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.

I am pleased to announce that the Public Bank Group achieved a 51% increase in net profit attributable to shareholders to RM717 million in the first quarter of 2008 from RM476 million in the previous corresponding quarter. The net profit of RM717 million represents 29% of the market consensus of the 2008 full year net profit of RM2.47 billion. The Group's pre-tax profit improved by 44% to RM971 million over the same period.

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

Net interest income and net income from Islamic Banking for the quarter grew by 17% to RM1,018 million, surpassing the RM1 billion mark for the first time. This was driven by the continued strong expansion in both the Public Bank Group's lending and deposit-taking businesses as well as further improvement in asset quality. Other operating income grew strongly by 93% to RM558 million as compared to RM289 million in the previous corresponding period. The Group saw a strong growth in its wealth management business, particularly the fund management business and bancassurance distribution pursuant to its 10-year regional strategic alliance with ING/Asia Pacific Limited ("ING"). In addition, a goodwill payment of RM200 million was received from ING during the quarter pursuant to this strategic alliance.

The increase in loan loss allowances during the quarter as compared to the previous corresponding quarter was partly due to additional specific allowance made for old non-performing loan accounts secured by properties which are more than seven years. These accounts are fully provided for with no value assigned to the collateral.

Highlights of the Public Bank Group's First Quarter Performance

• Net profit attributable to shareholders increased by 51% as compared to the corresponding quarter ended 31 March 2007, contributed by strong growth of 46% in operating profit.
• Annualised net return on equity for the first quarter of 2008 improved further to 34.0% as compared to 26.3% for the financial year ended 31 December 2007.
• Earnings per share increased by 51% to 21.4 sen in the first quarter of 2008 as compared to 14.2 sen in the previous corresponding period.
• Non-interest income grew by 93% during the quarter.
• Productivity and efficiency improved further as reflected by the lower cost to income ratio of 28.6% in the first quarter of 2008 as compared to 33.5% in the previous corresponding quarter.
• Public Bank Group's total assets stood at RM178.1 billion as at the end of March 2008, which was almost three times the Group's total asset size of RM61.9 billion as at the end of 2002.
• Total loans and advances grew by RM5.6 billion or an annualized rate of 22% during the first quarter of 2008 to reach RM106.6 billion as at the end of March 2008.
• Total customer deposits rose at an annualized rate of 16.4% to stand at RM144.5 billion as at the end of March 2008.
• Net non-performing loan ratio further improved from 1.2% as at the end of December 2007 to 1.1% as at the end of March 2008 and was about one third that of the banking industry's net NPL ratio of 3.1%.
• The Group's risk-weighted capital ratio remains strong at 12.2% as at the end of March 2008.

Continued Strong Loan Growth

In the first quarter of 2008, the Public Bank Group's loans and advances expanded by RM5.6 billion or 5.5% which is equivalent to an annualized rate of 22% to reach RM106.6 billion as at the end of March 2008. As a result of a higher rate of growth compared to the industry loan growth rate, the Group's domestic market share for loans and advances rose to 14.6% as at the end of February 2008 from 14.4% as at the end of 2007.

The lending activities of the Public Bank Group remained focused on the retail sector, in particular consumer loans for the financing of residential properties and purchase of passenger vehicles and loans to small- and medium-sized enterprises. These sectors accounted for 66% of the total loan portfolio of the Group as at the end of March 2008. Loan approvals for these key sectors rose by 20% in the first quarter of 2008 as compared to the previous corresponding quarter.

Sustained Strong Asset Quality

The Public Bank Group's non-performing loans ("NPL") continued to trend downwards. In the first quarter of 2008, the amount of NPL decreased by RM86 million or 6% to RM1.32 billion, despite a RM5.6 billion growth in the total loan base. Gross and net NPL ratios improved to 1.2% and 1.1% respectively as at the end of March 2008 compared to 1.4% and 1.2% as at the end of 2007. The Group's net NPL ratio of 1.1% was about one third that of the Malaysian banking industry's net NPL ratio of 3.1%. The level of net new NPL formation also declined in the first quarter of 2008, as reflected by the ratio of net new NPL to gross loans of 0.25% in the current quarter compared to 0.44% for the year ended 31 December 2007.

Apart from the healthy NPL ratio, the Public Bank Group also maintained a high level of provisioning with a loan loss coverage ratio of 132% as at the end of March 2008, significantly above the banking industry's coverage ratio of 76%. The Group's general allowance stood at RM1.58 billion as at the end of March 2008, exceeding the total NPL amount of RM1.32 billion despite that more than 90% of the NPLs are secured.

Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality and loan loss coverage.

Healthy Growth in Customer Deposits

The Public Bank Group's total customer deposits increased by RM5.7 billion or 4.1% in the quarter, equivalent to an annualized growth rate of 16.4%, to stand at RM144.5 billion as at the end of March 2008. The growth was contributed by wholesale deposits in the form of money market deposits and negotiable instruments of deposits, which grew by 8.1% or RM3.4 billion during the quarter, as well as a healthy 2.4% growth in core customer deposits.

With the healthy growth in customer deposits, the Group's liquidity remains strong with loans to deposits ratio standing at 72.6% as at the end of March 2008.

Expansion of Overseas Operations

The international operations of the Group achieved 25% growth in profit before taxation for the first three months of 2008, before taking into account the impact of a stronger Ringgit exchange rate.

The Group's operations in Hong Kong accounted for two-thirds of the total profit from international operations. The Public Financial Holdings Group registered strong organic loan growth of 9% in the first quarter of 2008, backed by the Group's large branch network and active promotion of the "PUBLIC" brand name in Hong Kong.

The Group's wholly-owned subsidiary in Cambodia, Cambodian Public Bank Ltd ("CAMPU Bank"), delivered strong operating performance with profit before taxation increasing by 79% compared to the previous corresponding period. The profit growth was underpinned by strong loan and deposit growth of 34% and 17% respectively during the first three months of 2008. With the opening of another branch during the period, CAMPU Bank is now operating with 10 branches and is the largest lender in Cambodia.

Strong Growth in Wealth Management Products and Services

The Group achieved a significant growth of 93% in non-interest income to RM558 million in the first quarter of 2008, contributed mainly by the strong growth in the Group's fund management business and bancassurance distribution.

The 10-year regional strategic alliance between Public Bank and ING for bancassurance distribution came into effect on 1 January 2008 and a goodwill payment of RM200 million was received from ING. During the first quarter of 2008, Public Bank launched its first single premium insurance product, PB-ING Baraka Commodities Plan, which is a 3-year investment-linked insurance capital protected fund. Total sales achieved for the PB-ING Baraka Commodities Plan was RM182 million which is significantly higher than the targeted sales for investment-linked insurance products for the year. With the strategic alliance with ING, fee income from bancassurance distribution for 2008 is expected to grow by at least three fold from that of 2007.

Public Mutual, the Group's wholly-owned unit trust management subsidiary, continued to achieve strong performance in the first quarter of 2008 with a 36% increase in pre-tax profit to RM45 million as compared to RM33 million in the first three months of 2007. Unit trust management fees increased by 59% to reach RM88 million compared to RM55 million in the corresponding period in 2007. This was due to the significant growth in net asset value ("NAV") of funds under management over the last twelve months to RM26.2 billion as at the end of March 2008, 42% higher than the NAV of RM18.5 billion as at 31 March 2007. This led to an increase in Public Mutual's market share of the private sector unit trust management business to 39.4% as at the end of March 2008 compared to 35.4% a year ago.

