Media Release

The Public Bank Group delivers yet another strong set of results in the first nine months of 2011 with record net profit of RM2.6 billion, which is 18.4% higher compared to the corresponding period in 2010. Pre-tax profit grew by 16.6% to RM3.4 billion over the same period.

Chairman’s Review
The Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow said, “The Public Bank Group’s sound financial results are a validation of the Group’s effective organic growth strategies and sustainable business model. The Group continues to retain a clear lead with the highest net return on equity of 26.7% amongst the Malaysian banking groups. At the same time, we continue to sustain top ranking in asset quality and cost efficiency amongst the peers. We have benefited from our disciplined execution of our growth strategies whilst preserving prudent risk management practices to ensure sustainable and stable returns.

We are encouraged by the steady performance in our core businesses, with both our net interest income and fee income registering growth despite the weaker economic sentiments particularly over the past 2 quarters. Despite the competitive pressure on interest margin, the Group’s net interest and finance income improved by 9.7% in the first nine months of 2011, and fee income grew by 9.1% over the same period.

Our balance sheet growth indicators remained healthy. Gross loans book stood at RM172.7 billion, which grew by 13.8% on an annualised basis. Domestic loan growth remained strong with an annualised growth rate of 14.1%. Over the same period, total customer deposits grew by an annualised rate of 12.7% to RM193.7 billion, while domestic customer deposits grew at a stronger annualised growth rate of 13.8%. We are confident that with our healthy loans pipeline and coupled with our strong PB Brand franchise, we will continue to strengthen our core revenue streams.”

Growth & Profitability Intact
The lending activities of the Public Bank Group remained focused on the retail sector, with loans to mid-market commercial enterprises as well as loans for the financing of residential properties and purchase of passenger vehicles accounting for 85% of the total loan portfolio of the Group as at the end of September 2011. Domestic retail pre-tax profit grew by RM335 million or 15.9% year-on-year, with a notable 11.9% increase in net interest income and lower credit charges.

Tan Sri Teh highlighted that, “Public Bank continued to sustain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 18.0%, 33.7% and 25.7% respectively. In particular, the Group’s residential properties and passenger vehicles financing grew at impressive annualised rates of 17.7% and 9.7% respectively during the 9-month period, compared to lower industry growths of 12.5% and 6.7% respectively.” The Group remained supportive in promoting small- and medium-sized enterprise (“SME”) activities particularly for working capital and investment financing. Loans to the SME sector for the 9-month period grew strongly by an annualised rate of 15.6%.

“The Public Bank Group’s funding position remained robust supported by its strong retail franchise and large domestic depositor base of over 4.5 million customers. Domestic customer deposits grew at an annualised growth rate of 13.8%, compared to the domestic banking industry’s annualised growth of 9.8%,” said Tan Sri Teh. The strong domestic deposit growth was mainly attributed to steady inflows of fixed deposits and savings deposits which grew at annualised growth rates of 12.2% and 11.9% respectively, outperforming the Malaysian banking industry’s annualised 9.5% growth in fixed deposits and annualised 9.1% growth in savings deposits.

Growth in Fee-based Income
Non-interest income of the Public Bank Group recorded a commendable growth of 9.1% compared to the corresponding period in 2010, mainly driven by higher banking transactional income and income from Public Mutual’s unit trust business as well as higher investment income.

Tan Sri Teh explained, “The Group’s unit trust management business through its wholly-owned subsidiary, Public Mutual, continued to show commendable performance with a pre-tax profit growth of 22.3% in the nine months of 2011, and maintained its pole position in private unit trust business with RM41.3 billion of net assets under management, accounting for an overall market share of 43% as at the end of August 2011, and with market shares in the equity and Islamic unit trust fund sectors of 60% and 55% respectively.”

Continued Disciplined Cost Management
Tan Sri Teh further commented, “The Public Bank Group continues to drive cost efficiency initiatives to further improve productivity with cost-to-income ratio of 30%. Compared to the banking industry’s average cost-to-income ratio of 46.7%, the Group remained the most cost-efficient bank in Malaysia.” Operating expenses increased marginally by 4.6%, less than half the pace of the much higher income growth of 9.6%. Increase in personnel costs was in line with the investment in human resources and larger headcount to support business expansion.

Lending with Uncompromised Asset Quality
“The Public Bank Group has not only maintained its top ranking in asset quality amongst its peers, but also further improved its gross impaired loans ratio from 1.14% as at the beginning of the year to below 1% as at the end of September 2011, significantly lower than the Malaysian banking industry’s gross impaired loan ratio of 2.8%,” said Tan Sri Teh. The strong asset quality of the 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 recovery efforts undertaken.

The Public Bank Group's loan loss coverage ratio continued to remain one of the highest at 178.1%, compared to the banking industry's coverage ratio of 96.3% notwithstanding that more than 90% of the Group’s impaired loans outstanding are secured. In line with BNM’s Guidelines to maintain a minimum of 1.5% collective assessment, the increase in the Group’s loan loss coverage was a result of setting aside additional collective assessment allowance for strong loan growth while maintaining a stable level of impaired loan. New impaired loans formation for the first nine months of 2011 improved to an annualised 0.33% from 0.51% in 2010. As a result, the Group’s loan impairment allowances improved by 15% during the nine months ended 30 September 2011 compared to the previous corresponding period, despite setting aside 1.5% collective assessment for loan growth.

Expansion of Overseas Operations
For the first nine months of 2011, the Public Bank Group’s overseas operations contributed 6.5% of the Group’s overall pre-tax profit compared to 7.6% contribution in 2010 due to the negative effect of foreign exchange differences. Excluding the impact of the foreign exchange differences, overseas profit grew by 11.8% compared to the corresponding period in 2010, led by improvement in asset quality and operational efficiency. Over the same period, Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank reported a strong growth in pre-tax profit of 90% to USD20.6 million compared to USD10.8 million in the last corresponding period.

Capital Position Remains Healthy
Tan Sri Teh emphasised that, “The Public Bank Group’s capital position remains healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 9.5% and 14.9% respectively as at the end of September 2011 compared to 10.0% and 13.7% respectively as at the beginning of the year.” The improvement in the risk-weighted capital ratio of the Group during the current period was due to the issuance of RM3 billion subordinated notes under the existing subordinated Medium Term Note programme in August 2011.

The Public Bank Group will continue to monitor further developments in relation to the Basel III requirements and any additional regulatory capital requirements to be imposed by Bank Negara Malaysia. This will allow the Group to address the potential impact of such requirements by realigning existing capital management strategies from time to time. The Group remains committed to maintaining a healthy level of capital at all times to support the Group’s business growth strategies whilst maximising its shareholder value.

Chairman’s View on Group’s Prospect
Tan Sri Teh remarked that, “Our strategies remain unchanged. The Public Bank Group will continue to focus on its core retail banking and financing business whilst maintaining its prudent credit policies, and further improve on its cost efficiency. The Group expects its strong asset quality to be sustained, and will continue to leverage on the strong PB Brand franchise and its wide and efficient branch network to deliver balance sheet and revenue growth. The Group remains steadfast in its commitment to upholding strong corporate governance and implementation of sound risk management policies to support long-term growth.

With the expectations that global uncertainties and volatility will persist over the medium term, we remain vigilant and focused in balancing growth with sustainable returns. Taking cognisance that economic growth pace will moderate further, we will focus on reinforcing our business performance through prudent and effective balance sheet management to sustain our profitability. On the service delivery front, we will continue to uphold our superior customer service and delivery excellence.

The outlook of the Malaysian banking sector, in which the Group largely operates in, continues to be stable and supportive of growth. We continue to see the Group’s business performance to be in line with expectations and on track in meeting the key business targets for 2011.”

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

We would like to congratulate the Honorable Prime Minister and Minister of Finance for the people-friendly budget.  Budget 2012 is well-crafted and has provided a string of initiatives, measures and incentives to benefit the Rakyat especially the lower to middle income segments.  This should help to ease the financial burden of the Rakyat amidst the rising cost of living environment which has been much anticipated.

