowances.

The increase in the Overnight Policy Rate ("OPR") by 0.25% in March 2010 translated into a direct improvement to the Group's net interest margin. Whilst the positive impact of the recent rate increase had not been fully reflected in the current quarter's results, the Group's net interest and financing income improved by RM160 million or 14.5% in the first quarter of 2010 as compared to the corresponding quarter in 2009, on the back of the strong organic growth in loans and customer deposits.

Non-interest income of the Group increased by 31.5% as compared to the corresponding period in 2009, mainly driven by higher income from the unit trust and stockbroking businesses resulting from the stronger equity market, coupled with a broader fee-based business.

The Public Bank Group's loan impairment allowances decreased by 11% despite the strong loan growth for the quarter. This was directly attributed to the continued improvement in asset quality, particularly in the Group's overseas operations.

Continued Strong Loan Growth
In tandem with the improving economic sentiment, the Public Bank Group continued to record a strong increase in total loan and advances of RM4.8 billion, a 3.5% growth for the first quarter of 2010 or a 14% annualised growth rate, to reach RM142.4 billion as at the end of March 2010. Domestic loan growth for the quarter was stronger at 4.4%, growing at an annualised rate of 17.6%. With this, the Group's domestic market share of loans and advances further increased to 16% as at the end of February 2010. Based on the strong loan performance for the first quarter of 2010, the Group is on track and is well positioned to achieve its targeted loan growth rate of 15% for 2010.

The lending activities of the Public Bank Group remained focused on the retail sector, particularly in loans to mid-market commercial enterprises as well as 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 2010.

In the first quarter of 2010, the Public Bank Group's domestic retail loan approvals increased by 19% as compared to the corresponding period of 2009. In particular, domestic loan approvals for hire purchase and housing loans grew at an impressive rate of 32% and 23% respectively.

For the first quarter of 2010, the Group approved a total of RM2.7 billion of loans to domestic SMEs which accounted for 23% of the Group's total domestic loans approved of RM11.6 billion in the same period.

Sustained Strong Asset Quality
The Public Bank Group's asset quality remained strong as at the end of March 2010. The Group's gross impaired loans ratio remained stable at below 1% as at the end of March 2010, as compared to the domestic banking industry's gross impaired loans ratio of 3.4% as at the end of February 2010.

The annualised new impaired loans formation of the Public Bank Group improved significantly to 0.37% in the first quarter of 2010 as compared to 0.61% in 2009, due to the improvement of the Group's overseas new impaired loans formation rate from 3.71% to 0.50%.

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

As at the end of March 2010, the Public Bank Group's loan loss coverage ratio stood at 172.3%, almost two times that of the banking industry's coverage ratio of 93.3% as at the end of February 2010 despite that more than 90% of the impaired loans outstanding are secured.

Healthy Growth of Customer Deposits
Total customer deposits of the Public Bank Group grew by RM4.7 billion or 2.8% in the first quarter of 2010 to reach RM175.6 billion as at the end of March 2010. Domestic customer deposits grew by a stronger 3.8% as opposed to a contraction of the domestic banking industry's total customer deposits of 1.3% for the first two months of 2010.

The Group's liquidity position remains strong with net loans to deposits ratio standing at 79.8% as at the end of March 2010.

Improved Performance of the Group's Overseas Operations
For the first quarter of 2010, the Public Bank Group's overseas operations recorded significant improvements in earnings with a decline in credit charge and lower rates of new impaired loans formation. Pre-tax profit from the Group's overseas operations rose by 53% as compared to the preceding quarter ended December 2009. In comparison to the preceding quarter, overseas loan impairment allowance improved by 41%.

The Public Bank Group's expansion plan in its overseas operations remain focused on its Hong Kong and Cambodian operations. The Public Bank Group currently has a network of 80 branches in Hong Kong and 3 branches in Shenzhen in the People's Republic of China, with a further 2 branches in Hong Kong to be opened in 2010. Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, the largest bank in Cambodia by balance sheet size, presently has 17 branches, with another 10 branches targeted to be opened in 2010.

Expansion of Fee-based Income
The Public Bank Group continued to develop its fee-based income from unit trust, bancassurance and wealth management products, in order to further enhance the Group's profitability and return on equity.

Public Mutual Berhad, the Group's wholly-owned unit trust fund management subsidiary, remained the clear market leader in the private unit trust industry with an overall market share of 42%, whilst its market share in equity funds and Islamic funds stood at 57% and 55% respectively as at the end of February 2010. In the first quarter of 2010, Public Mutual's pre-tax profit grew by 25% to RM63.2 million from RM50.6 million in the corresponding period in 2009 due to higher net assets under management of RM36.6 billion as at 31 March 2010, which was 51% higher as compared to RM24.2 billion a year ago. Public Mutual Berhad continues to build and nurture its large agency force, a highly effective distribution channel to drive the Group's unit trust business.

In the third year of its strategic alliance with ING group on bancassurance distribution, 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. Customers' response to the Group's bancassurance products has been encouraging and the trend is set to continue with more bancassurance product offerings targeted to be launched this year.

Capital Position Remains Healthy
The Public Bank Group has always sought to maintain a healthy level of capital to support the growth of the Group's business, whilst continuing to maintain healthy returns to its shareholders.

The Public Bank Group's capital position remains healthy, with its risk-weighted capital ratio and core capital ratio standing at 13.7% and 9.6% respectively as at the end of March 2010.

