For Immediate Release
2 February 2017
Chairman’s Review
The Public Bank Group accomplished another profit milestone following the favourable set of financial results recorded in 2016. The Group registered a pre-tax profit of RM6.55 billion as compared to RM6.49 billion achieved in previous year. Net profit attributable to shareholders grew by 2.9% to RM5.21 billion during the year.
The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow said, “In this 50th anniversary of the Public Bank Group’s formation, the Group has demonstrated the ability to generate stable profitability amid the increasing challenging operating environment. This was attributed to the Group’s proactive organic growth strategy with prudent banking practices, which has remained an edge in the current competitive banking landscape.”
On the Public Bank Group’s balance sheet growth, gross loans as at the end of 2016 stood at RM294.0 billion, representing a growth of 7.5% as compared to a year ago. Customer deposits grew by 2.9% to reach RM310.0 billion as at the end of 2016.
Tan Sri Teh commented that, “With the favourable financial performance, not only did the Public Bank Group continue to preserve its superior track record of 50 years of unbroken profitability since its inception in 1966, it also continued to be at the forefront amongst its domestic banking peers in Malaysia by delivering high net return on equity of 16.5% as well as maintaining low gross impaired loan ratio of 0.5% and efficient cost-to-income ratio of 32.3% in 2016.”
In view of the Public Bank Group’s favourable performance in 2016, Tan Sri Teh announced that, “The Board of Directors has declared a second interim dividend of 32 sen, taking full year dividend for 2016 to 58 sen.” The total dividend paid and payable for 2016 amounted to RM2.24 billion and represents a total payout of 43.0% of the Group’s net profit for 2016.
Above-Industry Loan and Deposit Growth
Tan Sri Teh highlighted that, “Despite the intense competition amongst banks for market share, the Public Bank Group continued to achieve above industry loan performance. The Group recorded total loan growth of 7.5%, with its domestic loan growth standing at 7.2% compared to the domestic banking industry’s loan growth of 5.3%, leading to an increased market share of 17.7% in the domestic lending market.”
Lending to the retail banking segment remained the key strategic focus of the Public Bank Group, with consumer financing for the purchase of residential properties and passenger vehicles, and extension of credit to small and medium enterprises (“SME”). As at the end of 2016, the Group’s retail and SME loan portfolio collectively accounted for 85% of its total loans.
On deposit-taking, the Public Bank Group continued to achieve above industry deposit growth amid challenges encountered in the deposit market. During the year, the Group’s total customer deposits grew by 2.9% compared to the domestic banking industry’s deposit growth of 1.5%.
Steady Net Income Growth
The Public Bank Group has demonstrated the ability to generate steady net income growth despite challenges in the operating environment. In 2016, total net income of the Group grew by 4.3% to RM9.96 billion, supported by continued growth in the net interest income and fee and commission income.
Tan Sri Teh emphasised that, “Besides sustaining a healthy loan growth and resilient deposit structure which contributes to its net interest income growth, the Public Bank Group has continued to place great emphasis in growing its fee-based revenue, leveraging on its strong retail franchise, superior customer service and effective cross selling initiatives. In 2016 the Group’s unit trust management business and transactional banking fee income remained positive, contributing two-thirds of the Group’s total non-interest income.”
Public Mutual Berhad (”Public Mutual”), the Public Bank Group’s wholly-owned subsidiary, reported a profit growth of 5.9% for 2016 and remained as the market leader in the private unit trust industry with a retail market share of 46.8%. As at the end of 2016, Public Mutual has 133 funds and a total net asset value of RM70.3 billion under its management.
To further drive the Public Bank Group’s unit trust business, Public Mutual will continue to maintain its strong brand and leading market position in the private unit trust industry in Malaysia through the delivery of efficient customer service to its clients as well as by expanding and diversifying its product range to meet investors’ demand.
Sustaining Cost Efficiency
As a result of rising costs of doing business as well as the increasingly complexity of the banking business, the Public Bank Group’s cost-to-income ratio has increased from 30.5% in 2015, but still remained efficient at 32.3% in 2016. This is well below the banking industry’s average cost-to-income ratio of 48.8%, sustaining the Group’s position as the most cost-efficient bank in Malaysia.
Tan Sri Teh commented, “The Public Bank Group sustained the most efficient level of operating costs relative to its business and revenue growth. Consistently, the Group always strives to enhance productivity while adopting efficient cost measures in all aspects of its operations.”
Preserving Asset Quality
Tan Sri Teh highlighted that, “Amid the prevailing economic uncertainties and challenges, the Public Bank Group continued to demonstrate resilience in its asset quality.”
As at the end of 2016, the Public Bank Group’s gross impaired loan ratio stood at 0.5%, continued to remain significantly lower than the banking industry’s ratio of 1.6%. The Group’s low impaired loan ratio presents a good indication of the Group’s prudent credit risk management practices.
Meanwhile, the impaired loans of the Group was well covered, with loan loss coverage ratio of 102.7% as at the end of 2016, as compared to the banking industry’s coverage ratio of 90.2%.
Overseas Operations
The pre-tax profit of the Public Bank Group’s overseas operations grew by 8.5% from RM572 million in 2015 to RM621 million in 2016, contributing 9.5% to the Group’s overall pre-tax profit for 2016.
Public Financial Holdings Limited Group in Hong Kong and Cambodian Public Bank Plc, both subsidiaries of Public Bank, continued to be the main contributors to the Group’s overseas business growth.
Tan Sri Teh reiterated that, “The Group remains committed to expand its presence in the region through organic growth strategy and will continue to transfer its best practices from its domestic operations to accelerate business growth in its overseas operations.”
Healthy Capital Position
The Public Bank Group’s capital position remained stable, with its common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio standing at 11.4%, 12.2% and 15.5% respectively as at the end of 2016.
Tan Sri Teh commented, “The Group will continue to be proactive in maintaining a healthy level of capital at all times to support the Group’s business growth strategies whilst maximising its shareholders’ return.”
Group’s Prospect
The operating conditions will continue to be even more challenging in 2017, with strong economic headwinds stemming from policy uncertainties in the US, the Brexit negotiation, political uncertainties in Europe, moderation in China’s economic growth and volatility in global oil prices. The financial and foreign exchange markets will continue to face volatility. While the Malaysian economy is not expected to be insulated from these headwinds, the Country’s sustained domestic demand and continued accommodative monetary policy are expected to remain supportive of continued expansion of the economy, with GDP expected to grow at a stable 4.0 – 5.0% in 2017.
With continued growth in economy, albeit at a moderate pace, coupled with sound banking fundamentals, Tan Sri Teh is positive on the sustainability of earnings of the Public Bank Group in 2017 and commented, “The Group has weathered various headwinds and challenges over the past 50 years of its banking operation. The Group had learned and grown stronger along the way. It has also validated the Group’s time-tested strength, sustaining the trust and confidence of its stakeholders. The Group is confident of continued profitability in 2017 and will strategise around its key focus on the organic growth in retail banking business. Vigilance and agility remain key in the Group’s operation amid the macro uncertainties.”
“Stepping into the next half of the century of the Public Bank Group, the Group will continue to strive further to strengthen its position as a premier bank of excellence.”
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