In striking a balance between meeting the needs of the Rakyat and providing impetus for businesses and private sector to be the engine of growth, the Government has taken cognisance in recognising the economic sectors that are primarily driving the economic growth which include the services sector, in particular tourism, banking and financial services, as well as agriculture sector.  We welcome the various measures and incentives provided under Budget 2012 in helping to boost the contribution of these sectors to drive the overall economic growth.

On the GDP growth outlook, in view of heightened uncertainties in the global economy, a 5%-6% projection for 2012 is achievable. The growth is still a respectable performance, given that the Malaysian economy has strong economic fundamentals such as high savings, strong external position and healthy banking sector. Government’s measures to stimulate domestic economic activities, in particular the public and private investments, will continue to support growth.  The Government’s commitment to its fiscal discipline and prudence with the reducing budget deficit to 4.7% of GDP in 2012 from 5.4% in 2011 is commendable.

Budget 2012 has also provided various measures and incentives to Small- and  Medium-Enterprises (“SMEs”) which contribute 31% to the GDP of Malaysia.  Some of these measures and incentives include the RM2.0 billion shariah-compliant SME Financing Fund, SME Revitalisation Fund, SME Emergency Fund and the RM500 million shariah-compliant Commercialisation Innovation Fund.  The banking sector has always been playing its vital role in supporting and nurturing the growth of SMEs to be a significant contributor to our economy. We believe that these funds will further support the growth of SMEs towards this direction.     

On the banking and capital market sector, Budget 2012 further alluded the Government’s effort to promote the development of a more integrated and comprehensive financial services which include, amongst others, the development of the Kuala Lumpur International Financial District, the promotion of the Islamic bonds and treasury management services.

The upward revision of the 10% real property gains tax on disposal of properties held and disposed within two years is indeed complementing the earlier measure instituted by Bank Negara Malaysia in applying the lower loan-to-value ratio for third property financing. We believe that these measures will help to discourage real estate speculative activities.  

Budget 2012, as appropriately guided by its theme of “Welfare for the Rakyat, Well-Being of the Nation”, demonstrates the Government’s concern for the people’s welfare such as affordability of home ownership, improvement in disposable income and relief over the rising cost of living.  It also provides stimulus to further promote domestic private and public investments in growing national wealth, while ensuring human capital development, creativity and innovation are embraced in the nation’s path to growth.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

In conjunction with the current Hari Raya Aidil Fitri festive season, Public Bank brought much joy and cheer to 220 children who were warded at the Paediatric Institute of the Kuala Lumpur General Hospital by distributing goodies hampers and duit Raya worth RM18,000.

The presentation was carried out at the Paediatric Institute on 8 September 2011 by the Senior General Manager of Public Affairs Division, Encik Razak Dali on behalf of the Bank’s Founder and Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow.

En. Razak Dali said that the presentation from the Bank was a gesture to bring much needed cheer to the young patients who were unable to celebrate the festival with their families at home. It is also the Bank’s way in fulfilling its corporate social responsibility to society and the community it serves. 

It was heartfelt moments to see the young faces all lighted up upon receiving the goodies hampers and duit Raya.  Also present at the distribution ceremony was Dr. Norzila Mohamed Zainudin, Senior Consultant Paediatrician - Paediatrics Respiratory Physician and her team of dedicated nurses who had earlier gave an insightful information on the set-up of the Paediatric Institute and its mission to the public.

En. Razak Dali presenting a goodie bag and duit Raya to a patient who has just undergone an operation accompanied by Dr. Norzila Mohamed Zainudin and Ms. Nancy Seng, Director of Marketing Communications, Public Bank

Public Islamic Bank is pleased to announce the launch of a new deposit investment product known as Istismar Account-i to all Muslim and non-Muslim individuals, businesses and organizations.

Istismar Account-i (IA-i) is structured under Shariah concept of Wakalah Bil Istithmar. It refers to an “investment agency” contract where the investor (the depositor) appoints the Bank (the agent) to undertake investment activities on behalf of the depositor for a fee.

The Bank acts in two capacities, i.e. as an agent in accepting deposits from the depositor who plans to invest and as an investment manager in carrying out Shariah compliant investment activities as agreed by the parties.  The Bank as an agent cannot guarantee the profit expected from the investment.

With the introduction of IA-i, the Bank is able to inform the Expected Profit Rate (EPR) at the point of placement, thus, allowing customers to know their expected rate of return on their investment. IA-i offers a competitive rate with flexible range of tenures. During the 3 month launch campaign, a special rate will be given to retail customers. The product is available at all 251 Public Bank/Public Islamic Bank branches throughout the country effective from 16 August 2011.

Public Islamic Bank is confident that the product will be well received as it appeals to both corporate and retail customers.  The launch of IA-i will enhance the competitiveness of the Bank’s deposit products.

Leveraging on its extensive branch network and strength in retail business, the Bank has remained focused on growing Islamic banking business and will continue to introduce more innovative products and services.

The Public Bank Group achieved another strong set of results in the first half of 2011 with a record half-year pre-tax profit of RM2.26 billion.

Tan Sri Dato’ Sri Dr. Teh Hong Piow, Chairman of Public Bank said, “The Public Bank Group’s track record of profitability remained strong, with net profit attributable to shareholders growing by 20.3% in the first half of 2011 and maintains the high net return on equity of 27.1% of the Group.”

Tan Sri Teh further added, “Domestic loan growth remained strong, achieving an annualised growth rate of 14.5% whilst gross impaired loan ratio declined to below 1%.”

In view of the Public Bank Group’s strong performance for the period, Tan Sri Teh announced that the Board of Directors has declared a first interim single-tier dividend of 20%, which will result in a total dividend payout of RM700 million.

Highlights of the Public Bank Group’s Performance in the First Half of 2011

Highlights of the Public Bank Group’s Performance for the Second Quarter as compared to the First Quarter of 2011

Continued Strong Profit Performance
“The strong profit performance of the Public Bank Group for the first half of 2011 was mainly attributed to the healthy growth in net interest and finance income, higher non-interest income coupled with lower credit charges,” said Tan Sri Teh.  

Tan Sri Teh further commented that, “Despite the competitive pressure on interest margins, the Group’s net interest and finance income improved by RM270 million or 10.4 % in the first half of 2011 as compared to the corresponding period of 2010 due to strong growth in loans and customer deposits as well as  the sustained strong asset quality.

Non-interest income of the Public Bank Group recorded a commendable growth of 12.7% as compared to the corresponding period in 2010, mainly driven by higher fee income from Public Mutual’s unit trust business as well as higher investment income.

The Public Bank Group’s loan impairment allowances decreased by 3% despite the strong loan growth in the first half of 2011. This was directly attributed to the continued improvement in asset quality as a result of the Group’s prudent credit policies and effective credit monitoring,  as evidenced by the Group’s low gross impaired loan ratio of below 1%.”

Strong Momentum in Loan Growth
The Public Bank Group sustained its strong loan growth momentum with a RM10.6 billion increase or an annualised growth rate of 13.6% in the first half of 2011. “In particular, domestic loans grew at a stronger annualised growth rate of 14.5%, leading to an increase in the Group’s domestic lending market share to 16.4%,” said Tan Sri Teh.

The lending activities of the Public Bank Group remained focused on the retail sector, with loans to mid-market commercial enterprises as well as loans for the financing of residential properties and purchase of passenger vehicles accounting for 85% of the total loan portfolio of the Group as at the end of June 2011. In particular, the Group’s residential properties financing grew at an impressive annualised rate of 16.7% in the first half of 2011.  

Tan Sri Teh added that, “Public Bank continued to sustain its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 17.7%, 34.0% and 25.8% respectively.”

In the first half of 2011, the Public Bank Group’s domestic loan approvals for residential properties rose at an impressive rate of 17% as compared to the corresponding period in 2010. The Group continued its strong support of the Government’s effort to promote SME activities with the approval of RM5.7 billion of loans to domestic SMEs, accounting for more than 21% of the Group's total domestic loans approved of RM26.9 billion in the same period.