The Public Bank Group continues to proactively monitor the latest developments in regard to the Basel III proposals and to address its potential impact on the Group's capital requirements by realigning existing capital management strategies from time to time. The Group will pursue continued proactive capital management in order to maintain a healthy level of capital at all times to support the Group's business growth whilst maximising shareholders' returns.

Group Prospects
The economic performance of Malaysia in the last quarter of 2009, with a growth rate of 4.5% in the quarter amidst strengthening domestic economic activities and external demand, suggest a turnaround of the domestic economy in 2010. The sustained expansion in private consumption, improved conditions for SMEs and increased public sector spending contributed to higher domestic demand, which in turn translates to a healthy domestic operating environment in which the Public Bank Group largely operates.

The Public Bank Group will continue to pursue its strategy of strong organic business growth, maintaining its superior quality loan portfolio, expand its fee-based income and further improve its productivity. At the same time, the Group will continue with its efforts to further enhance its risk management capabilities, uphold its strong corporate governance culture and practices and further reinforce the strong PB Brand. The improved operating environment in 2010 will provide further leverage for the Group to sustain its growth trajectory.

Barring unforeseen circumstances, the Group is expected to continue to record satisfactory performance for the rest of 2010.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Founder & Chairman of Public Bank
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Ever dream of getting your credit card bill paid for? Public Bank Berhad's new marketing campaign "PB Card Pays For Your Bill" may just be your dream come true.

Starting 1 April 2010, hundreds of lucky PB Credit Cardmembers will have their credit card bills paid for during the 6-month credit card promotion. The campaign offers 10 Grand Prizes of FREE 1 Year Credit Card Bill worth RM20,000, as well as 300 Monthly Prizes of FREE 1 Month Credit Card Bill worth RM1,000.

Open to both new and existing PB Credit Cardmembers, the campaign mechanism is simple and straightforward. With every minimum retail transaction of only RM50 charged to PB Credit Card, Cardmembers will automatically be eligible to participate in the Monthly and Grand Prize draw. No SMS registration or contest submission required. Just use any PB Credit Card for retail purchases and contest entries will be automatically system tracked. The more frequent the card usage, the higher the chances of being selected a winner.

On top of this, Public Bank also offers guaranteed activation Cash Back rewards for newly approved PB Credit Cardmember. New-to-Bank Principal Credit Cardmember will get RM60 Cash Back upon accumulated retail spending of RM80 within first 2 months from card approval date. Newly approved supplementary credit cardmember will get RM30 Cash Back upon first usage on new supplementary card within first 45-day from card approval date.

That is not all, new successful card applicants will be accorded Free-for-Life Cardmembership. The first year annual fee is FREE and subsequent years' annual fee waiver is subject to a minimum of 12 swipes over the preceding 12 months. Other benefits of the Cardmembership include Unlimited Cash MegaBonus of up to 0.9% on any amount spent for retail purchases, PB Zero-Interest Instalment Plan (ZIIP) for up to 36 months, PB Flexipay Scheme for up to 24 months with 0% Interest Instalments, and great savings and flexibility with PB Balance Transfer. Cardmembers will also be accorded special discounts and privileges with selected merchants and will also be allowed to participate in the various usage contest arranged throughout the year.

Hesitate no more, apply for a PB Credit Card today and stand a chance to get your PB Credit Card bill paid for! For more information on 'PB Card Pays For Your Bill' campaign and the latest offerings, please access www.pbebank.com.

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The Asset, a leading international financial publication has voted Tan Sri Dato' Sri Dr. Teh Hong Piow, Founder and Chairman of Public Bank as "Asia's Banking Grandmaster" at the closing dinner of the Public Bank Management Seminar 2010, held at Mines International Exhibition and Convention Centre on Saturday, 13 March 2010.

The award was presented to Tan Sri Teh by Mr. Daniel Yu, Editor-in-Chief of The Asset, who also presented Public Bank with the 'Best Domestic Bank in Malaysia' for the eighth consecutive year and "The Asset Platinum Award for All-Round Excellence in Financial Performance, Management, Corporate Governance, Social Responsibility, Environmental Responsibility and Investor Relation", the highest award bestowed by The Asset Corporate Awards in 2009.

Referring to the "Asia's Banking Grandmaster" award presented to Tan Sri Teh, Mr. Daniel Yu in his speech said, "The secret to the success of Public Bank is the leadership by example, led by the Founder and Chairman. So like a thoroughbred in a race, this leadership is able to ensure that Public Bank is able to gallop ahead of the pack."

When the presenting the "Best Domestic Bank in Malaysia", Mr. Daniel Yu said, "Public Bank's ability to continue to grow its business during the most difficult period in global financial markets, while at the same time maintaining the quality of its assets underpin the decision of the board of editors in selecting Public Bank as the Asset Triple A Best Domestic Bank in Malaysia, for eighth year in a row."

In describing "The Asset Platinum Award", Mr, Yu said, "Public Bank scored among the highest in the annual The Asset Corporate Awards, joining a small and select group of Asian corporate, which have excelled in financial performance, management, corporate governance, social and environmental responsibility and investor relations. It is the only bank in Malaysia to have secured The Asset Platinum Award, the highest honour in The Asset Corporate Awards."

At the same ceremony, The Malaysia Book of Records has certified Public Bank as the 'Most Award-Winning Bank' for having achieved 270 awards over a 19-year period (1990-2009). These awards were accorded by over 45 reputable institutions and publications, many of which are "Best Bank" and "Best Managed Company" awards that recognised repeatedly the Bank's impressive performance and exemplary corporate governance.