Capital Position Remains Strong

The Public Bank Group has always maintained an efficient level of capital to support the Group's business. Public Bank had implemented the Standardised Approach under the Basel II Capital Accord with effect from 1 January 2008. The Group's risk-weighted capital ratio stood at 12.2% as at the end of March 2008, which is significantly above the statutory minimum requirement of 8.0%.

The proposed Subordinated Medium Term Note Programme for issuance of subordinated notes of up to RM5 billion, which was recently approved by Bank Negara Malaysia and pending approval from the Securities Commission, will provide greater flexibility to Public Bank over the next few years to further enhance the efficiency of its capital structure whilst supporting future business expansion.

Public Bank is the second largest bank and the fourth largest listed company on Bursa Securities, the Malaysian Stock Exchange, in terms of market capitalization. As at 11 April 2008, the market capitalization of Public Bank stood at RM 38.6 billion, a 43% increase as compared to RM26.9 billion as at the beginning of 2007.

Group Prospects

Despite the increasingly challenging environment due to high global oil prices, tighter global credit conditions and deceleration of the US economy, the Malaysian economy is expected to remain steady in 2008 supported by its strong economic fundamentals. The banking industry in Malaysia will continue to be driven by consumer financing and SME lending, strong growth in retail and wholesale deposits and rising demand for wealth management services. However, the intense competition in the financial services sector will continue to exert pressure on lending margins.

The Public Bank Group will continue to focus on its core business of lending to consumers and SMEs and to promote a wider range of deposit products in both its domestic and overseas markets. The Group will also expand the scale and scope of its fee-based revenue by widening its suite of wealth management products and services. In its pursuit of business expansion, the Public Bank Group remains committed to its tradition of prudence and the maintenance of its strong corporate governance culture to ensure the sustainable long-term growth of the Group.

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

I am pleased to announce that the Public Bank Group’s pre-tax profit increased by 24% to reach a record RM3,004 million in 2007, surpassing the RM3 billion mark for the first time. The Group’s earnings per share stood at 63.3 sen, up by 21% from 2006 whilst net return on equity grew strongly from 21.9% in 2006 to 26.3% in 2007.

The strong financial performance of the Public Bank Group was attributed to a healthy growth in net interest and financing income, strong other operating income as well as lower loan loss allowances, partially offset by an increase in operating expenses.

Net interest income and net income from Islamic Banking increased by RM424 million or 13% to RM3,722 million in 2007, on the back of the continued strong growth in both the Public Bank Group’s lending and deposit-taking businesses, as well as further improvement in asset quality. Other operating income expanded by 43% to RM1,389 million, mainly contributed by higher fee income due to significant growth of the Group’s fund management business, increase in commissions from stockbroking activities, as well as higher gain from the sale of securities. This had resulted in the ratio of non-interest income to total income increasing from 23% in 2006 to 27% in 2007. Loan loss allowances decreased by RM59 million mainly due to higher recovery of non-performing loans.

In view of the Public Bank Group’s stellar performance, the Board of Directors is pleased to propose a final dividend of 40 sen and a special dividend of 10 sen, totaling 50 sen less 26% taxation. Together with the interim dividend of 25 sen less 27% taxation, which was paid in August 2007, the dividend paid and payable for 2007 amount to 75 sen per Public Bank share or RM1,854 million in total.  The Group’s risk-weighted capital ratio remains strong at 12.4% after the payment of the proposed final and special dividends.

Highlights of the Public Bank Group’s Performance

• Pre-tax profit for 2007 expanded by 24% to RM3,004 million as compared to 2006.

• Net profit attributable to shareholders expanded by 23% to RM2,124 million in 2007 as compared to RM1,727 million in 2006.

• Net return on equity for 2007 increased to 26.3% compared to 21.9% in 2006 and is more than double the net return on equity of 12.1% five years ago.

• Earnings per share jumped by 21% to 63.3 sen from 52.1 sen in 2006.

• Pre-tax profit and net profit for the fourth quarter increased by 6% and 7% to RM821 million and RM580 million respectively as compared to the preceding quarter ended 30 September 2007.

• Cost-to-income ratio remains low at 33.1% as compared to the industry average of 44.0%.

• Total assets grew by 18% in the year to reach RM174.2 billion as at the end of 2007, which was almost three times the Group’s total asset size of RM61.9 billion as at the end of 2002.

• Total loans and advances expanded by 20% or RM17.1 billion to stand at RM101.4 billion as at end of 2007 with loan market share rising to 14.0% as at November 2007 from 13.2% as at the end of 2006.

• Total customer deposits increased by 24% to reach RM138.8 billion as at end of 2007, leading to increase in market share of deposits to 14.3% as at November 2007.

• Net non-performing loan ratio improved to 1.2% as at the end of 2007 compared to 1.6% a year ago, with loan loss coverage standing at 119% which is the highest and most prudent in the Malaysian banking industry.

• Risk-weighted capital ratio remains strong at 12.4% as at end of December 2007, after deducting the proposed final and special dividends.

• The Group’s wholly-owned unit trust management subsidiary, Public Mutual, increased its total fund assets under management by 75% to RM28.4 billion as at end of 2007 and commanded an improved market share of 40.0% as at end of 2007 from 27.6% as at the beginning of 2006.

Improved Shareholder Value and High Dividend Payouts

The Public Bank Group’s strong profit performance is reflected in Public Bank’s outperforming share price. Public Bank (Local) share price and Public Bank (Foreign) share price both rose to RM11.00 as at the end of 2007 from RM7.75 and RM7.85 respectively at the start of the year. This together with the total gross dividend received during the year translate to an annual return of 50% in 2007 to Public Bank shareholders. Public Bank’s market capitalization increased by 44% from RM26.9 billion to RM38.8 billion during the same period.

The Public Bank Group continued to pursue a high dividend payout policy in 2007 as an integral part of the Group’s initiatives to improve its capital efficiency. Its dividend payout ratio for 2007 further increased to 87% from 84% in 2006.

Strong Organic Loan Growth

The Public Bank Group’s loans and advances increased by 20% to stand at RM101.4 billion as at the end of 2007. The total loan growth amount of RM17.1 billion in 2007 is 43% higher than the organic loan growth amount of RM11.9 billion recorded in 2006, contributed by higher growth achieved by both the Group’s domestic as well as overseas operations. The Group’s domestic market share for loans and advances rose to 14.0% as at November 2007 from 13.2% at the beginning of 2007.

The Public Bank Group’s lending activities continued to be focused on the retail sector, with commercial lending to small-and medium-sized enterprises (“SMEs”) and consumer loans for the financing of residential properties and purchase of passenger vehicles accounting for 68% of the total loan portfolio of the Group as at the end of 2007. During the year, loan approvals for these key sectors rose by 35% compared to 2006.

Further Improvement in Asset Quality

The Public Bank Group’s asset quality remains the strongest in the industry and is ranked the best amongst all banks in Malaysia, reflecting the Group’s continued prudent lending policies and practices which were complemented by strong credit management.