Sustained Strong Asset Quality
Tan Sri Teh highlighted that, “The Public Bank Group has not only maintained its top ranking in asset quality amongst its peers, but also further improved its gross impaired loans ratio from 1.14% as at the beginning of the year to below 1% as at the end of June 2011, significantly lower than the Malaysian banking industry’s gross impaired loan ratio of 3.0%.”

The strong 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.

The Public Bank Group's loan loss coverage ratio also continue to remain one of the highest at 169.7%, as compared to the banking industry's coverage ratio of 92.2% despite that more than 90% of the impaired loans outstanding are secured. In line with BNM’s Guidelines to maintain a minimum of 1.5% collective assessment, the increase in the Group’s loan loss coverage was a result of setting aside additional collective assessment allowance for strong loan growth while maintaining a stable level of impaired loan.

Healthy Growth of Domestic Customer Deposits
The customer deposits of the Public Bank Group grew at an annualised growth rate of 12.9% in the first half of 2011. In particular, domestic customer deposits grew at a stronger annualised growth rate of 14.8%.

“The Group’s domestic core customer deposits grew at an annualised growth rate of 13% in the first half of 2011, as compared to the domestic banking industry’s core customer deposits annualised growth of 8.5%,” said Tan Sri Teh. The strong domestic core deposit growth of the Group was mainly supported by steady inflows of deposits, particularly fixed deposits and savings deposits which grew at an annualised growth rate of 13.5% and 14.1% respectively in the first half of 2011, outperforming the Malaysian banking industry’s annualised 8% growth in both fixed deposits and savings deposits.

Expansion of Overseas Operations
The Public Bank Group’s overseas operations contributed 7% of the Group’s pre-tax profit for the first half of 2011. Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank reported a strong growth in pre-tax profit of 33% to USD13.4 million in the first half of 2011 as compared to USD10.1 million in the corresponding period in 2010. Campu Bank remains one of the largest banks in Cambodia by balance sheet size.

“The Public Bank Group remains committed to expanding its overseas operations, particularly the Group’s Hong Kong and Cambodian operations. The Group currently has a network of 83 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China, with further plans to open 3 new branches in Hong Kong by the end of 2011. In Cambodia, the Group has 21 branches, with another 6 branches targeted to be opened in the second half of 2011,” said Tan Sri Teh.

Growth in 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.

Tan Sri Teh said, “The Group’s unit trust management business through our wholly-owned subsidiary, Public Mutual, continued to show commendable performance with a pre-tax profit growth of 24% in the first half of 2011, and maintained its market leadership position with RM44.4 billion of net assets under management, accounting for an overall market share of 44%.”

Public Mutual’s market share in the equity and Islamic unit trust fund sectors stood at 60% and 58% respectively. Net assets under management increased by 21.7% to RM44.4 billion as at the end of June 2011 as compared to RM36.5 billion a year ago. Public Mutual currently manages 86 funds with more than 100 billion units in circulation. Leveraging on the Public Bank Group’s large branch network and a strong unit trust consultant force, Public Mutual aims to further expand its customer base, which currently stands at over 2.5 million accounts.

2011 marks the fourth year of the Public Bank Group’s strategic alliance with the ING Group on bancassurance distribution. The Public Bank Group will continue with its efforts to further build the infrastructure to drive the expansion of the Group's bancassurance business to increase its fee-based commission income in the long run.

Tan Sri Teh added that, “Public Takaful Ehsan Berhad, the joint venture family takaful business between ING Management Holdings (Malaysia) Sdn Bhd and the Public Bank Group, which was launched on 5 April 2011, is also expected to contribute positively towards this end and further enhance the Group’s long-term fee-based revenue flows.”

Capital Position Remains Healthy
The Public Bank Group’s capital position remains healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 9.7% and 13.2% respectively as at the end of June 2011, after the payment of the first interim dividend of 2011. The Group is confident that it is well-positioned to meet the minimum requirements of Basel III, with its phased implementation coming into effect from 1 January 2013.

The Public Bank Group will continue to monitor further developments in relation to the Basel III requirements as well as additional regulatory capital requirements to be imposed by Bank Negara Malaysia. This will allow the Group to address the potential impact of such requirements by realigning existing capital management strategies from time to time.

“The Group remains committed to maintaining a healthy level of capital at all times to support the Group’s business growth strategies whilst maximising its shareholder value,” said Tan Sri Teh.

Prospects
The Malaysian economy is expected to grow by 5% to 6% in 2011. The outlook of the Malaysian banking sector, in which the Public Bank Group largely operates in, remains positive, supported by the strong economic fundamentals, robust domestic demand and the roll-out of the Economic Transformation Programme.

Tan Sri Teh emphasised that, “The Public Bank Group will continue to focus on its core retail banking and financing business whilst maintaining its prudent credit policies, and further improve on its cost efficiency. The Group expects its strong asset quality to be sustained, and will continue to leverage on the strong PB Brand as well as wide and efficient branch network to deliver balance sheet and revenue growth. The Group remains steadfast in its commitment to upholding strong corporate governance and implement sound risk management policies to support long-term growth.”

Tan Sri Teh remarked that, “The Public Bank Group’s performance for the first half of 2011 was satisfactory and in line with expectations. The Group will continue to expand its core banking and financing business with strong credit fundamentals and remain on course to meet its key business targets for 2011. Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and record satisfactory performance in the second half of 2011.”

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

Public Bank presented the Grand, 1st, 2nd & 3rd Prizes to the winners of the “PB Gold Rush” Campaign on 6 May 2011.

A total of 118 prizes comprising 18 monthly prizes of 18 grams of gold per customer were already awarded to the lucky winners each month. The remaining 10 main prizes were presented to the winners by Dato’ Chang Kat Kiam, the Chief Operating Officer of Public Bank Berhad at Menara Public Bank.

The Grand Prize of the “PB Gold Rush” Campaign which is 1kg of gold in Public Bank Gold Investment Account (GIA) valued at almost RM150,000 was awarded to Mr Tan Lai Hoe. Each 1st Prize winner won 500 grams of gold and the 3 winners were Mr Yap Swee Keong, Ms Saw Phek Lean and Mr Teo King Kowang. The 2nd prize winners who each won 334 grams of gold were Ms Kuan Mui Khim, Ms Wong Pick Yii and Mr Mak Chee Seng. The 3rd Prize winners were Mr Teh Kok Yam, Mr Harban Singh A/L Tara Singh and Encik Ahyat Khalissabri Bin Ishak, each of them won 250 grams of gold.

Dato’ Chang expressed his heartiest congratulations to all winners and also thanked them for their patronage and support.

“This campaign had received overwhelming response from our new and existing customers with more than 350,000 entries. The Bank is continuously looking to reward our loyal customers with more exciting prizes and promotional programmes”, added Dato’ Chang.

Currently the Bank’s latest campaign “U $ave V Reward” is open to all new and existing individual current and savings account customers with up to RM2 million cash rewards up for grabs. The Bank is currently also offering limited edition 24k gold-plated gifts for those who invest in the PB Investment Prosperity Campaign.

To find out more about the Bank’s latest promotions and campaigns, please visit your nearest Public Bank branch, call free phone at 1-800-22-9999 during working hours or log on to Public Bank’s website at www.pbebank.com.

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Public Bank presented 10 Grand Prizes to winners of the PB Card Pays For Your Bill contest on 6 May 2011. The prizes were given away to the winners by Dato’ Chang Kat Kiam, Chief Operating Officer of Public Bank. He expressed his heartiest congratulations to all winners and also thanked them for their full support in using the PB Credit Cards.

There were ten lucky Grand Prize winners for the PB Card Pays For Your Bill contest. The winners who walked away with FREE one year credit card bill worth RM20,000 each were Mr. Chan Hing Yin, En. Kamaruddin bin Mohamed Ismail, Mr. Liew Nyan Foo, Mdm. Loh Yok Peng, Dr. Wolfgang Neuberger, Mr. Ng Kian Yong, YAM Raja Nazhatul Shima, Mdm. Song Yok Zhen, Mdm. Tan Lean Bee and Mr. Wong Hon Men.