Datuk Danny Ooi, Founder and Managing Director of The Malaysia Book of Records presented Tan Sri Teh with the certificate, which recognised and listed Public Bank's achievement as a national record-holder and placed the bank amongst the 'Best of the Nation'.

Tan Sri Teh feels especially exhilarated with all the coveted awards and said, "To be given such honour gives me a great sense of satisfaction and all these recognitions make my 60th year in the banking industry very rewarding and enriching experience. And it is certainly a wonderful birthday gift."

Tan Sri Teh also expressed his delight that Public Bank's culture of excellence, developed through the 44 years of Public Bank's operations, has once again received recognition. He continued that these awards will further spur the Bank to push the boundaries of excellence while continuing to demonstrate outstanding performance in the banking industry.

Tan Sri Teh has also been the past recipient of The Asset's "Asia's Banker of High Distinction" and other prestigious awards as FinanceAsia's "Best CEO in Malaysia", "Asian Banker Par Excellence", "Lifetime Achievement Award"' and "One of Asia's Most Influential 1996-2006" and Asiamoney's "Best CEO in Malaysia" , all of which acclaim his exceptional foresight and leadership.

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Tan Sri Teh receiving the 'Asia's Banking Grandmaster' award from Mr. Daniel Yu


From left to right: Executive Director Dato' Sri Lee Kong Lam holding the certificate for the 'Most Award-Winning Bank' by The Malaysia Book of Records, Tan Sri Teh with the 'Asia's Banking Grandmaster' award, Managing Director Tan Sri Dato' Sri Tay Ah Lek holding 'The Asset Platinum Award' and Tan Sri Dato' Sri Thong Yaw Hong Co-Chairman of Public Bank with 'Best Domestic Bank in Malaysia' award.
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As a responsible corporate citizen, Public Bank responded to the call initiated by the IJN Foundation to assist with the operational and management costs in running the newly setup "Halfway House" by providing financial assistance totalling RM500,000.

The cheque was presented by Tan Sri Teh Hong Piow, Founder and Chairman of Public Bank to Toh Puan Dato' Seri Dr. Hajjah Aishah Ong, Chairman of the Board of IJN Trustees this morning at the Menara Public Bank in Kuala Lumpur. The sponsorship is in the form of an annual grant of RM100,000 for a period of five years.

The Halfway House which has 40 beds will provide free accommodation to the families of needy patients undergoing treatment at the Institut Jantung Negara (IJN) to enable close family support which will provide comfort and promote faster recovery to the heart patients.

"This initiative is part of our Bank's CSR programme of caring for the underprivileged and we are proud to extend our assistance when the need arises," said Tan Sri Teh.

At the same ceremony a plaque was presented to Tan Sri Teh by Toh Puan Aishah Ong in recognition of the partnership between Public Bank and Institut Jantung Negara for supporting its Patient Assistance Programme with a total donation of RM240,000 since 2007.

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Tan Sri Teh Hong Piow presenting the mock cheque to Toh Puan Dato' Seri Dr. Hajjah Aishah Ong at Menara Public Bank

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In conjunction with Public Bank's 44th Annual General Meeting held on 2 March 2010, I am pleased to present a review of the Public Bank Group's performance in 2009.

Financial performance
2009 began with an unprecedented crisis in the global financial services sector and threats of a global depression. Despite such challenging conditions and economic uncertainties, the Public Bank Group again recorded another year of solid performance.

In 2009, the Public Bank Group achieved pre-tax profit of RM3.32 billion and net profit of RM2.52 billion. Excluding the effects of the RM200 million one-off goodwill income from the ING bancassurance alliance in 2008, the Group's underlying pre-tax profit grew by 4.5% in 2009.

The strong profit performance was driven by steady net interest income growth, above industry rate of loan growth, sustained strong asset quality and high staff productivity.

The improved underlying profit performance in 2009 translated into a net return on equity of 26.1% and earnings per share of 73.3 sen.

Continued strong loan growth
In 2009, the Public Bank Group achieved strong loan growth of 14.4% for the year, significantly higher than the banking system's loan growth rate of 7.8%. As a result of the consistent strong loan growth rates over the years, the Group's domestic market share of loans increased from 11.1% in 2004 to 15.9% in 2009.

The Group's lending activities remained focused on the financing of residential properties and passenger vehicles, as well as loans to mid-market commercial enterprises. These three sectors accounted for 78% of the Group's total loan portfolio. The Group's financing of residential properties grew by 18% to RM38 billion as at the end of 2009. Passenger vehicle hire purchase financing grew by 8% to RM31.6 billion. Public Bank is the No.1 financier for residential mortgage and passenger vehicles in the domestic market, with market shares of 16.6% and 24.6% respectively.

Total domestic loan approvals in 2009 grew strongly by 22% with housing loan approvals growing particularly strongly by 39% as compared to 2008. Public Bank continued to strongly support the government's efforts in promoting the financing of SMEs. Of the total domestic loans approved of RM47.5 billion in 2009, RM10.3 billion was for commercial loans to SMEs. This benefited about 44,000 SMEs in the country.

Sustained strong asset quality
Defying conventional wisdom which predicted deteriorating asset quality in the recessionary environment at the start of 2009, the Public Bank Group continues to outshine the rest with the best asset quality in the banking industry. The Group's NPL ratios continued to improve in 2009 with its gross NPL ratio reducing from 1.00% to 0.96% whereas its net NPL ratio improved from 0.9% in 2008 to 0.8% in 2009. This is less than half of the Malaysian banking industry's net NPL ratio of 1.8%.