The Public Bank Group’s gross non-performing loans (“NPL”) ratio improved to 1.4% from 1.9% a year earlier. Net NPL ratio further improved to 1.2% as compared to 1.6% as at the end of 2006. The Group’s net NPL ratio of 1.2% was about one third that of the Malaysian banking industry’s net NPL ratio of 3.3%.

The Public Bank Group’s total gross NPL amount decreased by 11% or RM174 million to RM1.40 billion as at the end of 2007, despite a RM17.1 billion growth in the Group’s total loan base during the year. The level of net new NPL formation improved significantly, as reflected by the ratio of net new NPL to gross loans of 0.44% in 2007 as compared to 0.78% in 2006. The lower new NPL formation coupled with strong loan recoveries had led to an improvement in the Group’s credit charge-off rate to 0.21% in 2007 as compared to 0.34% in 2006.

The Public Bank Group also maintained a high level of provisioning with a loan loss coverage ratio of 119% as at the end of 2007, significantly higher than the banking industry’s coverage of 73% as at the end of November 2007. The increase in the Group’s loan loss coverage ratio from 100% a year ago was primarily due to additional general allowance set aside with declining level of NPLs. As at the end of 2007, the Group’s general allowance of RM1.52 billion was about 1.2 times of the net NPL amount of RM1.25 billion despite that 90% of the NPLs are secured.

Strong Growth in Customer Deposits

The total customer deposits of the Public Bank Group grew by 24% or RM27.0 billion to stand at RM138.8 billion as at the end of 2007.

The Public Bank Group’s wholesale deposits in the form of money market deposits and negotiable instruments of deposits issued grew by RM10.6 billion or 33% whilst core customer deposits also registered strong growth, with lower cost savings deposits and current accounts as well as fixed deposits growing by 14%, 24% and 21% respectively in 2007. The strong growth in customer deposits was further enhanced through the expansion of the Group’s foreign currency deposits as well as the launch of the Group’s first offering of a structured investment product. As a result, the Group’s market share of domestic deposits increased to 14.3% as at the end of 2007. The Group’s liquidity has also improved with loans to deposits ratio standing at 71.6% as at the end of 2007 compared to 74.1% a year earlier.

Expansion of Overseas Operations

The Public Bank Group’s profit from its overseas operations recorded a 32% increase to RM436 million in 2007 despite the negative foreign exchange impact due to the strengthening of Ringgit against the Hong Kong Dollar and the US Dollar. This represented 15% of the Group’s profit before taxation for 2007. Public Financial Holdings Limited Group in Hong Kong and Cambodian Public Bank in Cambodia were the main contributors to the strong performance, chalking up growth in pre-tax profit of 32% and 65% respectively.

The Group’s commercial bank in Hong Kong, Public Bank (Hong Kong) Limited, continued to register strong loan and deposit growth of 51% and 44% respectively in 2007. The strong growth was supported by the active promotion of the Group’s PB Brand in Hong Kong, the expansion of Public Bank (Hong Kong)’s branch network and active marketing of its loan and deposit products. Since its acquisition by the Public Bank Group in May 2006, Public Bank (Hong Kong) has opened 11 new branches in Hong Kong and 1 new branch in Shenzhen, bringing the total branch network to 25 branches currently. Together with the Group’s finance company in Hong Kong, Public Finance Limited, the total branch network of the Group in Hong Kong and Greater China had expanded to 66 branches from 56 branches as at the end of 2006.

The Group’s commercial banking subsidiary in Cambodia, Cambodian Public Bank Ltd (“CAMPU Bank”), also achieved rapid expansion of its lending as well as deposit-taking activities. During the year, customer deposits grew by 59% while loans grew strongly by 130% and making CAMPU Bank the largest lender in Cambodia as at the end of 2007. CAMPU Bank has 9 branches currently, an increase of 4 branches since the beginning of 2007.

In the first quarter of 2008, the Public Bank Group plans to further expand its branch network overseas with the opening of 2 branches each in Hong Kong, Cambodia and Laos and 1 branch in Vietnam.

Besides the significant expansion of the Public Bank Group’s commercial banking activities overseas, the Group has also ventured into the general insurance business during the year with the setting up of a 55% owned subsidiary in Cambodia, CampuBank Lonpac Insurance Plc, on 30 August 2007. This subsidiary, whose minority shareholder is LPI Capital Bhd, contributed marginally to the Group’s profit during its initial 4-month operations and is expected to make more significant contribution in the medium-to longer-term.

Outstanding Performance of Fund Management Business

Public Mutual, the wholly-owned unit trust fund management subsidiary of Public Bank, significantly outperformed the industry in 2007. Twenty one new unit trust funds were launched during the year, bringing the total number of funds managed by Public Mutual to 55. As at the end of 2007, net assets value (“NAV”) of funds under management stood at RM28.4 billion, an increase of 75% in 2007. Seventy nine percent of Public Mutual’s NAV of funds under management are equity linked funds. Over a period of less than 2 years, Public Mutual has increased its market share of the private sector unit trust management business to 40.0% as at the end of 2007 from 27.6% at the beginning of 2006, thus strengthening its market leadership position further.

Total unit trust sales of Public Mutual surged to a record high of RM13.1 billion, more than three times that of the total unit trust sales of RM4.1 billion achieved in 2006. Unit trust management fees and income on sale of trust units grew by 64% and 221% respectively to reach RM285 million and RM200 million respectively. As a result, Public Mutual achieved a 88% increase in pre-tax profit to RM183 million in 2007.

The number of Public Mutual unit trust agents increased to nearly 30,000 agents at the end of 2007 from 11,800 agents at the beginning of 2006. The rapid expansion in the sales agency force is backed by the strong Public Bank Group branding and reputation, and Public Mutual’s excellent fund management track record and award-winning fund performances.

Capital Position Remains Strong

The Public Bank Group has always maintained a strong and efficient level of capital to support the strong growth of the Group’s business. As at the end of 2007, the Group’s risk-weighted capital ratio remained strong at 12.4%, after deducting the proposed final and special dividends for 2007. This was significantly above the statutory minimum requirement of 8.0%.

Public Bank’s implementation of the Standardised Approach under the Basel II Capital Accord with effect from 1 January 2008 will see a strengthening of the risk-weighted capital ratio of the Bank by at least 0.6%.

Group Prospects

Economic growth in the Asian region is expected to remain positive in 2008 despite the increasingly challenging environment due to high global oil prices, tighter global credit conditions and deceleration of the US economy. The Malaysian economy is also expected to be resilient, boosted by supportive government policies to promote domestic consumption and support SMEs as well as development activities of the Ninth Malaysia Plan and regional development initiatives. Competition, however, will intensify in the financial services sector leading to further pressure on lending margins.

In this challenging environment, the Public Bank Group will continue to pursue its strategy of high organic business growth, improving cost efficiency and maintaining strong asset quality to sustain profitability growth. The Group has also embarked on initiatives to enhance long-term fee-based revenue by expanding the Group’s fund management and bancassurance business as well as wealth management services, including structured investment products. The 10-year regional strategic alliance between Public Bank and ING/Asia Pacific Limited for bancassurance distribution which came into effect on 1 January 2008 is expected to boost the Group’s fee-based commission income in the medium- to longer- term. In its pursuit of business expansion, the Public Bank Group will continue to adhere to good corporate governance and transparency as well as maintain its strong risk management policy.