Dato’ Chang said that the campaign had generated phenomenal response from new and existing cardmembers with more than 25,000,000 eligible entries. The Bank has recently launched the “Swipe More & Get Rewarded with PB Credit Card” promotion from 1 March 2011 to 31 July 2011. This 5-month new campaign offers 8% Cash Back to Cardmembers who swipe a minimum of eight times with a minimum of RM80 in a single receipt with PB cards in a tracking month. Alternatively, Cardmembers who swipe a minimum of 12 times with a minimum of RM80 in a single receipt with PB Cards in a tracking month are qualified for the 12% Cash Back. Maximum Cash Back per Cardmember is RM120 per month. Total of RM500,000 Cash Back is available per month based on first-come-first-serve basis. To participate, a one time SMS registration is required. SMS “PBCB 16-digit credit card number” to 32968. Not a PB Card Cardmember yet? Sign up now to enjoy cash activation rewards of up to RM60 or enjoy 0% Finance Charge for eight months from card approved date. Access www.pbebank.com for more information.
 

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I am pleased to announce that the Public Bank Group achieved a strong start to 2011 with net profit attributable to shareholders of RM828 million for the first quarter of the year, 21% higher as compared to RM685 million in the corresponding quarter in 2010. The Group’s quarterly pre-tax profit continues to surpass the billion ringgit mark, with pre-tax profit of RM1.10 billion for the first quarter of 2011, 19% higher than the corresponding quarter in 2010.

The Public Bank Group achieved an earnings per share of 23.6 sen for the first quarter of 2011 and an annualised net return on equity of 26.4%.

The Public Bank Group’s domestic loan base grew healthily by 3.6% in the first quarter of 2011 as compared to the domestic banking industry’s loan growth of 1.7% in the first two months of 2011.

Highlights of the Public Bank Group's Performance in the 1st Quarter of 2011

Strong 1st Quarter Profit Performance
The strong profit performance of the Public Bank Group for the first quarter of 2011 was mainly attributed to the strong growth in net interest and finance income, higher non-interest income whilst loan impairment allowance charges remained stable.

The Group’s net interest and finance income improved by RM136 million or 10.8% in the first quarter of 2011 as compared to the corresponding quarter in 2010, on the back of the strong organic growth in loans and core customer deposits.

Non-interest income of the Group increased by over 9% as compared to the corresponding period in 2010, mainly driven by higher income from the unit trust and stockbroking businesses and a widening and broader fee-based business.

The Public Bank Group’s loan impairment allowances remained stable in the quarter. This was attributed to the continued improvement in asset quality as demonstrated by the further reduction in the Group’s impaired loan ratio of 1.05%, resulting from the continued pursuit of prudent credit policies and effective credit monitoring and management.

Strong Growth in the Group’s Domestic Lending Portfolio
The Public Bank Group continued to record a strong increase in total loan and advances of RM5.1 billion, a 3.2% growth for the first quarter of 2011, to reach RM162 billion as at the end of March 2011. Domestic loan growth for the quarter was stronger at 3.6%, or an annualised rate of 14.6%, with the Group’s domestic market share of loans and advances standing at 16.2% as at the end of February 2011.

The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the Group’s total loan portfolio, mainly comprising loans to mid-market commercial enterprises as well as loans for the financing of residential properties and the purchase of passenger vehicles. In particular, the Group’s loan portfolio for property financing grew at an impressive annualised rate of 16.8% in the first quarter of 2011. Public Bank continued to sustain its market leadership in its core lending businesses with domestic market share of residential mortgages, commercial property lending and passenger vehicles financing of 17.5%, 34.1% and 25.6% respectively as at the end of February 2011.

For the first quarter of 2011, the Public Bank Group’s domestic retail loan approvals increased by 10% as compared to the corresponding period in 2010, with housing loan approvals growing at a higher 17%.  The Group also approved a total of RM3.0 billion of loans to domestic SMEs, 11% higher than the corresponding quarter in 2010, with approvals of SME loans accounting for 24% of the Group's total domestic loans approved of RM12.6 billion in the first quarter of 2011.

Healthy Asset Quality Maintained
The Public Bank Group's asset quality remained healthy as at the end of March 2011, with the Group’s gross impaired loans ratio improving further to 1.05% as at the end of March 2011, as compared to 1.14% as at the end of 2010. This compares favourably to the domestic banking industry's gross impaired loans ratio of 3.3% as at the end of February 2011.

The sound 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, and the prompt and timely credit recovery efforts undertaken by the Group.

As at the end of March 2011, the Public Bank Group's loan loss coverage ratio stood at 155.4%, which is significantly higher and more prudent than that of the banking industry's coverage ratio of 89.6% as at the end of February 2011, despite that more than 90% of the impaired loans outstanding are secured. Guided by Bank Negara Malaysia’s requirement to maintain a minimum 1.5% collective allowance, the increasing loan loss coverage was the result of higher collective allowance set aside for the strong loan growth in the first quarter of 2011.

Sustainable Growth in Domestic Core Customer Deposits
Core customer deposits, which represent a stable funding base of the Public Bank Group, grew by RM3.0 billion or 2.1% in the first quarter of 2011 to reach RM147 billion as at the end of March 2011. Domestic core customer deposits grew by a stronger 3.0% in the quarter, as compared to the domestic banking industry’s core customer deposits growth of 1.8% for the first two months of 2011. In particular, domestic fixed deposits and savings deposit of the Group grew by 3.6% and 4.4% respectively in the first quarter of 2011, significantly above the banking industry’s fixed deposits and savings deposit growth rates of 0.1% and 2.3% respectively in the first two months of 2011.

With core customer deposits growing healthily in tandem with the high loan growth rate, the Public Bank Group's liquidity position remains stable with net loans to deposits ratio standing at 88.1% as at the end of March 2011.

Expansion of Overseas Operations
The Public Bank Group's expansion plan in its overseas operations remains focused on the Group’s Hong Kong and Cambodian operations. The Public Bank Group currently has a network of 83 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China, with a further 3 branches in Hong Kong to be opened in 2011. Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, is one of the largest banks in Cambodia by balance sheet size. Cambodian Public Bank Plc presently has a total of 21 branches, with another 6 branches targeted to be opened in 2011.

Fee-based Income Growth Remains Upbeat
The Public Bank Group continues 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 Public Bank 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 45%, whilst its market share in equity funds and Islamic funds each stood at 60% as at the end of March 2011. In the first quarter of 2011, Public Mutual’s pre-tax profit grew by 23% to RM77.7 million from RM63.2 million in the corresponding quarter in 2010. Net assets under management stood at RM42.4 billion as at 31 March 2011, 16% higher as compared to RM36.6 billion a year ago. Public Mutual Berhad continues to build and nurture its large force of unit trust consultants, a highly effective distribution channel to drive the Group’s unit trust business, with its unit trust customer base growing to over 2.4 million accounts.

In the fourth year of its strategic alliance with the 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. With the recent official launch of ING PUBLIC Takaful Ehsan Berhad, the joint venture family takaful business between ING Management Holdings (Malaysia) Sdn Bhd and the Public Bank Group on 5 April 2011, the Group is set to extend further its fee-based revenue activities.

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 maintaining healthy returns to its shareholders.

The Public Bank Group’s capital position remains healthy, with its Tier I capital ratio and risk-weighted capital ratio standing at 9.5% and 13.0% respectively as at the end of March 2011. The Group is confident that it is well positioned to meet the Basel III minimum capital requirements, with its phased implementation coming into effect from 1 January 2013.

The Public Bank Group continues to proactively monitor the developments in relation to the Basel III requirements as well as additional regulatory capital requirements to be imposed by Bank Negara Malaysia. This allows the Group to address the potential impact of such requirements on the Group’s capital and to realign existing capital management strategies from time to time. The Group remains committed to maintaining a healthy level of capital at all times to support the Group’s business growth strategies whilst maximising its shareholders’ returns.

Prospects
The strong growth of 7.2% registered in 2010 in the Malaysian economy, in which the Public Bank Group largely operates, augurs well for the outlook for 2011. Despite the weaker external demand amidst challenging global economic conditions, the domestic operating environment continues to remain buoyant due to sustainable domestic demand and accommodative policy environment, with the expectation of a 5% to 6% growth in the Malaysian economy in 2011.