The Group's credit charge-off rate remained low at 0.31% in 2009. The domestic credit charge-off rate was particularly low at 0.11% in 2009, a marked improvement from 0.17% in 2008.

The Group's loan loss coverage ratio increased from 160% in 2008 to 172% in 2009. This was significantly above the 94% coverage for the banking system, despite that more than 90% of the Group's NPLs are secured. The increase in the Group's loan loss coverage was due to additional general allowance set aside for the strong loan growth in 2009 whilst the amount of non performing loans remained stable.

Moving forward, with the Group's prudent lending policies, healthy customer base and the pre-emptive measures taken to assist borrowers to meet their repayment obligations, the Group targets to maintain its low NPL ratios at below 1%.

Healthy expansion in core customer deposits
The Public Bank Group's total customer deposits grew by 13% to stand at RM170.9 billion as at the end of 2009, higher than the industry growth rate of 9.3%. The core customer deposits of the Group grew strongly by 14.8% in 2009, far outpacing the 7.3% growth registered by the banking system. As a result, the Group's market share of core deposits improved from 14.7% in 2008 to 15.4% in 2009. Deposits from individuals, which accounted for 61% of the Group's core customer deposits, represents a 17.4% market share of deposits by individuals as at the end of 2009.

The strong core deposit growth is supported by the Group's extensive network of 248 domestic branches and 1,308 Self-Service Terminals, as well as the superior ISO certified customer service delivery at the branches of the Group.

With the strong deposit growth keeping pace with the growth in loans, the Group continued to maintain its strong liquidity position with the net loan to deposit ratio standing at 79%.

International operations
Against the backdrop of an economic slowdown in the region, the contribution of the international operations of the Group to the Group's pre-tax profit in 2009 fell to 7% with 85% of the Group's profit from overseas operations coming from Hong Kong and Cambodia.

The Public Bank Group's overseas subsidiaries, in particular Public Financial Holdings Group in Hong Kong and CAMPU Bank in Cambodia recorded strong deposits growth of 17.2% and 64.3% respectively in 2009, significantly strengthened their liquidity positions. The growth was backed by the active expansion of their branch networks and sales and marketing resources, on top of the active promotion of the "PUBLIC BANK" brand name in these countries.

The Group's operations in Hong Kong and China has expanded to 80 branches in Hong Kong and 3 branches in Shenzhen in the People's Republic of China presently, with a further 2 branches in Hong Kong and 1 more branch in Shenzhen to be opened in 2010.

CAMPU Bank, the largest bank in Cambodia by balance sheet size, presently has 15 branches, with another 11 branches targeted to be opened in 2010.

In addition, the Group currently has 7 branches in Vietnam, 3 in Laos and 1 in Sri Lanka. There are plans to open another 2 new branches in Vietnam and 1 new branch in Laos this year.

Developing fee-based income
The Public Bank Group continued to develop its fee-based income from unit trusts, bancassurance and wealth management products, in order to further enhance the Group's profitability and return on equity.

Public Mutual, the Group's wholly-owned unit trust fund management subsidiary, continued to maintain its market leadership position. Five new unit trust funds were launched in 2009, bringing the total number of funds managed to 72. Total net asset value of funds under management recorded an impressive growth of 53% from RM23.3 billion as at the end of 2008 to RM35.6 billion as at the end of 2009. This has resulted in an increase in market share from 39% to 43% over the same period, whilst equity funds and Islamic funds market shares stood at 57% and 56% respectively. At the end of 2009, the total number of fund-accounts in Public Mutual increased to 2.3 million with a unit trust consultants force of above 40,000. With the strong support and confidence of unitholders, coupled with the significant expansion of its force of unit trust consultants, Public Mutual is well positioned to continue its market share gains and profitability growth when the market improves further.

In 2009, the Public Bank-ING Bancassurance partnership was considered the fastest growing bancassurance provider in the industry, moving up to 2nd position from 7th place in 2008, based on the volume of new business generated. The Public Bank Group continued to develop its bancassurance business through significant investment in the bancassurance business infrastructure and continued offerings of new products. The Group have also recruited 265 bancassurance sales executives as at the end of 2009 with plans to increase the bancassurance sales force to 600 over the medium-term.

Declaration of a 2nd interim dividend
In view of Public Bank's strong profit performance in 2009, a second interim cash dividend of 25 sen was paid and a share dividend of 1 Public Bank treasury share for every 68 shares held was distributed on 13 February 2010. Together with the first interim dividend of 30 sen paid in August 2009, the total gross dividend for 2009 would comprise 55 sen gross cash dividend and a share dividend which is equivalent in value to a gross cash dividend of 22.2 sen based on Public Bank's share price of RM11.30 as at 31 December 2009. Therefore, the equivalent value of the total gross cash dividend for 2009 is 77.2 sen. This translates to a total dividend payout of 79.3% for 2009, and a healthy gross dividend yield of 6.8%.

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, whilst continuing to maintain strong returns to its shareholders.

The distribution of the share dividend from the Bank's treasury shares is one of the capital management strategies adopted by the Group to maintain a higher level of equity capital whilst still providing a high return to shareholders. The 146 million treasury shares distributed in 2008 and 2009 as share dividends had enabled the Group to preserve a total equity capital of RM1.4 billion, enhancing the capital ratios of the Group by 1.1%. Subsequent to the share dividend distribution, the Bank will continue to hold 29.7 million treasury shares with a total value of RM328 million which are available to further enhance the Group's core equity capital.