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

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

* * * * * * * *

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

* * * * * * * *

I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM2.18 billion for the nine months ended 30 September 2007, a 24% increase compared to the corresponding period in 2006. The Group’s net profit attributable to shareholders rose by RM262 million or 20% to RM1.54 billion over the same period last year.

The improved profit performance of the Public Bank Group was contributed by strong topline growth in net interest income, net income from Islamic Banking operations and other operating income as well as lower loan loss allowances, partially offset by an increase in marketing and promotional expenses. 

The increase in net interest income and net income from Islamic Banking operations by RM288 million or 12% to RM2,723 million was driven by a 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 41% to RM1.0 billion, mainly attributable to higher fee income from sales of trust units, higher unit trust fund management fees and commissions from stockbroking activities, as well as higher net gain from the sale of securities. Loan loss allowances decreased by RM51 million mainly due to higher recovery of non-performing loans.

Highlights of the Public Bank Group’s Performance

• Pre-tax profit for the third quarter of 2007 increased by 6% to RM774 million as compared to the preceding quarter ended 30 June 2007, contributed by strong growth of 8% in operating profit as compared to second quarter of 2007.
• Annualised net return on equity for the nine-month period ended 30 September 2007 improved further to 24.4% compared to 21.9% in 2006.
• Earnings per share for the nine-month period ended 30 September 2007 improved to 46.0 sen compared to 38.7 sen in the previous corresponding period.
• Productivity and efficiency improved further on a quarter-to-quarter basis as reflected by the lower cost to income ratio of 32.2% for third quarter of 2007 as compared to 34.0% in second quarter of 2007.
• Public Bank Group’s total assets increased by 12% during the nine-month period to stand at RM165.62 billion as at the end of September 2007.
• Total loans and advances increased to RM96.19 billion as at end of September 2007, representing an annualized growth rate of 19%. This is higher than the annualized growth rate of total loans and advances for the first half of 2007 of 17%.
• Total customer deposits grew by RM18.86 billion to reach RM130.65 billion as at end of September 2007, representing an annualized growth rate of 22%.
• Net non-performing loan ratio improved to below 1.4% as at the end of September 2007 compared to banking industry’s rate of 3.6% as at end of August 2007. Loan loss coverage stood at 112% which is the highest and most prudent in the Malaysian banking industry.
• Risk-weighted capital ratio remains strong at 12.9% as at end of September 2007. This ratio was also well above the statutory minimum requirement of 8.0%.
• Public Mutual’s total assets under management expanded by 52% from RM16.19 billion at the end of 2006 to reach RM24.54 billion as at end of September 2007. During the nine-month period to September 2007, the total sales of trust units reached a record high of RM8.39 billion, which was over 3 times that of the total sales of RM2.77 billion achieved in the previous corresponding period in 2006 and more than doubled the total sales of trust units in the whole year of 2006 of RM4.10 billion.

Sustained Strong Loan Growth and Increasing Market Share

The Public Bank Group expanded its lending business by 14% or RM11.82 billion in the first nine months of 2007, or an annualized growth rate of 19%. As a result of achieving higher than the industry loan growth rate, the Group’s domestic market share for loans and advances increased further to 13.7% as at end of September 2007 from 13.2% at the beginning of 2007. The Group’s market share of the Malaysian banking industry’s lending business has more than doubled from 6.4% in 2001 to 13.7% currently.

The lending activities of the Public Bank Group remained focused on the financing of small- and medium-sized enterprises (“SMEs”), residential properties and passenger vehicles. As at the end of September 2007, loans to these key sectors accounted for 70% of the Group’s total loan portfolio.

Sustained Strong Asset Quality

Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality and loan loss coverage.

The Public Bank Group’s total gross non-performing loans (“NPL”) amount decreased by RM62 million or 4% from the beginning of 2007 to RM1.52 billion as at end of September 2007, despite a RM11.82 billion growth in the total loan base. Gross NPL improved to 1.6% as at end of September 2007 as compared to 1.9% as at end of 2006. Net NPL further improved to below 1.4% as compared to 1.6% as at end of 2006. During the nine-month period, the Group’s annualized credit charge-off rate improved to 0.22% as compared to 0.34% in 2006. The level of net new NPL formation had also declined as reflected by improvement in the ratio of the net new NPL to gross loans of 0.34% in the first nine months of 2007 as compared to 0.47% for the corresponding period in 2006.

Apart from the healthy net NPL ratio, the Public Bank Group also maintained a comfortable level of provisioning with a loan loss coverage ratio of 112%, significantly higher than the banking industry’s coverage of 69% as at end of August 2007. The Group’s general allowance of RM1.47 billion was sufficient to cover the entire net NPL amount of RM1.29 billion as at end of September 2007 despite that more than 90% of the NPLs are secured.

Healthy Growth in Customer Deposits

Total customer deposits of the Public Bank Group rose by 17% or RM18.86 billion to stand at RM130.65 billion as at end of September 2007. The Group’s wholesale deposits in the form of negotiable instruments of deposits and money market deposits expanded by 19% to RM38.0 billion during the nine-month period to 30 September 2007. The core customer deposits of the Group continued to register healthy growth, with lower cost savings deposits and current accounts as well as fixed deposits accounts growing by 8%, 17% and 18% respectively in the same period. The strong growth, which was supported by the Group’s established PUBLIC Brand name, high standards of customer service delivery and fast turnaround time at its extensive branch network, resulted in an increase in the Group’s market share of domestic deposits to 14.3% as at end of September 2007 compared to 14.2% as at end of December 2006.  

As a result of the strong deposit growth, the Group’s liquidity continued to improve with loan to deposit ratio standing at 72.3% as at end of September 2007 compared to 74.1% nine months earlier.

Expansion of Overseas Operation

The Public Bank Group’s commercial banking subsidiary in Hong Kong, Public Bank (Hong Kong) Limited, continued to register rapid expansion of its business, with loan and deposit growths of 47% and 38% respectively during the nine-month period to 30 September 2007. The strong loan and deposit growths are backed by major expansion in branch network and active promotion of the PUBLIC Brand in Hong Kong. Public Bank (Hong Kong) has 24 branches currently, an increase of 11 branches from 13 branches when it was acquired by the Public Bank Group on 30 May 2006.

The Public Bank Group’s wholly-owned subsidiary in Cambodia, Cambodian Public Bank Ltd (“CAMPU Bank”), also registered a very strong growth of 68% in its loans and advances in the nine-month period to 30 September 2007, during which CAMPU Bank opened 3 new branches, bringing the total branch network to 8 branches in Cambodia. On 30 August 2007, Public Bank’s insurance subsidiary in Cambodia, CampuBank Lonpac Insurance Plc, commenced operations in Phnom Penh offering the full suite of general insurance products such as fire and motor policies. CampuBank Lonpac, in which Public Bank has a 55% interest, is a joint venture with LPI Capital Bhd.

In the fourth quarter of 2007, the Public Bank Group plans to further expand its branch network overseas with the opening of 5 branches in Hong Kong, 1 branch in Shenzhen in the People’s Republic of China, 2 branches in Cambodia, 2 branches in Laos and 1 branch in Vietnam.