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 sound corporate governance practices and further reinforce the strong PB Brand. The encouraging operating environment, both domestically as well as the regional economies in which the Group operates in, will provide further leverage for the Group to sustain its growth trajectory in 2011.

Barring unforeseen circumstances, the Group is expected to continue to record satisfactory performance for the rest of 2011.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

Public Bank has appointed Mr. Tang Wing Chew as an Independent Non-Executive Director with effect from 29 March 2011.

Mr. Tang has more than 45 years experience in the financial services industry, ranging from research, management and project studies, training, mergers and integration, and stewardship of financial institutions.

He joined Bank Negara Malaysia (BNM) in 1966 as an Assistant Economist in the Economic Research Department. During his 18 years of service with BNM, he also served as Manager (Penang branch), Principal (BNM Staff Training Centre) and Manager (Operational Planning Division), where he was responsible for the automation of Kuala Lumpur Interbank Cheque Clearing System in 1984.

Mr. Tang had working experience in two finance companies, where he was the Chief Executive Officer and General Manager (Operations). Mr. Tang had also served as an Executive Adviser and the Chief Executive Officer of an insurance company.

At the Board level, Mr. Tang also served as an Independent Non-Executive Director in two general insurance companies and in a leasing and credit company.

Mr. Tang has also been appointed as an Independent Non-Executive Director of 2 subsidiaries of Public Bank with effect from 29 March 2011 ie. Public Islamic Bank Berhad and Public Investment Bank Berhad.

He is also an Independent Non-Executive Director of Cagamas Berhad and Cagamas Holdings Berhad.

The newly appointed Member of The Board of Directors, Mr. Tang Wing Chew

Public Bank is pleased to announce the launch of the “U $ave V Reward” Campaign to encourage savings and to reward loyal customers.  Under the campaign, customers who participate would stand a chance to win total cash prizes worth over RM2 Million. 

The campaign promotes a step-up approach in terms of prize value over a period of six and a half months to encourage customers to save more and stay over a longer period, as bigger cash prizes will be offered in the later months. In addition, the allotments of the contest entries are based on the “Early Bird” concept as more entries are allotted to customers who participate in the campaign earlier.

The campaign is available to both new and existing individual customers. A total of 68 cash prizes worth over RM2 Million will be given away to the grand and monthly prize winners. The two grand prizes of the “U $ave V Reward” Campaign is a cash prize amounting to RM188,800 per winner. The cash value of the other top prizes are RM108,800, RM88,800 and RM68,800 respectively for two winners under the 1st, 2nd and 3rd prize categories.

The monthly draws comprise 10 winners each month with cash prizes ranging from RM6,800 per winner for the month of April 2011 to RM36,800 per winner for the month of September 2011. The customers will also be given PB Day 2 Day Card (an ATM cum Debit Card) with first year fee waiver.  

The campaign does not require the customers to fill up or submit any forms as the customers who have met the eligibility criteria will automatically be assigned the contest entry(s).  Every new savings or current account opened with a Monthly Average Credit Balance of RM1,000 and RM3,000 respectively will be entitled to contest entries. In addition, every subsequent net increase of RM1,000 in the customers’ accounts will also entitle the customers to contest entries. 

For more information on the campaign, customers are cordially invited to visit their nearest Public Bank branch, call free-phone at 1-800-22-9999 during office hours, or visit Public Bank’s website at www.pbebank.com.

* * * * * * * *

In conjunction with Public Bank’s 45th Annual General Meeting held on 14 March 2011, I am pleased to present a review of the Public Bank Group’s performance in 2010.

Financial performance

Global economic condition was mixed in 2010, with continuing uncertainty in the US and European economies, while Asian economies rebounded. With the commendable recovery of the Malaysian economy, the Public Bank Group performed well, delivering another year of solid profit growth.

The Public Bank Group achieved a new milestone in 2010 with a record pre-tax profit of RM4.09 billion. This was a 23% increase from RM3.32 billion in 2009. The Group’s net profit grew by 21% to RM3.05 billion from RM2.52 billion achieved in 2009, surpassing the RM3 billion mark for the first time.

The strong profit performance was a result of healthy growth in net interest income, strong growth in loans and core customer deposits, as well as sustained strong asset quality.

The Public Bank Group’s net return on equity increased from 26.1% in 2009 to 27.1% in 2010. Earnings per share also grew from 73.3 sen in 2009 to 87.2 sen in 2010.

Strong momentum in domestic lending business

In 2010, the Public Bank Group achieved healthy loan growth of 13.8% with total loans standing at RM156.5 billion. In particular, domestic loans grew at a stronger rate of 15.6%. This has led to a higher market share of the domestic lending business of 16.3%, as compared to 15.9% a year ago.

The Public Bank Group’s lending activities remained focused on the financing of residential properties and passenger vehicles, and loans to mid-market commercial enterprises. These three sectors accounted for 85% of the Group’s total loan portfolio.   The Group’s residential properties and passenger vehicles financing grew at impressive rates of 17.1% and 12.4% respectively in 2010. Public Bank is the country’s No.1 passenger vehicle and residential mortgage financier with market shares of 25.5% and 17.4% respectively.

The Public Bank Group’s loan growth indicators remain robust with domestic retail loan approvals increasing by 8% in 2010. In particular, domestic loan approvals for hire purchase grew at an impressive rate of 18%. Public Bank continued to strongly support the Government’s efforts in promoting the financing of small- and medium-sized enterprises (“SMEs”). Of the total domestic loans approved of RM51.0 billion in 2010, RM10.8 billion or a sizeable 21% was for commercial loans to SMEs.

Strong  asset quality

The Public Bank Group’s asset quality remains the best in the banking industry, reflecting the Group’s prudent credit culture and stringent lending policies. The Group’s impaired loans ratio remained low at 1.1% in 2010 despite the more stringent criteria on the classification of impaired loans under FRS139 which was adopted during the year. The Group’s impaired loans ratio of 1.1% is significantly lower than the Malaysian banking industry’s gross impaired loans ratio of 3.0%. The Group’s impaired loans ratio has also improved from 1.4% as at the beginning of 2010.

The Public Bank Group’s loan loss coverage ratio increased further from 120% in 2009 to 144% in 2010, despite that more than 90% of the Group’s impaired loans are secured. This was also significantly above the 99% coverage for the banking system. The increase in the Group’s loan loss coverage was due to additional collective allowance set aside for strong loan growth, and is in line with Bank Negara Malaysia’s guidelines which require a minimum of 1.5% collective allowance.  

Moving forward, with the Public Bank Group’s prudent lending policies, healthy customer base and pre-emptive measures taken to assist borrowers to meet their repayment obligations, the Group targets to maintain its low impaired loans ratio at below 1%.

Healthy expansion in domestic core customer deposits

In line with the Public Bank Group’s strategy to build a long-term core customer deposit base, the Group’s core customer deposits grew by 12.5% in 2010. In particular, domestic core customer deposits grew by 15.0% in 2010 as compared to the industry growth rate of 6.7%. Domestic fixed deposits, savings deposits and demand deposits of the Group grew by 16.6%, 8.7% and 14.1% respectively, far outpacing the industry growth rates of 5.9%, 2.6% and 11.3% respectively. As a result, the Group’s market share of core customer deposits improved from 15.4% in 2009 to 16.3% in 2010.

The strong core deposit growth is supported by the Public Bank Group’s extensive domestic network of 250 branches and 1,362 Self-Service Terminals, as well as the superior ISO certified customer service delivery at the branches of the Group.

With the strong core customer deposit growth keeping pace with the growth in loans, the Public Bank Group continued to maintain its healthy liquidity position with the net loan to deposit ratio standing at 87%.

International operations

In 2010, the Public Bank Group’s overseas operations recorded a 30% improvement in pre-tax profit to reach RM311 million, accounting for 8% of the Group’s pre-tax profits. The improved performance was mainly due to a decline in loan impairment allowances and improved business sentiment in the region. In particular, the Hong Kong operations of the Group achieved a marked improvement, with a 75% growth in pre-tax profit for the year, and contributed to over 5% of the Group’s pre-tax profit. Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, recorded a marginal pre-tax profit improvement and a strong customer deposit growth rate of over 29% for the year.