In 2009, Public Bank undertook various capital initiatives to further strengthen the Group's capital structure to support its business expansion. This includes the issuance of RM2.1 billion Non-Innovative Tier-1 Stapled Securities and RM473 million Subordinated Notes, which were partly used to refinance the early redemption of its USD350 million Subordinated Notes issued in 2004.

With the various capital initiatives undertaken during the year, coupled with its strong profitability, the Public Bank Group's risk-weighted capital ratio improved from 13.1% in 2008 to 14.2% in 2009 whereas its core capital ratio improved from 7.7% to 9.9% over the same period.

In light with the recent proposed changes to the Basel II capital accord which sets out broadly more stringent capital requirements, particularly in respect of core equity capital, the Group will ensure continued proactive capital management in order to maintain a healthy level of capital at all times to support business growth whilst maximising shareholders' returns.

Second largest non government-linked listed company by market capitalisation
Since the end of 2002, Public Bank's share price had risen by 203% from RM3.64 per share to RM11.04 per share as at 1 March 2010. Public Bank's market capitalisation has increased by 3.5 times from RM10.97 billion as at the end of 2002 to RM38.97 billion. In 2002, Public Bank's market capitalisation was only 42% that of Maybank, being the largest in the banking sector by market capitalisation. Today, the Bank's market capitalisation amounts to 78% of Maybank's market capitalisation.

Recently, on 20 January 2010, Public Bank's market capitalisation of RM42.67 billion stood at its historical high since its listing in 1967. Today, Public Bank is the second largest non government-linked company listed on Bursa Securities by market capitalisation.

Superior returns to shareholders
The efficient capital structure and high return on equity of the Public Bank Group had led to sustained delivery of superior shareholder value over the years.

An investor who had bought 1,000 shares in Public Bank when it was listed in 1967 would now have 135,400 Public Bank shares worth RM1.49 million based on the Public Bank share price of RM11.04 as at 1 March 2010. In addition, the shareholder would have received a total gross dividend of RM633,000 in this period. This translates into a total value of RM2.13 million, representing a remarkable compounded rate of return of 20% annually for each of the 42 years since its listing in 1967.

Over the last 14 months since the beginning of 2009, the Public Bank shares have provided a total return of 40%, inclusive of the cash and share dividends during the period. Over the medium-term of 5 years since the beginning of 2005, an investor would have enjoyed a superior total return of 116%, or compounded 19% annually, over the 5-year period.

Outstanding KPIs
Over the past 5 years, the Public Bank Group has shown sterling business growth and outstanding financial performance. As at the end of 2009, total assets of the Group stood at RM217.1 billion, which has more than doubled when compared to RM92.4 billion five years ago. Over the past 5 years, the Group recorded a compounded average loan growth rate of 19.3% per year which was doubled that of the industry average of 9.1%. Deposits also grew strongly at a compounded average growth rate of 20.9% which outpaced the industry average of 11.2% over the past 5 years.

Over this same period of 5 years, the Group's net return on equity improved significantly from 19.1% in 2005 to 26.1% in 2009, with a surge in the Group's net profit by 73% in this 5 years. Net NPL ratio improved to 0.8% in 2009, less than half as compared to 1.7% in 2005.

Public Bank remained the clear leader in terms of profitability, cost efficiency and asset quality as compared to the 5 largest banking groups in Malaysia. In terms of profitability, the Group's net return on equity of 26.1% is the highest in the Malaysian banking industry and is well above the average of 14.3% achieved by the other 5 banking groups. The Group's cost to income ratio of 34.4% is the lowest in the industry, significantly lower than the latest available industry average of 46.4%. The Group's asset quality remained the best in the industry with the lowest net NPL ratio of 0.8%.

When benchmarked against leading regional banks, Public Bank Group's net return on equity of 26.1% is the highest in the region. The Group is also amongst the top three best performing banks in terms of cost efficiency and dividend payout. Over the medium term, the Group aims to achieve a higher net return on equity of 30%.

Corporate responsibility
Public Bank remains committed to bring sustainable benefits to the community and the environment it operates in. These include contributions through education, healthcare, youth and community activities and support of the underprivileged.

Public Bank continues to support the on-going Public Bank Tree Planting- Climate Change Programme in collaboration with the Malaysian Nature Society, with the planting of up to 20,000 trees.

Public Bank has also been actively channeling low cost funds under various funds launched by Bank Negara Malaysia to assist SMEs and micro enterprises.

With its strong and rising profitability, the Public Bank Group is a major contributor to the fiscal revenue of the country with total tax payments of RM3.6 billion since 2004.

An award winning bank
A total of 54 awards and recognition of excellence were conferred on Public Bank in 2009, including 10 Best Bank or Company in Malaysia awards. The best bank and best company awards, some of which were for a number of consecutive years, are as follows:

• Best Bank in Malaysia by FinanceAsia (10th time)
• Best Managed Company by FinanceAsia (3rd time)
• Best Domestic Bank by The Asset (7th time)
• Best Retail Bank in Asia Pacific by The Asian Banker (1st time)
• Best Retail Bank in Malaysia by The Asian Banker (5th time)
• Best Bank in Malaysia by Alpha Southeast Asia (2nd time)
• Malaysia's Best Managed Company by Asiamoney (2nd time)
• Best Bank in Malaysia by Euromoney (10th time)
• Best Banking Group in Malaysia by World Finance (1st time)
• Best Emerging Market Bank in Malaysia by Global Finance (4th time)

For the seventh consecutive year, Public Mutual is again the biggest recipient of The Edge-Lipper Malaysia Fund Awards with a total of 10 awards won in 2010, including the Best Overall Group Award. Some of the other awards which Public Mutual received in 2009 are:

• Morningstar 2008 Fund Awards (Malaysia) (2nd time)
• AsianInvestor 2009 Investment Performance Award for Best Malaysia Onshore Fund House (2nd time)
• 2008 Asia Asset Management (AAM) 2008 Best of the Best Country Awards for Best Fund House - Malaysia and Best House for Offshore Funds - Malaysia (2nd time)
• Best Malaysian Islamic Bond Fund Manager for 5-year category by Failaka Advisors, Dubai (1st time)
• The Most Outstanding Islamic Fund Manager at the KLIFF (Kuala Lumpur Islamic Finance Forum) Islamic Finance Awards 2009 (3rd time)

Corporate governance
Public Bank's record of excellence in corporate governance continued to be validated by various top corporate governance rankings and awards.

In recognition of Public Bank's top performance on the Malaysian Corporate Governance Index 2009, the Bank was awarded the Overall Excellence Award and the Best AGM Conducted in 2009 Award by the Minority Shareholder Watchdog Group.

Amongst various corporate governance awards received in 2009, Public Bank was awarded the Malaysian Business- CIMA Enterprise Governance Awards 2009 for being the overall winner for the second consecutive year and for Best Returns to Shareholders and Best Corporate Social Responsibility by the Malaysian Business publication.

The Public Bank's 2008 Annual Report won 3 top NACRA awards, including the Overall Excellence Award for the 9th time.

Outlook
For 2010, the global economic outlook remains cautious albeit with emerging signs of gradual global economic recovery. The operating environment for banks in Malaysia is expected to improve in 2010, on the back of the economic growth momentum built up since the second half of 2009.

The Public Bank Group's solid performance in 2009 reaffirms the continued soundness of its proven business strategies and the Group is confident that it is well placed to deliver another strong profit performance in the current financial year.

To achieve this, the Group will continue to expand its lending and deposit-taking businesses at rates higher than the industry's growth rates, accelerate its growth in fee-based revenue, maintain its strong asset quality and further improve its cost efficiency, leveraging on its wide branch network, superior PB Brand and service excellence.

The Group will continue to carry out a balanced strategy to cater for the potential need of higher equity capital for business growth and most importantly, maximising its shareholders' returns.

Barring unforeseen circumstances, shareholders can expect the healthy dividend payout to continue.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman
 

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

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In conjunction with the Golden Tiger Year, Public Bank is pleased to announce the launch of the "PB Gold Rush" Campaign which offers more than RM800,000 worth of gold to reward customers for banking with Public Bank. This campaign will run until 31 July 2010.

The "PB Gold Rush" Campaign offers more than 6 kilograms of gold at 99.9% fineness in the Bank's Gold Investment Account. A total of 118 prizes is up for grabs comprising 18 monthly prizes of 18 grams of gold per customer each month and 10 main prizes that offers the Grand Prize at 1kg worth of gold, 1st prize at 1/2kg of gold, 2nd prize at 1/3kg of gold and 3rd prize at 1/4kg of gold. The Gold Investment Account is an account which allows individual customers to invest in the purest available gold commodity in 99.9% fineness at daily prices for 1 gram in Ringgit Malaysia (RM) and the trading is carried out through a passbook.

The "PB Gold Rush" Campaign is open to all new and existing Public Bank and Public Islamic Bank customers who are individuals aged 18 years old and above.

Each new account / investment signed up for selected deposits, loans, investment, hire purchase and bancassurance products will put customers in the running to win. The chances of winning the gold prizes increase when customers sign up more products with the Bank.

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I am pleased to announce that the Public Bank Group achieved another year of strong performance with a pre-tax profit of RM3.32 billion and net profit of RM2.52 billion for 2009, on the back of a strong 10.2% growth in net interest and financing income. In the previous year, the Group's pre-tax profit of RM3.38 billion included a significant one-off goodwill income of RM200 million in respect of the bancassurance distribution alliance with ING Asia/Pacific Limited ("ING"). Excluding this one-off income, the Group's underlying operating pre-tax profit improved by 4.5%. We are pleased to have delivered a strong set of results for the year, driven by steady revenue growth, above industry rate of loan growth, strong asset quality, cost efficiency and uncompromising prudent risk management. The Group's 2009 results are again a testament to the strength of the PB Brand and the resilience of the Group's core businesses in times of economic uncertainty.

The Public Bank Group's improved profit was mainly due to continued strong growth in net interest and financing income by RM435 million or 10.2% to stand at RM4.71 billion in 2009, despite the negative impact on net interest margins arising from the reduction in the Overnight Policy Rate on three occasions between November 2008 and February 2009. This was mainly driven by loan growth and core customer deposits growth which remained strong at 14.4% and 14.8% respectively, whilst the Group's net non-performing loans ("NPL") ratio continued to be capped at below 1%.

Other operating income amounted to RM1.40 billion in 2009, an increase of 11.4%, excluding the RM200 million one-off goodwill income from ING recorded in the previous year's other operating income. The growth was mainly due to higher income from the unit trust management business and investment income from securities held.

The improved profit performance translated into a net return on equity of 26.1% and earnings per share of 73.3 sen for 2009.

