Media Release

Public Bank is pleased to announce the launch of 2 campaigns namely ‘PB GOLD for GOLD 2’ and ‘PB FCY FD Top Rates’ Campaigns on 1 August 2012 to further drive the growth of the Bank’s Gold Investment Account and foreign currency deposits.

‘PB GOLD for GOLD 2’ Campaign
The Campaign was re-launched following the encouraging response received from our customers for the previous ‘PB GOLD for GOLD’ Campaign, which was launched on 1 December 2011.

The Campaign offers free 1 gram of gold for every 200 grams of gold purchased in Gold Investment Account (GIA) during the Campaign period from 1 August to 30 November 2012. The free units of gold will be given to customers based on the total cumulative gold purchases made during the Campaign period. The Campaign will end on 30 November 2012.

‘PB FCY FD Top Rates’ Campaign
The Campaign is a foreign currency fixed deposits (FCY FD) campaign which offers additional interest rates of up to 2% per annum on top of the Bank’s prevailing FCY FD interest rates for US Dollar (USD), Australian Dollar (AUD), Pound Sterling (GBP), Euro (EUR) and New Zealand Dollar (NZD). As for Chinese Renminbi (CNY), customers will enjoy an additional interest rate of 0.8% per annum.

As an example, customers could earn interest rates as high as 5.65% per annum for a 1 month AUD FCY FD compared to current counter rate of 3.65% per annum. To participate in the Campaign, customers are required to place a minimum of RM10,000 equivalent of foreign currency amount into their FCY FD account. There is no cap on the maximum amount to be placed under the Campaign. The available FCY FD placement tenures are 1 month, 3 months, 6 months and 12 months.

The additional interest rates offered under the Campaign is for a limited period only i.e. until 31 October 2012. Customers who intend to invest abroad or intend to send their children for overseas education should grab this opportunity to earn the additional interest rates. The Campaign is opened to individual investors as well as corporations making new FCY FD placement with funds converted from Ringgit Malaysia.   
          
In addition to the free gold and additional interest rates offered under these 2 Campaigns,  customers who participate in ‘PB GOLD for GOLD 2’ and ‘PB FCY FD Top Rates’ Campaigns are also eligible to participate in the Bank’s ‘PB Bank2Win’ Campaign to win attractive cash prizes via monthly and grand draws totalling more than RM1.3 million.

To find out more about these two Campaigns, customers are invited to meet up with our customer representatives at any of our branches, log on to Public Bank’s website at www.pbebank.com or call free phone at 1-800-22-9999 during working hours. Terms and conditions apply.

Chairman's Review

The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow said, “The Public Bank Group achieved another strong set of results in the first half of 2012 with a half-year pre-tax profit of RM2.49 billion.”

Tan Sri Teh highlighted that, “As a result of the retrospective application of MFRS 139, the Public Bank Group’s pre-tax profit and net profit for the corresponding first half of 2011 were restated upwards by RM175 million and RM131 million to RM2.43 billion and RM1.84 billion respectively. Hence, the Group’s pre-tax profit and net profit for the first half of 2012 grew by 2.1% and 3.0% respectively as compared to the higher restated pre-tax profit and net profit for the corresponding first half of 2011. Excluding the effects of higher restated profits for the last corresponding period, the Group’s pre-tax profit and net profit for the same period recorded double-digit growth of 10.0% and 10.9% respectively.

As compared to the first quarter of 2012, the Group’s net profit attributable to shareholders for the second quarter grew by RM11.9 million or 1.3% to RM953 million.

The Public Bank Group maintained its pole position amongst the Malaysian banking groups in terms of profitability with the highest net return on equity of 24.7%. The Group’s asset quality and cost efficiency continued to be the best amongst its domestic banking peers with the lowest gross impaired loan ratio of 0.8% and cost-to-income ratio of 31.4%. ”

The Public Bank Group’s balance sheet position remained healthy. “The Group’s gross loans increased at an annualised rate of 10.8% in the first half of 2012 to reach RM187.3 billion as at the end of June 2012. In particular, domestic loans grew at a stronger annualised rate of 12.3%.  The Group’s customer deposits expanded at an annualised rate of 11.3% in the first half of 2012 while domestic customer deposit growth remained strong, achieving an annualised growth rate of 12.0%,” said Tan Sri Teh.