The Public Bank Group's expansion plan in its overseas operations remains focused on its Hong Kong and Cambodian operations. The Group currently has a network of 81 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China. Cambodian Public Bank Plc is one of the largest banks in Cambodia by balance sheet size and presently has a total of 21 branches, with another 6 branches targeted to be opened in 2011.

In addition, the Group currently has 7 branches in Vietnam, 3 in Laos and 1 in Sri Lanka. There are plans to open another 4 new branches in Vietnam and 1 new branch in Laos this year.

Developing fee-based income

In 2010, the Public Bank Group built on its strategic initiatives to grow fee-based income from unit trusts, bancassurance and wealth management products, to enhance further 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 in the private unit trust industry with an overall market share of 43%. Public Mutual’s market share in equity funds and Islamic funds grew to 59% and 60% respectively in 2010, from 57% and 56% in 2009. Total assets under management rose to RM40.6 billion as at the end of 2010, 14% higher as compared to RM35.6 billion a year ago. With 12 new unit trust funds launched during the year, Public Mutual currently manages a total of 84 funds, with nearly 100 billion units in circulation. On the strength of these strong fundamentals, Public Mutual is well-positioned to continue its market share gains and profitability growth.

The PB-ING bancassurance business alliance is into its third year in 2010 and was ranked 2nd in the country based on volume of new business.  The Public Bank Group will continue its efforts to further build its bancassurance sales force and infrastructure to drive the expansion of the Group's bancassurance business in the long-term. In 2010, the Group achieved a significant 72% increase in the sales of bancassurance products as compared to 2009, as measured by annualised premium equivalent achieved.

On 1 September 2010, Bank Negara Malaysia approved a family takaful licence to a joint venture company in which ING and the Public Bank Group holds 60% and 40% equity interest respectively. The joint venture for the family takaful business will provide the Group with a further avenue to grow its fee-based income when the operations of the joint venture commence by the first half of 2011.

Payment of a 2nd interim dividend

In view of Public Bank’s strong profit performance in 2010, a second interim  dividend of 33 sen was paid, comprising a 25 sen franked dividend and a 8 sen single-tier dividend. Together with the first interim dividend of 25 sen paid in August 2010, the total gross dividend for 2010 was 58 sen gross cash dividend. This represents a total dividend payout ratio of 52% for 2010 and a healthy gross dividend yield of 4.5%.
 

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 delivering healthy and sustainable returns to its shareholders, by maintaining a disciplined capital and balance sheet management process. As at 31 December 2010, the Group’s capital position remains healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.0% and 13.7% respectively, after deducting the second interim dividend for 2010.

The Public Bank Group’s capital position under the new global capital and prudential standards, commonly referred to as the Basel III standards, is expected to remain supportive of the Group’s business growth strategies whilst maximising shareholders’ returns. The implementation of the Basel III standards, which are subject to adaptation by national banking regulators, will be phased-in gradually, commencing 1 January 2013, with final implementation in 2019. The Group is confident that it is well-positioned to meet the revised minimum capital requirements. The Group will closely monitor future developments pertaining to these regulatory capital reforms. The Group will also continue to effectively manage its capital structure as well as maintain maximum financial flexibility to pursue strategic objectives whilst maximising shareholder value.

Largest non government-linked listed company by market capitalisation

Since the end of 2005, Public Bank’s share price had doubled from RM6.55 per share to RM13.02 per share as at 31 December 2010. Public Bank’s market capitalisation has increased by 107% from RM22.23 billion as at the end of 2005 to RM45.96 billion as at the end of 2010, and remained the largest non-government-linked company listed on Bursa Malaysia 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 135,398 Public Bank shares worth RM1.76 million based on the Public Bank share price of RM13.00 as at 11 March 2011. In addition, the shareholder would have received a total gross dividend of RM711,000 in this period. This translates into a total value of RM2.47 million, representing a remarkable compounded rate of return of 20% annually for each of the 43 years since its listing in 1967. 

Over the last 14 months since the beginning of 2010, the Public Bank shares have provided a total return of 25%, inclusive of the cash and treasury share dividends paid during the period. Over the medium-term of 5 years since the beginning of 2006, an investor would have enjoyed a superior total return of 160%, or a compounded 24% annual return over the 5-year period.

Outstanding KPIs

Over the past 5 years, the Public Bank Group has demonstrated an outstanding and resilient track record of performance. As at the end of 2010, total assets of the Group stood at RM226.3 billion, which has doubled when compared to RM111.69 billion five years ago. Over the past 5 years, the Group recorded a compounded loan growth rate of 18.1% which was significantly higher than that of the industry average of 9.9%. Core customer deposits also grew strongly at a compounded growth rate of 17.1%, which is more than double the industry average growth rate of 7.7% over the past 5 years.

The Public Bank Group’s net return on equity improved significantly from 19.1% in 2005 to 27.1% in 2010, whilst the Group’s net profit grew by 109% over the same 5-year period. Gross impaired loans ratio improved to 0.9% in 2010 as compared to 2.1% in 2005, based on the old Bank Negara Malaysia GP3 classification of impaired loans. Under the more stringent FRS 139 impaired loans classification, gross impaired loans ratio also improved to 1.1% as at the end of 2010 as compared to 1.4% as at the beginning of 2010.

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 Public Bank Group’s net return on equity of 27.1% is the highest in the Malaysian banking industry and is well above the average of 15.4% achieved by the other 5 banking groups. The Group’s cost to income ratio of 30.7% is the lowest in the industry, significantly lower than the latest available industry average of 48.4%. The Group’s asset quality remained the best in the industry with the lowest gross impaired loans ratio of 1.1%.

When benchmarked against leading banks in the Asia Pacific region, Public Bank was the top performing bank in terms of cost efficiency and return on equity. Over the medium term, the Group aims to continue to achieve a net return on equity of above 26% and a low impaired loan ratio of below 1%.

Corporate responsibility

Public Bank remains committed to build sustainable practices in every aspect of the Public Bank Group’s banking business and the environment it operates in. These include creating long-term value for the Group’s customers, employees, shareholders and the community it serves.

Public Bank provided financial assistance for the setup of a “Halfway House” initiated by Institute Jantung Negara Foundation and continued to pledge to Universiti Tunku Abdul Rahman for research studies in the field of banking and finance.

Public Bank has also been actively channelling 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 RM3.45 billion since the end of 2005. 

An award winning bank

A total of 52 awards and recognition of excellence were conferred on Public Bank in 2010, including 8 Best Bank or Best Company in Malaysia awards. The best bank and best company awards, some of which were for a number of consecutive years, are as follows:

For the eighth consecutive year, Public Mutual is again the biggest recipient of The Edge-Lipper Malaysia Fund Awards with a total of 9 awards won in 2011, including the esteemed Best Overall Fund Group Award.

Some of the other awards, which Public Mutual received in 2010, are:

Corporate governance

Public Bank’s record of excellence in corporate governance continued to be validated by several corporate governance awards and recognition by international publications and surveys.

In recognition of Public Bank’s top performance on the Malaysian Corporate Governance Index 2010, the Bank was awarded the Corporate Governance Hall of Fame Award, Best Conduct of AGM Award and three other awards by the Minority Shareholder Watchdog Group.

Public Bank was also awarded the Malaysian Business-CIMA Enterprise Governance Awards 2010 by Malaysian Business as the Overall Winner for the third consecutive year, as well as the awards for Best Return to Shareholders and Corporate Social Responsibility, and the Corporate Governance Asia Recognition Award 2010 by Corporate Governance Asia.

Public Bank also ranked top in corporate governance in Euromoney’s Best Managed and Governed Companies - Asia Poll 2010 and in FinanceAsia’s Asia’s Best Managed Companies 2010 Poll.

The Public Bank’s 2009 Annual Report won 3 top NACRA awards, including the Overall Excellence Award for the 10th time.

Outlook

Looking ahead, there remains a degree of uncertainty in the global markets. However, the banking industry in Malaysia is expected to sustain its profitability with healthy capital and strong asset quality amidst a more competitive landscape.