In view of the Public Bank Group's sustained strong performance, the Board of Directors has declared a second interim cash dividend of 25 sen less 25% tax and a share dividend to be distributed from the treasury shares of Public Bank, on the basis of 1 Public Bank share for every 68 existing shares held. Based on the share price of Public Bank (Local) shares of RM11.30 each as at 31 December 2009, the value of the share dividend per Public Bank share is equivalent to a gross cash dividend of 22.2 sen. Together with the first interim dividend of 30 sen less 25% taxation, which was paid in August 2009, the total dividend for 2009, inclusive of the share dividend, is equivalent to a gross cash dividend per share of 77.2 sen. The total net dividend for 2009, including the share dividend, amounts to RM1,997 million and represents a total payout of 79.3% of the Group's net profit for the year. The Board of Directors does not propose any final dividend for 2009.

Highlights of the Public Bank Group's Performance

• Net profit attributable to shareholders was RM2.52 billion as compared to RM2.58 billion in 2008. Excluding the one-off goodwill income from ING in 2008, the Group's underlying operating net profit increased by 3.3%.
• Net return on equity remained strong at 26.1%.
• Earnings per share was 73.3 sen, showing an uptrend on a quarter-to-quarter basis, with 17.4 sen in the first quarter, 17.7 sen in the second quarter, 18.5 sen in the third quarter and 19.7 sen in the fourth quarter of 2009.
• Cost to income ratio remains efficient at 34.4%, and was significantly lower than the industry average of 46.4%.
• Total assets expanded by RM20.9 billion or 10.7% to stand at RM217.1 billion as at the end of 2009.
• Total loans and advances expanded by 14.4% or RM17.3 billion in 2009 to stand at RM137.6 billion as at the end of 2009, significantly above the banking industry's annualised loan growth of 7.4% for the first eleven months of 2009.
• Total customer deposits increased by 13.0% or RM19.7 billion to stand at RM170.9 billion as at the end of 2009.
• Core customer deposits grew strongly by 14.8% or RM16.4 billion to stand at RM127.6 billion as at the end of 2009 as compared to the banking industry's annualised growth rate of core customer deposits of 6.9% for the first eleven months of 2009.
• As at the end of November 2009, the Group's domestic market share of loans and advances and core customer deposits rose to 15.9% and 15.1% respectively from 14.8% and 14.7% respectively as at 31 December 2008.
• Gross NPL ratio remained below 1%, which was significantly lower as compared to the banking industry's gross NPL ratio of 3.4% as at November 2009. Loan loss coverage stood at 172% which is almost two times of the banking industry loan loss coverage ratio of 92%.
• With the improved results in 2009, the Group's and the Bank's risk-weighted capital ratio rose to 14.2% and 13.6% respectively, from 13.1% and 12.8% respectively as at 31 December 2008, after the payment of the second interim dividend.

Highlights of the Public Bank Group's Performance for the Fourth Quarter as compared to the Third Quarter of 2009

• Profit before taxation grew by 5.1% or RM44 million to RM900 million from RM856 million for the third quarter of 2009.
• Net profit grew by 6.1% to RM678 million.
• Net interest and financing income achieved a strong growth of 7.3% in the fourth quarter of 2009, due to continued healthy loans and deposits growth.

Continued Strong Organic Loan Growth and Increasing Market Share

The Public Bank Group achieved a strong loan growth of 14.4% or RM17.3 billion to reach RM137.6 billion as at the end of 2009. This growth rate significantly exceeded the banking industry's annualised loan growth rate of 7.4% as at November 2009. The Group achieved its targeted loan growth for 2009 and this has translated into a stronger position in the market place.

In 2009, the Public Bank Group's domestic loans and advances expanded strongly by 16.8%, driven mainly by financing of residential properties and passenger vehicles, as well as 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 2009. This has led to the Group's market share of domestic loans and advances rising to 15.9% as at the end of November 2009, from 14.8% as at the end of 2008.

Public Bank Group's domestic loan approvals and loan applications rose by 21.9 % and 26.3% respectively in 2009 as compared to the previous year. Housing loan approvals were particularly strong, recording an increase of 39.3% in 2009.

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. In 2009, a total of RM10.3 billion of new domestic SMEs loans was approved, which accounted for 21.7% of the Group's total domestic loans approved of RM47.5 billion for the year.

Sustained Strong Asset Quality

The strong financial performance of the Public Bank Group has consistently been underpinned by its strong asset quality, with the Group's NPL ratios remaining the lowest in the Malaysian banking industry. Despite achieving significantly higher rates of loan growth as compared to that of the banking industry, the Group's gross and net NPL ratios continue to stand at below 1% as at the end of 2009, as compared to the banking industry's gross and net NPL ratios of 3.4% and 1.9% respectively as at the end of November 2009.

As at the end of 2009, the Public Bank Group's loan loss coverage ratio further increased to 172% as compared to 160% as at the end of 2008, which was almost twice the average coverage ratio of 92% for the banking industry. The growth in the Group's loan loss coverage was primarily due to additional general allowance set aside for the strong loan growth. The Group's general allowance of RM2.05 billion as at the end of 2009 was about 2 times of the entire net NPL amount of RM1.10 billion, despite that more than 90% of the NPLs outstanding are secured.

Strong Growth in Core Customer Deposits

The Public Bank Group's customer deposits grew by RM19.7 billion to RM170.9 billion, representing a healthy growth rate of 13.0%, which was mainly supported by growth in its core customer deposits funding base. Core customer deposits of the Group grew by RM16.4 billion or 14.8% to RM127.6 billion which was double that of the pace of growth of the banking industry's core customer deposits of 6.9%. For the year, core customer deposits which comprise fixed deposits, savings accounts and current accounts grew by 12.3%, 20.1% and 20.5% respectively. The overall strong deposit growth boosted the Group's market share of domestic core customer deposits to 15.1% as at the end of November 2009.