Despite the strong loan growth in the first half of 2012, the Public Bank Group’s loan impairment allowances decreased by 13%. 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  0.8%.

Tan Sri Teh said, “In view of the Public Bank Group’s continued strong performance, we are pleased to announce 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.”

Healthy Momentum in Loan and Deposit Growth

The lending activities of the Public Bank Group remained focused on the retail sector, with loans to mid-market commercial enterprises and loans for the financing of residential properties and purchase of passenger vehicles accounting for 86% of the total loan portfolio of the Group as at the end of June 2012.

Tan Sri Teh highlighted that, “Public Bank further strengthened its leadership in the domestic core lending business. The Group’s domestic market share of residential mortgages, commercial property financing and passenger vehicles financing rose to 18.5%, 33.3% and 26.2% respectively as at the end of May 2012 from 18.1%, 32.9% and 25.9% as at beginning of the year.”

Tan Sri Teh commented, “The Group’s SME lending segment continues to strengthen, with loans to SME growing strongly at an annualised rate of 23.7% in the first half of 2012.”
 
“The Public Bank Group’s funding position continued to be sound supported by its strong retail franchise and large domestic depositor base of over 4.8 million customers. The Group’s domestic customer deposits grew at an annualised rate of 12.0% in the first half of 2012, higher than the domestic banking industry’s annualised growth rate of 8.3%. As a result, the Group's domestic customer deposit market share remained strong at 14.8% as at the end of May 2012,” said Tan Sri Teh. The Group’s strong domestic customer deposit growth was mainly supported by steady inflows of deposits, particularly demand deposits and savings deposits which grew at an annualised rate of 10.6% and 11.5% respectively in the first half of 2012, outperforming the Malaysian banking industry’s annualised growth rate of 0.8% and 10.8% respectively.

Growth in Fee-based Income

The Public Bank Group continued to grow 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.

“The Group’s unit trust management business carried out through its wholly-owned subsidiary, Public Mutual, remained the clear market leader in the private unit trust industry with an overall market share of 43% as at the end of May 2012 whilst its market share in equity funds and Islamic funds stood at 61% and 56% respectively. Public Mutual reported commendable results with a pre-tax profit growth of 11.3% in the first half of 2012.  Net assets under management grew by RM3.9 billion or 8.7% during the first half of 2012 from RM44.7 billion as at beginning of the year to RM48.6 billion as at 30 June 2012. Public Mutual currently manages 94 funds with more than 110 billion units in circulation. Moving forward, Public Mutual will further expand its customer base, which now stands at over 2.7 million accounts by leveraging on its large force of unit trust consultants and the Group’s extensive branch network,” said Tan Sri Teh.

Disciplined and Effective Cost Management

Tan Sri Teh commented, “The Public Bank Group remained the most cost-efficient bank in Malaysia with its cost-to-income ratio of 31.4%, well below the banking industry’s average cost-to-income ratio of 46.0%.”  Total operating expenses increased by 8.8% mainly due to higher personnel and establishment costs to support continued business growth.

Sustained Strong Asset Quality

“The Public Bank Group has not only maintained its top ranking in asset quality but further improved its gross impaired loans ratio from 0.9% as at beginning of the year to 0.8% as at the end of June 2012, which was one third the Malaysian banking industry’s gross impaired loan ratio of 2.4%. ” said Tan Sri Teh. The strong asset quality of the Group is due to a combination of preventive and proactive measures taken such as its prudent credit culture, stringent lending policies, efficient restructuring and rescheduling processes as well as the rehabilitation of impaired loans.

Tan Sri Teh said, “The Public Bank Group's loan loss coverage ratio stood at 123%, which was higher and more prudent than the banking industry's coverage ratio of 93% despite the write-back of excess collective assessment allowances due to the full adoption of MFRS 139.” New impaired loans formation further improved to an annualised rate of 0.30% in the first half of 2012 from 0.34% in 2011.

Overseas Operations

The Public Bank Group’s overseas operations contributed 7% of the Group’s pre-tax profit for the first half of 2012. Cambodian Public Bank Plc (“Campu Bank”), a wholly-owned subsidiary of Public Bank recorded strong growth in pre-tax profit of 54% to  USD20.7 million in the first half of 2012 as compared to USD13.4 million in the previous corresponding period. Campu Bank remains one of the largest banks in Cambodia by balance sheet size.