The Public Bank Group’s record financial results in 2010 reaffirms the Group’s proven business strategies. The Group is confident that it is well placed to meet any challenges ahead and will continue to strive to maintain its solid profit performance in 2011.

The Public Bank Group will continue to pursue strong growth in its lending and deposit-taking businesses, expedite and diversify its growth in fee-based revenue, and further enhance its cost efficiency and return on equity. The Group will continue to maintain its strong asset quality and leverage on its wide branch network, superior PB Brand and service excellence. The Group also remains committed to its tradition of prudence and practice of strong corporate governance.

The imminent changes to the regulatory capital framework under the Basel III standards mean that banks generally will have to maintain a higher level of shareholders’ capital to support their businesses. The Group is confident of meeting these challenges based on the Group’s strong earning generation capacity, healthy balance sheet profile and strong asset quality. The Group will continue to balance the potential need for higher equity capital for business growth, and maximizing shareholders’ returns.

Barring unforeseen circumstances, the Public Bank Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2011.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

In conjunction with the Lunar New Year festive season, Public Bank brought goodwill and cheer to 100 needy patients of the Tung Shin Hospital, Kuala Lumpur by distributing hampers and Ang Pows worth RM20,000 on 16 February 2011.

The presentation was carried out at the Charity Wards of the hospital by the Senior General Manager of Public Affairs Division, Encik Razak Dali on behalf of the Bank’s Founder and Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow.

Tan Sri Teh, who is also the Honorary President of the Tung Shin Hospital said the presentation from the Bank was a gesture to bring much needed cheer to needy patients who were unable to celebrate the auspicious festival with their loved ones at home.  It is also the Bank’s way in fulfilling its corporate social responsibility to society and the community it serves. 

The presentation lighted up the faces of the patients who each received a hamper of Chinese New Year goodies and an Ang Pow.  Also present at the distribution ceremony were Mr. Ng Hong, Administrator and Madam Janice Koo, Patient Service Manager of the Tung Shin Hospital.

En. Razak Dali presenting an Ang Pow to one of the needy patients at Tung Shin Hospital

The Public Bank Group achieved another year of strong performance with a record pre-tax profit of RM4.09 billion for 2010, representing a 23% growth over 2009. In 2010, the Group recorded net profit of RM3.05 billion, 21% higher as compared to RM2.52 billion achieved in 2009. We are pleased to have delivered, yet again, a strong set of results on the back of sustainable revenue growth, efficient cost management, superior asset quality whilst maintaining prudent banking practices.

The Public Bank Group's improved financial performance in 2010 was mainly driven by the strong growth in net interest and finance income and higher non-interest income, coupled with lower loan impairment allowances. Supported by strong organic growth in loans and core customer deposits, the Group's net interest and finance income increased by RM638 million or 14% in 2010 as compared to 2009.

Non-interest income of the Public Bank Group which recorded a commendable growth of 19% as compared to 2009, was supported by higher fee income generated by the Group's unit trust and foreign exchange businesses.

On a quarterly basis, the Public Bank Group continued to surpass the RM1 billion quarterly profit mark by recording a pre-tax profit of RM1.13 billion in the fourth quarter of 2010. This represented a strong growth of 8% as compared to the pre-tax profit of RM1.05 billion in the third quarter of 2010. Similarly, net profit attributable to shareholders for the quarter also grew by 8% as compared to the preceding quarter, to RM846 million.

The Public Bank Group's results translated into improved earnings per share of 87.2 sen and higher net return on equity of 27.1% in 2010 as compared to 26.1% in previous year.

In view of the Public Bank Group's strong performance for the year, the Board of Directors has declared a second interim cash dividend of 25 sen less 25% tax and a single tier dividend of 8 sen. Together with the first interim dividend of 25 sen less 25% taxation, which was paid in August 2010, the total gross dividend for 2010 is 58 sen. The total net dividend paid and payable for 2010 amounts to RM1.59 billion and represents a total payout of 52% of the Group's net profit for the year. The Board of Directors does not propose any final dividend for 2010.

Highlights of the Public Bank Group's Performance in 2010

• Pre-tax profit of the Group increased by 23% to RM4.09 billion as compared to RM3.32 billion in 2009, on the back of a strong 14% growth in net interest and finance income.
• Net profit attributable to shareholders increased by 21% to RM3.05 billion as compared to RM2.52 billion in 2009.
• Net return on equity increased further to 27.1% as compared to 26.1% a year ago.
• Earnings per share of 87.2 sen was 19% higher as compared to 73.3 sen in 2009.
• Cost-to-income ratio improved to 30.7% from 32.6% in 2009, and is significantly lower than the industry's cost-to-income ratio of 48.4%.
• Total assets increased to RM226.3 billion as at the end of December 2010.
• Total loans and advances of the Group grew by 13.8% to reach RM156.5 billion as at the end of December 2010, driven by strong lending growth of 15.6% in the domestic market.
• The Group's core customer deposits grew at a rate of 12.5%, supported by the domestic core customer deposits growth rate of 15.0%.
• The gross impaired loans ratio of the Group as at the end of December 2010 remained low at 1.1% as compared to the industry's gross impaired loans ratio of 3.2% and was an improvement from the gross impaired loans ratio of 1.4% a year ago.
• The Group's loan loss coverage of 143.5% remains one of the highest and most prudent in the Malaysian banking industry.
• The Tier 1 capital ratio and risk-weighted capital ratio of the Group remain healthy at 10.0% and 13.7% respectively as at the end of December 2010, after the payment of the second interim dividend.

Strong Momentum in Domestic Lending Business

The Public Bank Group sustained its strong loan growth momentum with a 13.8% growth in total loans and advances to reach RM156.5 billion as at the end of December 2010. In particular, domestic loans grew at a stronger rate of 15.6%. This has led to a higher market share of the domestic lending business of 16.2% as at the end of November 2010, as compared to 15.9% as at the beginning of the year.

The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the Group's total loan portfolio, mainly comprising loans to mid-market commercial enterprises as well as loans for the financing of residential properties and the purchase of passenger vehicles. In particular, the Group's loan portfolio for residential properties financing and passenger vehicles financing each grew at impressive rates of 17.1% and 12.4% respectively in 2010. Public Bank continued to sustain its market leadership in the residential mortgage and passenger vehicles financing businesses in the domestic market, with market shares of 17.4% and 25.1% respectively as at the end of November 2010.

For 2010, the Public Bank Group continued its strong support of the Government's effort to promote small- and medium-sized enterprise ("SME") activities particularly for working capital and investment financing. Total loan approvals of RM10.8 billion to domestic SMEs accounted for a sizeable 21% of the Group's total domestic loans approved of RM51.0 billion during the year.

Sustained Strong Asset Quality

The Public Bank Group's asset quality remained strong as at the end of 2010. The strong asset quality of the Public Bank Group is due to, inter alia, its prudent lending policies and strong risk management practices, as well as the extensive recovery efforts undertaken by the Group. Despite the more stringent criteria on the classification of impaired loans under FRS 139 which was adopted during the year, the Group's impaired loans ratio as at the end of the year remained low at 1.1%, which is approximately one-third that of the banking industry's gross impaired loans ratio of 3.2%. The Group's impaired loans ratio has also improved as compared to the impaired loans ratio of 1.4% as at the end of 2009.

The Public Bank Group's loan loss coverage ratio remains one of the highest at 143.5%, as compared to the banking industry's loan loss coverage ratio of 97.4% notwithstanding that more than 90% of the impaired loans outstanding are secured. The increase in the Group's loan loss coverage was primarily due to additional collective allowance set aside for the strong loan growth, based on the guidelines of Bank Negara Malaysia which require the maintenance of a minimum 1.5% collective allowance.

Growth in Domestic Core Customer Deposits Remains Strong

In line with the Public Bank Group's strategy to build a long-term core customer deposit base, intensified efforts to grow retail deposits continued to contribute positively to the expansion of the Group's core customer deposit base. In particular, domestic core customer deposits grew by 15.0% in 2010, against the backdrop of a 5.9% annualised growth in the domestic industry's core customer deposits for the first eleven months of 2010.