The Public Bank Group continues to experience strong core customer deposits growth which reflects on the Group's strong domestic franchise and a stable funding base to support the Group's continued strong loan growth.

The Public Bank Group's overseas subsidiaries, in particular Public Financial Holdings Group ("PFHG") in Hong Kong and Cambodian Public Bank Plc ("CAMPU Bank") also delivered strong deposits growth of 17.2% and 64.3% respectively in 2009. The growth was 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 these countries. Presently, PFHG has 72 branches in Hong Kong and 3 branches in Shenzhen in the People's Republic of China. CAMPU Bank, the largest bank in Cambodia by balance sheet size, has 15 branches as at the end of 2009.

With the strong customer deposits growth matching the high loan growth rate, the Public Bank Group's liquidity position remained strong with net loans to deposits ratio standing at 79.2% as at the end of 2009.

Expansion of Wealth Management Products and Services

With the continued strong support and confidence of unit holders, coupled with its large and growing force of over 40,000 unit trust consultants, Public Mutual, Public Bank's wholly-owned unit trust and fund management subsidiary delivered strong performance in 2009, with its overall market share of the private sector unit trust management business rising to 43% as at the end of 2009 from 39% as at the end of 2008. Public Mutual's market share of equity funds and Islamic funds grew to 57% and 56% respectively, from 54% and 52% respectively a year ago. For 2009, the profit contribution of the Group's fund management segment grew by 16.1% to RM212.8 million.

Public Mutual's net asset value of funds under management stood at RM35.6 billion as at 31 December 2009, representing a 53% growth from RM23.3 billion as at the end of 2008. Public Mutual's total unit trust sales for the year stood at RM7.6 billion of which RM4.9 billion was achieved during the second half of 2009. Five new unit trust funds were launched during the year and the number of account holders in Public Mutual has grown to 2.3 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.

In 2009, the Public Bank-ING Bancassurance partnership was considered the fastest growing bancassurance provider in the industry, moving up to 2nd position from 7th place in 2008, based on the volume of new business. The Public Bank Group continued to develop its bancassurance business through significant investment in the bancassurance business infrastructure and continued offerings of new products. The bancassurance business is supported by a dedicated sales force of 265 Bancassurance Sales Executive as at 31 December 2009, and this number is set to grow to 600 by 2014. A total of 20 products have been launched since the inception of the bancassurance partnership at the start of 2008. The core bancassurance offering known as the One Solution Plan is a whole-life regular premium unit-linked product offering a series of 7 packages to suit a wide range of insurance needs of customers of the Group. The sales of overall bancassurance products in terms of annualised premium equivalent increased by 31% in 2009 as compared to the previous year and the trend is set to continue with more bancassurance product offerings in the pipeline.

In order to provide more 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. Despite the difficult market condition, all these new products generated good customer response with total investments of RM219 million.

Capital Position Remains Strong

The Public Bank Group proactively manages its capital position to ensure a healthy level of capital with sustainable and strong returns to shareholders. The capital position of the Group was further enhanced with the issuance of capital securities, particularly non-innovative Tier-1 stapled securities and subordinated debt securities.

During the year, Public Bank has taken various capital initiatives which included the issuance of RM2.09 billion of Non-Innovative Tier 1 Stapled Securities and RM473 million of Subordinated Notes. These were partly to refinance the early redemption of its USD350 million (RM1.2 billion equivalent) Subordinated Notes issued in 2004 on the optional redemption date of these Subordinated Notes. These initiatives were taken to further enhance both the Public Bank Group's and the Bank's capital structure to support business expansion plans of the Group and the Bank.

As at the end of 2009, the Public Bank Group's risk-weighted capital ratio ("RWCR") and core capital ratio ("CCR") rose to 14.2% and 9.9% respectively, after deducting the second interim dividends for 2009, as compared to 13.1% and 7.7% respectively as at the beginning of the year. Public Bank's RWCR improved to 13.6% from 12.8% as at the end of 2008 and was significantly above the minimum statutory requirement of 8%.

Group Prospects

As the Malaysian economy gradually builds its growth momentum on the back of improved economic conditions in the second half of 2009, the operating environment for banks in Malaysia is expected to improve in 2010.

Going forward, the Public Bank Group will continue to pursue its strategy of strong organic business growth, maintaining its superior quality loan portfolio and improving its productivity. At the same time, the Group will continue with its efforts to further reinforce the strong PB Brand, enhance its risk management capabilities and uphold its strong corporate governance culture and practices. The Group, having overcome the many challenges faced thus far, will be stronger and more resilient as a leading financial services provider and is well set to sustain its growth trajectory as the economic recovery becomes more entrenched.

Barring unforeseen circumstances, the Public Bank Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2010.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman of Public Bank
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Public Bank's annual Sales Convention, held on 18 January 2010, was attended by 1,500 Senior Management and sales-related staff from both its domestic and overseas operations.

The Founder and Chairman of Public Bank, Tan Sri Dato' Sri Dr. Teh Hong Piow, said that the Sales Convention, which is held annually in January, is aimed at setting key business directions as well as aligning strategies and action plans of sales teams in the Public Bank Group to the Group's 2010 sales and business targets.

Tan Sri Teh said that the Public Bank Group will, in 2010, continue to build on its healthy loans and deposits growth, whilst maintaining strong asset quality. The Public Bank Group will also drive its Islamic operations and its fee-based portfolio, which include bancassurance and financial planning products and services.

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Tan Sri Teh with the Top 5 Sales Achievers
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