Capital Position Remained Healthy

On 20 June 2012, the Public Bank Group redeemed its USD400 million Subordinated Notes. Despite the redemption of these subordinated notes, the Group’s capital position remained healthy, with Tier 1 capital ratio and risk-weighted capital ratio standing at  10.5% and 13.9% respectively as at the end of June 2012, after deducting the first interim dividend of 2012.

Tan Sri Teh emphasised that, “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.”

Group’s Prospect

Tan Sri Teh said “The Malaysian economy is expected to remain resilient despite ongoing external uncertainties from the Euro debt crisis, with gross domestic product  anticipated to grow between 4% and 5% in 2012 driven by domestic demand and private investments. Competition is expected to intensify for loans and deposits and net interest margin will continue to be impacted.

The Public Bank Group will remain focused on its core retail banking and financing business whilst maintaining its prudent credit and sound risk management policies as well as strong corporate governance to support long-term sustainable growth.

Going forward, the Group is expected to maintain its earnings momentum and record satisfactory performance in the second half of 2012.”

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

From 1 June 2012 onwards, all new and existing customers of Public Bank and Public Islamic Bank stand a chance to win cash prizes over RM1.3 million via ‘PB Bank2Win’ Campaign.

The Campaign will run for 6 months until 30 November 2012 and offers a total of 321 attractive cash prizes via monthly and grand draws. 50 lucky monthly winners will each win RM3,000 whilst the top 3 monthly winners with the highest entries will win RM18,000 each. The campaign will conclude with a grand draw where the lucky grand prize winners will walk away with RM68,000 for the First Prize, RM38,000 for the Second Prize and RM28,000 for the Third Prize respectively.

PB Bank2Win is part of Public Bank’s ongoing initiatives to reward customers for their support and patronage. Everyone will have the chance to win and it is so easy to win. Customers just need to select a minimum of any 2 groups out of 3 product groupings i.e. Group A (Financing), Group B (Deposit) and Group C (Wealth Management) to be eligible.

Under the campaign, customers stand to gain more entries if they take up more products with the Bank. New customers will earn additional 5 contest entries and the customers who fulfill the full product bundle (Group A + Group B + Group C) will earn additional 20 contest entries.

That is not all, customers who fulfill the campaign’s eligibility criteria will be qualified for a Bonus Entitlement i.e. 12-month interest free credit card flexi-pay (PB Flexipay) on purchases made on their PBB Credit Card. There is also a “PB 3.33% Reward” Campaign for Current Account and Savings Account customers wherein they stand to earn 3.33% p.a. bonus interest / profit for incremental savings with the Bank.

The campaign mechanism is simple and hassle-free as it does not require customers to fill up or to submit any forms. As long as the customers meet the eligible criteria, they will automatically be assigned the contest entries. The chance of winning the cash prizes increases when customers sign up more products or have more incremental transactions with the Bank.

To find out more about the ‘PB Bank2Win’ Campaign, customers are invited to meet our customer representatives at any of our branches, log on to Public Bank’s website at www.pbebank.com / Public Islamic Bank’s website at www.publicislamicbank.com.my or call free phone at 1-800-22-9999 during working hours. Terms and conditions apply.

* * * * * * * *

Public Bank has appointed Ms. Lai Wai Keen as an Independent Non-Executive Director with effect from 29 May 2012.

Ms. Lai holds a Bachelor of Economics (Hons) - Business Administration degree from the University of Malaya and a LLB degree from the University of London.

She possesses extensive experience with Bank Negara Malaysia (BNM) and Perbadanan Insurans Deposit Malaysia (PIDM), concentrated in senior management and project leader positions, including significant central banking assignments.

Ms. Lai has over 20 years of banking regulatory experience with BNM, including in bank regulation, corporate communications, international negotiations and relations, deposit insurance systems and protection scheme for insurance policy holder.

She was seconded to PIDM as General Manager, Policy and International in 2005 until her retirement in January 2011.

Ms. Lai Wai Keen
Independent Non-Executive Director of Public Bank

Public Bank has appointed Mr. Lai Wan as an Independent Non-Executive Director with effect from 26 April 2012.

Mr. Lai has 39 years of experience in the banking and finance related industries. He had served Bank Negara Malaysia for 20 years and the last position held before his resignation in 1985 was as the Deputy Manager, Bank Examination Department.