The strong domestic core customer deposit growth of the Public Bank Group is mainly supported by steady inflows of deposits, outperforming the growth of the domestic banking system. Domestic fixed deposits, savings deposits and demand deposits of the Group grew by 16.6%, 8.8% and 14.0% respectively, significantly above the industry's annualised growth rates of 5.5%, 0.4% and 10.4% respectively for the first eleven months of 2010.

With the strong core customer deposits growth in tandem with the high loan growth rate, the Public Bank Group's liquidity position remained healthy with net loan to deposit ratio standing at 87.1% as at the end of 2010.

Improved Earnings of the Group's Overseas Operations

In 2010, the Public Bank Group's overseas operations recorded a 30% improvement in earnings, due mainly to the decline in loan impairment allowances and overall improved business sentiments in the region. In particular, the Hong Kong operations of the Group achieved a marked improvement of 75% growth in pre-tax profit for the year, and contributed to over 5% of the overall Group's profit. Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, recorded a marginal profit improvement and a strong customer deposit growth rate of over 29% for the year.

The Public Bank Group's expansion plan in its overseas operations remains focused on its Hong Kong and Cambodian operations. The Group currently has a network of 81 branches in Hong Kong and 3 branches in Shenzhen in the People's Republic of China. Cambodian Public Bank Plc is one of the largest banks in Cambodia by balance sheet size and presently has a total of 21 branches.

Expansion in Non-interest Income

The Public Bank Group recorded a 19% growth in non-interest income in 2010, mainly attributed to its unit trust and its foreign exchange businesses. Driven by its fee-based revenue strategies which carry a low or zero capital cost, the Group continued to develop its fee-based income from unit trust, bancassurance and wealth management products to further enhance the Group's profitability, return on equity and capital structure.

Public Mutual Berhad ("Public Mutual"), the Public Bank Group's wholly-owned unit trust fund management subsidiary, maintained its market leadership position in the private unit trust industry with an overall market share of 43%. Public Mutual's market share in equity funds and Islamic funds grew to 59% and 60% respectively as at the end of 2010, from 57% and 56% respectively at the end of 2009. Public Mutual currently manages a total of 84 funds with 12 new unit trust funds launched during the year, with a total of nearly 100 billion units in circulation. Net assets under management of Public Mutual rose to RM40.6 billion as at 31 December 2010, 14% higher as compared to RM35.6 billion a year ago. Leveraging on the Group's large unit trust consultants force and distribution capacity through the branches of Public Bank, the Group aims to expand its unit trust customer base further, which currently exceeds 2.39 million accounts. On the strength of these strong fundamentals, Public Mutual's pre-tax profit for 2010 grew by 25% to RM274 million from RM219 million in 2009.

In the third year of its strategic alliance with the ING Group on bancassurance distribution, the Public Bank Group will continue its efforts to further build its bancassurance sales force and infrastructure to drive the expansion of the Group's bancassurance business in the long-term. In 2010, the Group achieved a significant 72% increase in the sales of bancassurance products as compared to 2009, as measured by annualised premium equivalent achieved.

As part of the bancassurance initiative, the Public Bank Group and ING Management Holdings (Malaysia) Sdn Bhd ("ING") had jointly applied to Bank Negara Malaysia for a family takaful licence, which approval was obtained on 1 September 2010. The family takaful operations will be undertaken through a new joint venture company in which ING and the Public Bank Group will hold 60% and 40% equity interest respectively. The joint venture for the family takaful business will provide the Group with a further avenue to expand its fee-based revenue when the operations of the joint venture commence by the first half of 2011.

Capital Position Remains Healthy

The Public Bank Group proactively manages its capital position to ensure a healthy level of capital whilst delivering healthy and sustainable returns to shareholders, by maintaining a disciplined capital and balance sheet management process. In 2010, the Public Bank Group's capital position remains healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.0% and 13.7% respectively as at the end of 2010, after deducting the second interim dividend for 2010.

Based on the recent announcement by the Basel Committee on Banking Supervision on bank capital reforms, the Public Bank Group's capital position under the new capital regime is expected to remain supportive of the Group's business growth strategies whilst maximising shareholders' returns. Based on the finalised Basel III requirements, which are to be gradually phased in commencing 1 January 2013, the Group is confident that it is well positioned to meet the revised minimum capital requirements. In the context of the regulatory capital regime reforms, the Group will continue to monitor further developments of the Basel III proposals and address the potential impact on the Group's capital requirements by realigning its capital management strategies from time to time.

Group Prospects

The global economic outlook remains challenging whilst advanced economies continue to experience anemic growth and structural issues of high unemployment, high budget deficits and large sovereign debt burdens. The Malaysian economy is however expected to remain healthy, supported by sustained expansion in domestic demand and recovery in exports. Along with the expectation that the Malaysian economy will grow by 5% to 6% in 2011, the Public Bank Group continues to operate in a healthy domestic operating environment due to favourable employment conditions, a stable financial system, sustained consumer and business sentiment, as well as the accommodative policy environment promoted by Bank Negara Malaysia.

The Public Bank Group's solid performance for 2010 reaffirms the proven business strategies of the Group. Leveraging on the strong PB Brand, the Group will continue to pursue strong organic growth strategies in 2011 in its lending and deposit-taking businesses, accelerate and diversify its fee-based revenue and further enhance its cost efficiency and return on equity. The Group will also continue to reinforce its prudent risk and capital management practices in sustaining its superior asset quality whilst upholding its strong corporate governance culture and practices. The Group is continuously seeking avenues to further improve its customer service delivery infrastructure and fulfill the Group's high customer experience expectations.

Barring unforeseen circumstances, the Public Bank Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2011.

Tan Sri Dato’ Sri Dr. Teh Hong Piow
Chairman

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

In conjunction with the forthcoming Chinese New Year Celebration, Public Bank is pleased to announce the launch of the ‘PB Investment Prosperity’ Campaign. The campaign offers 2 investment plans specially packaged to suit customers’ current financial and protection needs while rewarding them with limited edition 24K gold-plated gifts of good fortune. The campaign will run from 18 January 2011 onwards.

“At Public Bank, we offer a wide range of investment products to meet customers’ investment and protection needs and assist customers to achieve their financial goals. We believe that financial planning is absolutely vital for everyone. Whether customers are preparing funds for their children’s education or planning for their retirement needs, we have a variety of investment and insurance products to suit customers’ needs,” said Dato’ Chang Kat Kiam, Chief Operating Officer, Public Bank Berhad.

“To live up to our customers’ trust in the PB Brand, we are committed to help customers stretch their Ringgit with financial planning. To reciprocate our valued customers’ support, we are pleased to reward them with the specially designed, limited edition 24K gold-plated gifts for investing in the Bank’s products”, he added.

The ‘PB Investment Prosperity’ Campaign is open to all new and existing Public Bank customers aged 18 years old and above. Customers just have to sign up for one of the 2 investment plans to be entitled to a guaranteed 24K gold-plated gift. ‘Plan A’, unit trust bundled with bancassurance products, is specially designed for investors who wish to invest and at the same time provide the financial protection for their families. On the other hand, ‘Plan B’, unit trust bundled with foreign currency fixed deposit, is suitable for those seeking to diversify their investments.

The guaranteed gifts given away in this campaign consist of a series of 3 exquisite limited edition 24K gold-plated gifts namely the ‘Prosperity Fish’, ‘Prosperity Bowl’ and ‘Prosperity Peach’. These gifts are carefully selected where each gift represents a magnificent piece of gold craft that symbolizes good luck and prosperity. The gifts are limited and available while stocks last.

In addition, customers who purchase any One Solution Plan bancassurance products during the campaign period are also entitled to a special monthly contest. A total of 100 OSIM uSnooz Massage Wraps are up for grabs each month during the 4 months campaign period.

To find out more about the ‘PB Investment Prosperity’ Campaign, customers are invited to visit their nearest Public Bank branch, call free phone at 1-800-22-9999 during working hours or log on to Public Bank’s website at www.pbebank.com. Specific terms and conditions will apply.