Strong Performance of Public Mutual’s Business

The Public Bank Group’s unit trust and fund management business carried on by its wholly-owned subsidiary, Public Mutual, continued to achieve outstanding results in the first nine months of 2007. Fifteen new unit trusts funds were launched during this period, bringing the total number of funds under management to 49. As at end of September 2007, net assets value (“NAV”) of funds under management stood at RM24.54 billion, of which 77% are equity linked funds. This represented an increase of RM8.35 billion or 52% in NAV of funds under management in the nine-month period to 30 September 2007, and a growth of RM10.20 billion or 71% over the past 12 months since September 2006.

The performance of the unit trust funds of Public Mutual has been strong over the past few years. Over a period of less than two years, Public Mutual has increased its market share of the private unit trust industry to 36.4% as at end of August 2007 from 27.6% at the beginning of 2006 and strengthened further its market leadership position.

Public Mutual increased its sales agency force by more than two-fold from 11,800 agents at the beginning of 2006 to over 24,600 agents currently, backed by the strong Public Bank Group’s branding and Public Mutual’s excellent fund management reputation and award-winning fund performances.

Total unit trust sales registered a record high of RM8.39 billion during the first nine months of 2007 which was more than doubled the total unit trust sales of RM4.10 billion for the full year of 2006. Public Mutual’s unit trust management fees and income on sale of trust units of RM196 million and RM133 million respectively, represented an increase of 57% and 214% respectively as compared to the corresponding period in 2006. 

Capital Position Remains Strong

As at 30 September 2007, the Group’s risk-weighted capital ratio remains strong at 12.9%, after payment of the final and special dividend for 2006 and the interim dividend for 2007. This was significantly above the statutory minimum requirement of 8.0%. The Group’s capital base stood at RM12.27 billion as at end of September 2007 as compared to RM12.03 billion as at the end of 2006.

Group Prospects

The strong economic conditions in Asia will continue to provide a supportive environment for growth in the region’s financial services industry. The Public Bank Group will continue to capitalize on its established PUBLIC Brand name and strong customer service delivery to increase its market share of the retail banking business. The Group will also continue to expand its overseas operations. The Group targets to increase its fee-based activities, particularly in fund management, bancassurance and other wealth management service, by launching new products to meet the diverse investment needs of the Group’s customers. In its pursuit of business expansion, the Group will uphold its strong corporate governance culture and practices to sustain the long-term performance of the Group and to safeguard the interests of all its stakeholders.

The Public Bank Group is not exposed to any sub-prime debt securities and has not been affected by the sub-prime event in the US. Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and to continue to record satisfactory performance for the rest of 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

* * * * * * * *

Net interest income and net income from Islamic Banking operations increased by 12% to RM1,771 million, on the back of the continued healthy expansion in both the Public Bank Group’s lending and deposit-taking businesses, as well as its strong asset quality. Other operating income expanded by RM175 million or 38% to RM639 million, mainly contributed by the strong performance of the Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual, higher brokerage and commissions from stock-broking activities as well as higher net gain from the sale of securities. Loan loss allowances decreased by RM33 million mainly due to recovery of non-performing loans.

The Board of Directors is pleased to declare an interim dividend of 25% less 27% taxation, which will result in a payout totalling RM612 million. The Public Bank Group’s risk-weighted capital adequacy ratio remains strong at 13.7% after the payment of the interim dividend.

Highlights of the Public Bank Group’s Performance

• On a quarter-on-quarter basis, net profit attributable to shareholders for the second quarter of 2007 increased by 10% to RM524 million as compared to the first quarter of 2007.

• Annualised net return on equity for the first six months of 2007 was higher at 24.2% as compared to 21.9% in 2006.

• Earnings per share increased by 16% to 29.8 sen compared to 25.6 sen for the previous corresponding six months period.

• Total assets expanded by RM14.12 billion or 10% in the first half of 2007 to stand at RM161.91 billion as at the end of June 2007.

• Total loans and advances grew by 8.5% in the first half of 2007, more than 2.5 times that of the loan growth recorded by the banking industry.

• Net non-performing loan ratio improved to 1.5% as at the end of June 2007, with loan loss coverage standing at 105% which is the highest and most prudent in the Malaysian banking industry.

• The Group’s wholly-owned unit trust management subsidiary, Public Mutual, increased its total unit trust funds under management by 36% to RM22.07 billion in the first six months of 2007, and commanded an improved market share of 36.1% as at the end of May 2007. Public Mutual’s total sales of trust units for the first six months of 2007 reached RM5.35 billion, which was about 3 times that of the sales of RM1.77 billion achieved in the previous corresponding period in 2006.

Continued Strong Loan Growth

Sustained Strong Asset Quality

Healthy Growth in Customer Deposits

Strong Performance of Fund Management Business

Public Mutual expanded its sales agency force by 22% in the first six months of 2007 to over 20,200 agents as at the end of June 2007.

Capital Position Remains Strong

Group Prospects

Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance in the second half of 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

* * * * * * * *

I am pleased to announce that the Public Bank Group achieved a 24% growth in pre-tax profit for the first quarter of 2007 to reach RM675 million as compared to the corresponding quarter in 2006. The Group’s net profit attributable to shareholders rose to RM476 million, an increase of 23% over the same period last year.

The improved profit was attributable to the growth in net interest income, net income from Islamic Banking operations and other operating income as well as lower loan loss allowances, partially offset by an increase in other operating expenses. 

The Public Bank Group’s revenue rose by 31% to RM2.21 billion in the first quarter of 2007 as compared to the same period last year. Net interest income and net income from Islamic Banking operations expanded by 14% to RM868 million for the current quarter, on the back of the continued healthy expansion in both the Group’s lending and deposit-taking businesses, as well as its strong asset quality. Other operating income expanded by 53% to RM353 million, mainly contributed by higher income on sales of trust units, higher unit trust fund management fees, increase in brokerage and commissions from stockbroking activities as well as higher foreign exchange income. Loan loss allowances decreased by RM5.4 million despite higher general allowance of RM12.6 million arising from the healthy rate of loan growth in the first quarter of 2007.

The Public Bank Group’s overseas operations recorded a growth in pre-tax profit of 22% to RM85 million in the first quarter of 2007, arising from contribution by Public Bank (Hong Kong) Limited which was acquired in May 2006 as well as high loan growth, particularly in Hong Kong and Indo-China.

Highlights of the Public Bank Group’s Performance

Continued Strong Loan Growth

The Public Bank Group’s loans and advances increased by RM3.73 billion or 4.4% in the first quarter of 2007 to stand at RM88.10 billion at the end of March 2007, increasing its market share to 13.6% as compared to 13.2% at the end of 2006.

The Public Bank Group’s lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and transport vehicles as well as commercial lending to small- and medium-sized enterprises (“SMEs”) accounting for 70% of the Group’s total loan portfolio as at the end of March 2007.

Public Bank (Hong Kong) Limited, the Public Bank Group’s commercial banking subsidiary in Hong Kong registered a strong 13% growth in its loans and advances in the first quarter of 2007. Public Bank (Hong Kong) Limited continued to add to its branch network by opening a further 2 branches in Hong Kong, bringing its network in Hong Kong and Greater China to 19 branches.