Mr. Lai had working experience in three finance companies from 1985 to 1994 where he had held senior management positions.

Mr. Lai joined The Pacific Bank Bhd in 1994 as General Manager and was appointed the President/Chief Executive Officer in 1997 until his retirement on 31 December 2000. He was the Adviser and later appointed the Chief Executive Officer of PacificMas Bhd from 2001 to 2003.

Upon retirement from full time employment in 2003, Mr. Lai continued to be engaged in finance related industries through his directorships in various companies until 2011.

Mr. Lai Wan
Independent Non-Executive Director of Public Bank

Chairman's Review

The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow said, “The Public Bank Group delivered another strong set of results with a record pre-tax profit of RM1.25 billion and net profit of RM941 million for the first quarter of 2012.”

With effect from this year, the Group adopted fully the Malaysian Financial Reporting Standards (MFRS) 139, which resulted in a lower collective assessment allowances on the Group’s loans and financing. This resulted in a write-back of excess collective assessment allowances, leading to an increase in the Group’s shareholders’ funds as at the beginning of 2012 by RM859 million, which in turn enhanced the Group’s core equity capital ratio by 0.5%.

Tan Sri Teh highlighted that, “As a result of the retrospective application of MFRS 139, comparative pre-tax profit and net profit for the corresponding quarter in 2011 have been restated upwards by RM75 million and RM56 million respectively to RM1.17 billion and RM884 million respectively. Against the restated profits for the previous corresponding quarter, the Group’s pre-tax profit and net profit growth for the first quarter of 2012 are 6.2% and 6.4% respectively.

Excluding the impact of the higher restated profits in the previous corresponding quarter, the Public Bank Group’s pre-tax profit and net profit for the first quarter of 2012 would have shown a higher growth of 13.5% and 13.7% respectively.

Despite the higher restated shareholders’ equity base, the Group continued to lead in terms of having the highest net return on equity of 24.7% amongst the Malaysian banking groups. The Group also maintained its top ranking in asset quality and cost efficiency in the banking industry with notably lower gross impaired loan ratio of 0.8% and cost-to-income ratio of 31.8% for the first quarter of 2012.”

The Public Bank Group’s balance sheet growth indicators remained healthy. In the first quarter of 2012, the Group’s gross loans grew by RM4.2 billion, or 2.4% to reach RM 181.9 billion as at the end of March 2012. Domestic loan book grew at a faster pace of 3.1%. The Group’s customer deposits grew by 3.4% to reach RM207.1 billion as at the end of March 2012, while domestic customer deposits grew at a stronger rate of 3.6%. “On an annualised basis, both domestic loans and domestic customer deposits recorded healthy double-digit growth of 12.3% and 14.5% respectively.” said Tan Sri Teh.

Healthy Loan and Deposit Growth

The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the total loan portfolio of the Group, mainly comprising loans to mid-market commercial enterprises as well as loans for the financing of residential properties and purchase of passenger vehicles.

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 18.2%, 33.2% and 26.0% respectively. The Group’s financing in residential and commercial properties grew by an annualised rate of 13.7% and 21.5% respectively during the quarter, compared to the industry’s annualised growth of 11.8% and 16.0% respectively in the first two months of the year.”

Tan Sri Teh added, “The Group remained supportive in promoting small- and medium-sized enterprise (SME) activities particularly for working capital and investment financing. Financing to SME expanded strongly by an annualised rate of 18.2% in the first quarter of 2012”

“The Public Bank Group’s funding position remained robust supported by its strong retail franchise and large domestic depositor base of over 4.7 million customers. Domestic core customer deposits grew at an annualised rate of 17.9%, compared to the domestic banking industry’s annualised growth of 9.7%,” said Tan Sri Teh. The strong domestic core deposit growth was mainly attributed to steady inflows of fixed deposits and savings deposits which grew by an annualised rate of 23.1% and 12.5% respectively, outperforming the Malaysian banking industry’s annualised growth of 13.1% and 0.5% respectively.

Growth in Fee-based Income

Non-interest income of the Public Bank Group grew by 4.8% in the first quarter of 2012 as compared to the corresponding quarter in 2011, mainly driven by higher banking transactional income and income from the Group’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 12.9% in the first quarter of 2012. Public Mutual’s net assets under management grew by 6.0% during the quarter from RM44.8 billion as at the beginning of the year to RM47.4 billion as at the end of March 2012. Public Mutual had continued to maintain its pole position in the private unit trust business with an overall market share of 44% as at the end of February 2012, and with market shares in the equity and Islamic unit trust fund sectors of 61% and 57% respectively. Public Mutual 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 2.7 million accounts.”

Continued Disciplined Cost Management

Tan Sri Teh further commented, “The Public Bank Group continues to drive cost efficiency initiatives to further improve its productivity. The Group remained the most cost-efficient bank in Malaysia with its cost-to-income ratio of 31.8% as compared to the banking industry’s average cost-to-income ratio of 46.0%.” Increase in operating expenses in the first quarter was mainly attributed to increase in personnel costs which were 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 0.9% as at the beginning of the year to 0.8% as at the end of March 2012, significantly lower than the Malaysian banking industry’s gross impaired loan ratio of 2.7%,” 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.

Tan Sri Teh further added, “Despite the write-back of excess collective assessment allowances as a result of the full adoption of MFRS 139, the Public Bank Group's loan loss coverage ratio continued to remain high at 117%, compared to the banking industry's coverage ratio of 97%.” New impaired loans formation further improved to an annualised rate of 0.32% in the first quarter of 2012 from 0.34% in 2011.

Overseas Operations

The Public Bank Group’s overseas operations contributed 6.1% of the Group’s overall pre-tax profit for the first quarter of 2012. Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, reported a strong growth in pre-tax profit of 79% in the current quarter as compared to the corresponding quarter in 2011 with the improved business sentiment and higher loan recoveries. Campu Bank remains one of the largest banks in Cambodia by balance sheet size.

Capital Position Remained Healthy

The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.3% and 14.4% respectively as at the end of March 2012. 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 shareholder return.”

Group’s Prospect

Tan Sri Teh remarked that, “Along with the expectation that the Malaysian economy will grow by 4% to 5% in 2012, the Public Bank Group continues to strive in a healthy domestic operating environment due to the stable financial system, favourable employment conditions, sustained consumer and business sentiment as well as the accommodative monetary policy environment promoted by Bank Negara Malaysia.

The 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 remains steadfast in its commitment to upholding strong corporate governance and implementation of sound risk management policies to support long-term growth.

Moving forward, the Group is expected to maintain its earnings momentum and continue to record satisfactory performance for the rest of 2012.

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

In conjunction with Public Bank’s 46th Annual General Meeting held on 19 March 2012, the Founder and Chairman of Public Bank, Tan Sri Dato’ Sri  Dr. Teh Hong Piow is pleased to present a review of the Public Bank Group’s performance in 2011.

Performance Review
Tan Sri Teh said, “2011 was another commendable year for the Public Bank Group.The Group delivered another record net profit of RM3.48 billion, 14.3% higher as compared to 2010. The Group’s pre-tax profit grew by 12.8% to RM4.61 billion. 

With the improved earnings, the Group delivered a net return on equity of 26.8% for the year. Cost to income ratio was efficient at below 30% whilst gross impaired loan ratio improve further to 0.9%. The Group successfully maintained its leading position amongst Malaysian banking groups in terms of highest return on equity, and the best cost efficiency and asset quality.”

Tan Sri Teh commented that, “The Public Bank Group’s strong performance is a result of its strategy to remain focused on its core retail consumer and commercial banking businesses whilst maintaining its tradition of prudently managing the asset quality of its balance sheet.

Gross loans expanded by 13.5% to stand at RM177.7 billion as at the end of 2011. Domestic loans growth was stronger at 14.1% in 2011. Customer deposits increased by 13.3% to reach RM200.4 billion as at the end of 2011 supported by strong domestic customer deposit growth of 14.7%. ”

Tan Sri Teh added, “In view of Public Bank’s strong profit performance in 2011, a second interim single tier dividend of 28 sen was paid on 27 February 2012. Together with the first interim single tier dividend of 20 sen paid in August 2011, the total dividend for 2011 was 48 sen.”  The total dividend paid for 2011 amounted to RM1.68 billion and represented a total payout of 48% of the Group’s net profit for 2011.