Sustained Strong Asset Quality

The Public Bank Group’s gross non-performing loans (“NPL”) ratio improved further to 1.8% as at the end of March 2007 as compared to 1.9% as at the end of 2006, whilst its net NPL ratio remained below 1.6% and was less than one-third of the banking industry’s net NPL ratio of 4.7% as at the end of February 2007. The level of net new NPL formation had declined, as reflected by the ratio of net new NPL to gross loans of 0.15% in the current quarter as compared to 0.25% in the preceding quarter ended 31 December 2006.

The Public Bank Group also maintained a high level of provisioning with its loan loss coverage ratio standing at 102% as at the end of March 2007. The Group’s high loan loss coverage ratio was significantly above the 60% coverage for the banking industry at the end of February 2007. At the end of March 2007, the Group’s general allowance was sufficient to cover the Group’s net NPLs despite that more than 90% of the NPLs are secured.

The consistently strong asset quality of the Public Bank Group is a reflection of its prudent lending practices and proactive credit risk management. Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality as well as loan loss coverage.

Healthy Growth in Customer Deposits

The Public Bank Group’s customer deposits increased by 4.3% to stand at RM116.60 billion as at the end of March 2007, which was mainly supported by the growth in its core customer deposits funding base. Both demand and savings deposits expanded by 5.4% while fixed deposits grew by 5.1% in the first three months of 2007. The Group’s wholesale deposits, in the form of negotiable instruments of deposits, also expanded by RM664 million in the same period.

With the healthy growth in customer deposits, the Public Bank Group’s liquidity remained high with loan to deposit ratio standing at 74.2% as at the end of March 2007.

Fund Management

The Public Bank Group’s unit trust and fund management business continued to record strong performance in the first quarter of 2007. The five new funds launched during the first quarter achieved sales of RM1.28 billion. Total unit trust sales increased by 181% to a record RM2.22 billion for the first three months of 2007 as compared to RM0.79 billion for the corresponding quarter of 2006. Public Mutual posted income on sale of trust units and unit trust management fees of RM105 million and RM55 million respectively, an increase of 190% and 42% compared to the corresponding period in 2006. Total net asset value of unit trusts under management grew significantly to stand at RM18.46 billion as at the end of March 2007, reflecting a 14% growth during the first quarter from RM16.19 billion as at the end of December 2006 and a 43% growth for the past 12 months from RM12.88 billion as at the end of March 2006.

The significant increase in sales volume of the unit trust business had resulted in a corresponding increase in other operating expenses due to unit trust sales commission incurred. Consequently, the Public Bank Group’s cost to income ratio increased to 36.9% in the first quarter of 2007 as compared to 34.8% in 2006. The Group’s cost to income ratio of 36.9% was lower than the industry’s cost to income ratio of 44.0%.

Capital Position Remains Strong

The Public Bank Group’s capital base stood at RM12.09 billion as at the end of March 2007 and its risk-weighted capital ratio remained strong at 13.9%, after the payment of final and special dividend for 2006. This was above the industry ratio of 13.4% as well as the statutory minimum requirement of 8%.

Group Prospects

The banking industry is expected to remain sound in 2007 on the back of healthy and stable growth of the Malaysian economy. However, the operating environment will be very challenging due to the progressive liberalisation of the industry and the high level of liquidity in the banking system.

To sustain its profitability growth in this challenging environment, the Public Bank Group will strive to further increase its domestic market share in consumer financing and retail commercial lending to SMEs as well as its deposit-taking business by leveraging on its wide branch network, strong PB Brand and superior service quality, and continue to expand its overseas operations. The Group will also expand its fee-based activities, particularly in fund management, bancassurance and other wealth management products. In pursuit of its growth strategy and to enhance stakeholder value, the Public Bank Group will continue to be innovative, alert and vigilant; and will remain prudent, maintain strong corporate governance and implement sound risk management policies. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance for the rest of 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

* * * * * * * *

I am pleased to announce that the Public Bank Group posted another year of record profits in 2006 with pre-tax profit increasing by 17% to reach RM2.42 billion. The Group’s net profit attributable to shareholders rose by RM268 million or 18% to RM1.73 billion whilst net return on equity was higher at 21.9% compared to 19.1% in 2005.

The higher profit was contributed by growth in net interest income and net income from Islamic Banking operations as well as higher other operating income, partially offset by an increase in other operating expenses and higher loan loss allowances.

The Group’s revenue grew by 34% to RM7.84 billion in 2006. Net interest income and net income from Islamic Banking operations expanded by 16% to RM3.30 billion in 2006, driven by the continued strong growth in both the lending and deposit-taking businesses, as well as the strong asset quality, of the Group. Other operating income grew by 21% or RM189 million, mainly from higher gains on sales of trust units due to the launch of eight new trust funds in 2006, increase in unit trust fund management fees from higher net asset value of unit trust funds under management, higher foreign exchange income as well as higher fees and transaction income from retail banking operations.

The increase in loan loss allowances by RM84 million included an increase in general allowances of RM44 million set aside due to higher loan growth achieved and RM14 million additional specific allowances made due to the adoption of a more stringent provisioning policy on non-performing loans which are less than 6 months in arrears.

In view of the Public Bank Group’s strong performance, the Board of Directors is proposing a final dividend of 30 sen and a special dividend of 10 sen, totaling 40 sen less 27% taxation. Together with the interim dividend of 20 sen less 28% taxation, which was paid in October 2006, the dividend paid and payable for 2006 amounts to 60 sen per Public Bank share or RM1.45 billion in total. The Group’s and the Bank’s risk-weighted capital ratio remain strong, at 14.6% and 14.0% respectively, after the payment of the proposed final and special dividends.

Highlights of the Public Bank Group’s Performance in 2006

• Earnings per share jumped by 17% to 52.1 sen from 44.5 sen in 2005.

• Productivity and efficiency improved further as reflected by the lower cost to income ratio of 34.8% compared to 35.5% in 2005 and the improved cost to average assets ratio of 1.2% compared to 1.3% in 2005.

• Total assets expanded by 32% in 2006 to stand at RM147.8 billion, which was more than three times that of the Group’s asset size of RM45.3 billion at the end of 2000.

• Public Bank Group achieved an organic loan growth rate of 17.5% in 2006, excluding the effects of the acquisition of Public Bank (Hong Kong) Limited (formerly known as Asia Commercial Bank Limited) (“PB(HK)”). This led to an expanded loan market share of 13.2% as compared to 12.0% at the end of 2005.

• Net non-performing loan ratio improved to 1.6% as at the end of December 2006 as compared to 1.7% at the end of 2005, with loan loss coverage standing at almost 100% which is the highest and most prudent in the region.

• Total customer deposits grew by 33% to stand at RM111.8 billion as at the end of 2006.

Enhancement of Capital Efficiency

Public Bank issued USD200 million Innovative Tier-I Hybrid Capital in the international capital market in August 2006 and RM1.2 billion Innovative Tier-I Hybrid Capital in the Malaysian bond market in December 2006.