Steady momentum in domestic loan growth
The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the total loan portfolio of the Group, comprising mainly loans to mid-market commercial enterprises as well as loans for the financing of residential properties and the purchase of passenger vehicles. Tan Sri Teh highlighted, “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 18.1%, 33.0% and 25.9% respectively. The Group’s residential properties and passenger vehicles financing expanded by 17.5% and 9.5% respectively in 2011.”

Tan Sri Teh further added, “Public Bank continued to strongly support the Government’s efforts in promoting small- and medium-sized enterprises (“SMEs”) activities particularly for working capital and investment financing. Loans for working capital financing expanded strongly by 24.0%. In 2011, the Group approved loans to domestic SMEs amounting to RM12.39 billion, an increase of 15% as compared

to 2010, which accounted for 26% of the Group’s new domestic retail loans approved.”

Sustained strong asset quality
 “The Public Bank Group’s asset quality and loan loss coverage remained the best in the banking industry with the lowest gross impaired loans ratio and highest loan loss coverage amongst domestic banking groups. The Group’s gross impaired loan ratio further improved from 1.1% as at the beginning of the year to 0.9% as at the end of 2011, one-third that of the Malaysian banking industry’s gross impaired loan ratio of 2.7%,” said Tan Sri Teh. The strong asset quality of the Group is a result of a combination of preventive and proactive measures taken such as its prudent lending policies and strong risk management practices as well as the prompt and timely loan recovery efforts undertaken.

“The Public Bank Group’s loan loss coverage ratio increased from 144% in 2010 to 189% in 2011, significantly higher than the coverage ratio for the banking system of less than 100%,” Tan Sri Teh further added. In line with BNM’s guidelines to maintain a minimum of 1.5% collective assessment, the Group’s high loan loss coverage was a result of setting aside additional collective assessment allowance for the Group’s strong loan growth whilst the level of impaired loans remained stable.

Healthy growth of domestic customer deposits
Tan Sri Teh said, “The Public Bank Group’s funding position remained robust supported by the strong PB Brand franchise and the Group’s large domestic depositor base of over 4.5 million customers. Domestic customer deposits expanded at a healthy rate of 14.7% whilst domestic core customer deposits grew by 10.9%”  The healthy growth of the domestic core customer deposits was mainly due to steady inflows of demand deposits, fixed deposits and saving deposits which grew by 13.2%, 10.4% and 10.4% respectively.

The Group’s net loan to deposit ratio remained stable and healthy at 87.2% as at the end of 2011.

International operations
The Public Bank Group’s overseas operation contributed 6.4% to the Group’s overall pre-tax profit in 2011 as compared to a 7.6% contribution in 2010. The marginally lower contribution was mainly due to the negative effect of foreign exchange differences. Excluding the impact of the foreign exchange differences, Cambodian Public Bank, a wholly-owned subsidiary of Public Bank showed commendable performance with a pre-tax profit growth of 54% to USD29.0 million as compared to USD18.8 million in 2010.

The Public Bank Group remains committed to expand its overseas operations, particularly in Hong Kong and Indo-China as the Group takes a long-term view of the future potential market reach and opportunities in the region. The Group currently has a network of 83 branches in Hong Kong and 3 branches in Shenzhen in the People’s Republic of China. Cambodian Public Bank Plc expanded its branch network in 2011 to 23, with additional branches targeted to be opened in 2012.

Growing fee-based income
The Public Bank Group continued to develop its fee-based income from unit trusts, bancassurance and wealth management products, in order to further enhance the Group’s profitability and return on equity. Non-interest income of the Group grew by 7.2% compared to 2010, mainly due to higher banking transactional income and income from Public Mutual’s unit trust business as well as higher investment income.

Tan Sri Teh explained, “Public Mutual, the Group’s wholly-owned unit trust fund management subsidiary, registered a 17.5% increase in pre-tax profit and continued to maintain its market leadership position. Ten new unit trust funds were launched during the year, bringing the total number of funds managed to 91. Total net asset value of funds under management stood at RM44.8 billion as at the end of 2011. Public Mutual’s overall market share remained high at 44% whilst the market share of equity funds and Islamic funds stood at 60% and 58% respectively.”

2011 marked the fourth year of the strategic bancassurance alliance between the Public Bank Group and the ING Group. The PB-ING bancassurance business alliance moved up to 1st place in the third quarter of 2011, from 2nd place in the first quarter of 2011 based on the volume of new business generated in each quarter by bancassurance providers in Malaysia.