The two issues of Innovative Tier-I Hybrid Capital Securities in 2006, together with the gearing up of the Group’s core capital with Tier 2 subordinated debt and the share buy backs carried out by Public Bank in 2004 and 2005 have resulted in a more efficient capital structure, significantly lower weighted cost of capital and improved return on equity. The net return on equity of the Public Bank Group has risen from 12.1% in 2002 to 21.9% in 2006.

The Public Bank Group’s capital base stood at RM13.0 billion at the end of 2006 as compared to RM11.8 billion at the end of 2005. The Group’s risk-weighted capital ratio of 14.6% as at 31 December 2006, after taking into account of the proposed final and special dividend for 2006, was well above the statutory minimum requirement of 8%.

Improved Shareholder Value and High Dividend Payments

The Public Bank Group’s strong profit performance is reflected in Public Bank’s share price. Public Bank (Local) share price and Public Bank (Foreign) share price rose from RM6.55 and RM6.40 respectively at the start of 2006 to RM7.75 and RM7.85 respectively at the end of 2006. Public Bank’s market capitalisation has increased by 21% from RM22.23 billion to RM26.94 billion during the same period. Public Bank maintained its position as the largest non-government-linked company in Malaysia by market capitalisation.

The Public Bank Group continued to pursue a high dividend payout policy as an integral part of the Group’s initiatives to improve its capital efficiency. Its dividend payout ratio for 2006 remained high at 84%.

Strong Growth in Retail Loans

The Public Bank Group’s loans and advances increased by RM16.3 billion or 24% to stand at RM84.4 billion at the end of 2006, including RM4.3 billion arising from the acquisition of PB(HK). The Group’s lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and transport vehicles as well as commercial lending to SMEs accounting for 71% of the Group’s total loan portfolio at the end of 2006.

The strong loan growth has led to loans for residential properties growing by 28% to RM23.0 billion at the end of 2006. Meanwhile, loans for the purchase of transport vehicles increased by 18% to RM23.3 billion and loans to SMEs expanded by 17% to RM17.7 billion at the end of 2006.

Further Improvement in Asset Quality

The Public Bank Group has sustained its strong asset quality even as the Group achieved strong lending growth averaging 20% per year over the last 6 years. The Group’s gross non-performing loans (“NPL”) and net NPL ratios stood at 1.9% and 1.6% respectively at the end of 2006 compared to 2.1% and 1.7% respectively at the end of 2005. The Group’s net NPL ratio of 1.6% is less than one-third of the banking industry’s net NPL ratio of 4.9% as at the end of November 2006.

The Public Bank Group also maintained a high level of provisioning with its ratio of general allowance to net loans of 1.6% and its loan loss coverage ratio of 100% as at the end of 2006 as compared to 58% coverage for the banking industry at the end of November 2006. At the end of 2006, the Group’s general allowance was almost sufficient to cover the Group’s NPLs despite that more than 90% of the NPLs are secured.

Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality as well as loan loss coverage.

Accelerated Growth in Customer Deposits

The Public Bank Group continued to expand its core deposit funding as well as its wholesale deposit-taking business in the issuance of negotiable instruments of deposits. The Group’s customer deposits increased by 33% to stand at RM111.8 billion at the end of 2006.

Excluding the deposits arising from the acquisition of PB(HK), the Group’s customer deposits grew by RM21.4 billion or 25%, which was about two times that of the growth recorded by the banking industry. The growth was contributed significantly by the increase in the issue of negotiable instruments of deposits of RM12.8 billion or 69%. Demand deposits, fixed deposits and savings deposits grew by 15%, 13% and 10% respectively.

With the strong growth in customer deposits, the Group’s market share of customer deposits increased to 13.4% at the end of 2006 from 12.0% at the end of 2005. The Group’s liquidity has also improved with loans to deposits ratio standing at 74.1% as at the end of 2006 as compared to 79.4% as at the end of 2005.

Indo China and PB(HK) Operations

The Group’s operations in Indo China performed well, registering loan growth of 89% whilst pre-tax profit increased by 50% in 2006. Cambodian Public Bank Limited, Public Bank’s wholly-owned subsidiary in Cambodia, was the main contributor to the strong performance.

The pre-tax profit of PB(HK), which was acquired in May 2006, improved by 71% in 2006, supported by its annualised loan growth of 17% since the date of acquisition.

Group Prospects

The Malaysian economy is expected to remain resilient in 2007, boosted by economic activities with the rollout of the 9th Malaysia Plan. While the positive economic conditions will provide a supportive environment for the banking industry, the intense competition in the banking sector coupled with the liberalisation of the industry and the addition of the three newly established Islamic banks, will continue to put more pressure on interest margins.

To sustain its profitability growth in this challenging environment, the Public Bank Group will continue to pursue its strategy of high organic loan and deposit growth, improved cost efficiency and maintaining strong asset quality. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance in 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

* * * * * * * *

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

* * * * * * * *

I am pleased to announce that the Public Bank Group posted another year of record profits in 2006 with pre-tax profit increasing by 17% to reach RM2.42 billion. The Group’s net profit attributable to shareholders rose by RM268 million or 18% to RM1.73 billion whilst net return on equity was higher at 21.9% compared to 19.1% in 2005.

The higher profit was contributed by growth in net interest income and net income from Islamic Banking operations as well as higher other operating income, partially offset by an increase in other operating expenses and higher loan loss allowances.

The Group’s revenue grew by 34% to RM7.84 billion in 2006. Net interest income and net income from Islamic Banking operations expanded by 16% to RM3.30 billion in 2006, driven by the continued strong growth in both the lending and deposit-taking businesses, as well as the strong asset quality, of the Group. Other operating income grew by 21% or RM189 million, mainly from higher gains on sales of trust units due to the launch of eight new trust funds in 2006, increase in unit trust fund management fees from higher net asset value of unit trust funds under management, higher foreign exchange income as well as higher fees and transaction income from retail banking operations.

The increase in loan loss allowances by RM84 million included an increase in general allowances of RM44 million set aside due to higher loan growth achieved and RM14 million additional specific allowances made due to the adoption of a more stringent provisioning policy on non-performing loans which are less than 6 months in arrears.

In view of the Public Bank Group’s strong performance, the Board of Directors is proposing a final dividend of 30 sen and a special dividend of 10 sen, totaling 40 sen less 27% taxation. Together with the interim dividend of 20 sen less 28% taxation, which was paid in October 2006, the dividend paid and payable for 2006 amounts to 60 sen per Public Bank share or RM1.45 billion in total. The Group’s and the Bank’s risk-weighted capital ratio remain strong, at 14.6% and 14.0% respectively, after the payment of the proposed final and special dividends.

Highlights of the Public Bank Group’s Performance in 2006

• Earnings per share jumped by 17% to 52.1 sen from 44.5 sen in 2005.

• Productivity and efficiency improved further as reflected by the lower cost to income ratio of 34.8% compared to 35.5% in 2005 and the improved cost to average assets ratio of 1.2% compared to 1.3% in 2005.

• Total assets expanded by 32% in 2006 to stand at RM147.8 billion, which was more than three times that of the Group’s asset size of RM45.3 billion at the end of 2000.

• Public Bank Group achieved an organic loan growth rate of 17.5% in 2006, excluding the effects of the acquisition of Public Bank (Hong Kong) Limited (formerly known as Asia Commercial Bank Limited) (“PB(HK)”). This led to an expanded loan market share of 13.2% as compared to 12.0% at the end of 2005.

• Net non-performing loan ratio improved to 1.6% as at the end of December 2006 as compared to 1.7% at the end of 2005, with loan loss coverage standing at almost 100% which is the highest and most prudent in the region.

• Total customer deposits grew by 33% to stand at RM111.8 billion as at the end of 2006.

Enhancement of Capital Efficiency

Public Bank issued USD200 million Innovative Tier-I Hybrid Capital in the international capital market in August 2006 and RM1.2 billion Innovative Tier-I Hybrid Capital in the Malaysian bond market in December 2006.

The two issues of Innovative Tier-I Hybrid Capital Securities in 2006, together with the gearing up of the Group’s core capital with Tier 2 subordinated debt and the share buy backs carried out by Public Bank in 2004 and 2005 have resulted in a more efficient capital structure, significantly lower weighted cost of capital and improved return on equity. The net return on equity of the Public Bank Group has risen from 12.1% in 2002 to 21.9% in 2006.

The Public Bank Group’s capital base stood at RM13.0 billion at the end of 2006 as compared to RM11.8 billion at the end of 2005. The Group’s risk-weighted capital ratio of 14.6% as at 31 December 2006, after taking into account of the proposed final and special dividend for 2006, was well above the statutory minimum requirement of 8%.

Improved Shareholder Value and High Dividend Payments

The Public Bank Group’s strong profit performance is reflected in Public Bank’s share price. Public Bank (Local) share price and Public Bank (Foreign) share price rose from RM6.55 and RM6.40 respectively at the start of 2006 to RM7.75 and RM7.85 respectively at the end of 2006. Public Bank’s market capitalisation has increased by 21% from RM22.23 billion to RM26.94 billion during the same period. Public Bank maintained its position as the largest non-government-linked company in Malaysia by market capitalisation.

The Public Bank Group continued to pursue a high dividend payout policy as an integral part of the Group’s initiatives to improve its capital efficiency. Its dividend payout ratio for 2006 remained high at 84%.

Strong Growth in Retail Loans

The Public Bank Group’s loans and advances increased by RM16.3 billion or 24% to stand at RM84.4 billion at the end of 2006, including RM4.3 billion arising from the acquisition of PB(HK). The Group’s lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and transport vehicles as well as commercial lending to SMEs accounting for 71% of the Group’s total loan portfolio at the end of 2006.

The strong loan growth has led to loans for residential properties growing by 28% to RM23.0 billion at the end of 2006. Meanwhile, loans for the purchase of transport vehicles increased by 18% to RM23.3 billion and loans to SMEs expanded by 17% to RM17.7 billion at the end of 2006.

Further Improvement in Asset Quality

The Public Bank Group has sustained its strong asset quality even as the Group achieved strong lending growth averaging 20% per year over the last 6 years. The Group’s gross non-performing loans (“NPL”) and net NPL ratios stood at 1.9% and 1.6% respectively at the end of 2006 compared to 2.1% and 1.7% respectively at the end of 2005. The Group’s net NPL ratio of 1.6% is less than one-third of the banking industry’s net NPL ratio of 4.9% as at the end of November 2006.

The Public Bank Group also maintained a high level of provisioning with its ratio of general allowance to net loans of 1.6% and its loan loss coverage ratio of 100% as at the end of 2006 as compared to 58% coverage for the banking industry at the end of November 2006. At the end of 2006, the Group’s general allowance was almost sufficient to cover the Group’s NPLs despite that more than 90% of the NPLs are secured.

Public Bank continues to be ranked the best amongst all banks in Malaysia in terms of asset quality as well as loan loss coverage.

Accelerated Growth in Customer Deposits

The Public Bank Group continued to expand its core deposit funding as well as its wholesale deposit-taking business in the issuance of negotiable instruments of deposits. The Group’s customer deposits increased by 33% to stand at RM111.8 billion at the end of 2006.

Excluding the deposits arising from the acquisition of PB(HK), the Group’s customer deposits grew by RM21.4 billion or 25%, which was about two times that of the growth recorded by the banking industry. The growth was contributed significantly by the increase in the issue of negotiable instruments of deposits of RM12.8 billion or 69%. Demand deposits, fixed deposits and savings deposits grew by 15%, 13% and 10% respectively.

With the strong growth in customer deposits, the Group’s market share of customer deposits increased to 13.4% at the end of 2006 from 12.0% at the end of 2005. The Group’s liquidity has also improved with loans to deposits ratio standing at 74.1% as at the end of 2006 as compared to 79.4% as at the end of 2005.

Indo China and PB(HK) Operations

The Group’s operations in Indo China performed well, registering loan growth of 89% whilst pre-tax profit increased by 50% in 2006. Cambodian Public Bank Limited, Public Bank’s wholly-owned subsidiary in Cambodia, was the main contributor to the strong performance.

The pre-tax profit of PB(HK), which was acquired in May 2006, improved by 71% in 2006, supported by its annualised loan growth of 17% since the date of acquisition.

Group Prospects

The Malaysian economy is expected to remain resilient in 2007, boosted by economic activities with the rollout of the 9th Malaysia Plan. While the positive economic conditions will provide a supportive environment for the banking industry, the intense competition in the banking sector coupled with the liberalisation of the industry and the addition of the three newly established Islamic banks, will continue to put more pressure on interest margins.

To sustain its profitability growth in this challenging environment, the Public Bank Group will continue to pursue its strategy of high organic loan and deposit growth, improved cost efficiency and maintaining strong asset quality. Barring unforeseen circumstances, the Public Bank Group is expected to continue to record satisfactory performance in 2007.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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Y.Bhg. Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman, Public Bank
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I am pleased to announce that the Public Bank Group achieved a pre-tax profit of RM1.75 billion for the nine months ended 30 September 2006, an increase of 17% compared to the corresponding period in 2005. The Group’s net profit attributable to shareholders rose by RM213 million or 20% to RM1.27 billion over the same period last year.

The higher profit was mainly attributable to the increase in net interest income and net income from Islamic Banking operations as well as higher other operating income, partially offset by the increase in other operating expenses and higher loan loss allowances. 

The Group’s net interest income and net financing income from Islamic Banking operations grew by RM333 million or 16% compared to the previous corresponding period, on the back of continued strong loan and deposit growth, coupled with a further improvement in asset quality. Other operating income increased by RM122 million or 18%, mainly contributed by higher gains on sales of trust units due to launch of new trust funds, increase in management fees from higher net asset value of unit trust funds under management and higher fees and transaction income from retail banking operations.

The higher loan loss allowances during the period by RM65 million as compared to the previous corresponding period was mainly due to higher general allowance on loans as a result of higher loan growth achieved. In addition, the Group adopted more stringent provisioning for its non-performing loans in the quarter ended 30 September 2006 by making a 20% specific allowance on non-performing loans which are 3 to less than 6 months-in-arrears. Previously, specific allowance was only made when a non-performing loan was in arrears for 6 months and above. This had resulted in an additional specific allowance of RM12 million being recognised in the third quarter.

Financial Highlights of the Public Bank Group

Tan Sri Dato' Sri Dr. Teh Hong Piow
Chairman

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