ING PUBLIC Takaful Ehsan Berhad, the joint venture family takaful business between ING Management Holdings (Malaysia) Sdn Bhd and the Public Bank Group is also expected to contribute positively to the Group’s bancassurance business and further enhance the Group’s long-term fee-based revenue.

Capital management
The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio improving to 10.1% and 15.3% respectively as at the end of 2011, after taking account of the payment of the 2nd interim dividend, as compared to 10.0% and 13.7% respectively as at the end of 2010. The issuance of RM3 billion subordinated notes under the existing Subordinated Medium Term Note Programme contributed to the improvement in the risk-weighted capital ratio of the Group during the year.

Based on the latest guidelines on the implementation of Basel III capital regime issued by Bank Negara Malaysia, the Public Bank Group is well-positioned to meet the minimum requirements of Basel III, with the phased implementation of Basel III coming into effect on 1 January 2013. Tan Sri Teh further added, “In meeting the requirements of the regulatory capital regime reforms, the Group will continue to effectively manage its capital structure and maintain maximum financial flexibility to pursue strategic objectives whilst maximising shareholder value.”

Largest non government-linked listed company by market capitalisation
“Public Bank’s market capitalisation has increased by 78% from RM26.9 billion as at the end of 2006 to RM48.0 billion today, and remains the largest non-government-linked company listed on Bursa Malaysia by market capitalisation,” Tan Sri Teh highlighted.

Superior returns to shareholders
As a blue-chip stock, the Public Bank Group’s ability to deliver superior returns to shareholders, both over the medium-term and the long-term, demonstrates the creation of shareholders value.

Tan Sri Teh commented, “If a shareholder of Public Bank had bought 1,000 shares in Public Bank when it was listed in 1967, and assuming the shareholder had subscribed for all rights issues to date and had not sold any of the Public Bank shares, he would now have 135,398 Public Bank shares worth RM1.84 million based on the current share price of RM13.60 per Public Bank (Local) share. In addition, he would have received a total gross dividend of RM776, 137. This translates into a total value of RM2.6 million representing a remarkable compounded annual rate of return of 20% for each of the 44 years since 1967.”

“Over the medium-term of 5 years from 2007 to 2011, an investor would have enjoyed a total return of 118% or an annual rate of return of 19% over the 5 year period,” said Tan Sri Teh.

Outstanding KPIs
Tan Sri Teh remarked that, “Public Bank remained the clear leader in terms of return on equity, cost efficiency and asset quality as compared to the other 5 largest banking groups in Malaysia. The Group’s net return on equity of 26.8% is the highest amongst the 5 largest domestic banking groups and is well above the average net return on equity of 15.7%.”

The Group’s cost to income ratio of 29.8% is the lowest in the industry, significantly lower than the average of 48.3% reported by the other 5 largest Malaysian banking groups. The Group’s asset quality remained the best in the industry with the lowest gross impaired loans ratio of 0.9% and highest loan loss coverage of 189%. When benchmarked against leading regional banks, Public Bank also ranks top in terms of cost efficiency and return on equity.”

Tan Sri Teh commented, “Over the medium term, the Group aims to sustain its net return on equity of more than 26%, cost to income ratio of below 30% whilst maintaining a low gross impaired loans ratio of below 1%.”

Corporate responsibility
“The Public Bank Group, in fulfilling its corporate responsibility, seeks to conduct its business activities responsibly, ethically and prudently whilst engaging the community and caring for the environment in which it operates,” said Tan Sri Teh. These include creating long-term value for the Group’s customers, employees, shareholders and the community it serves.

Public Bank provided financial assistance to the Institute Jantung Negara Foundation for the setup of a dormitory to house families of needy patients undergoing treatment and continued to support Universiti Tunku Abdul Rahman in its research studies in the field of banking and finance.

Tan Sri Teh explained, “In support of the economic growth of the country, Public Bank has been actively channelling low cost funds under various funds initiated by the Malaysian Government and Bank Negara Malaysia to assist SMEs and micro enterprises. With its strong and rising profitability, the Public Bank Group is also a major contributor to the fiscal revenue of the country with total tax payments of RM3.72 billion since 2007.”

An award winning bank
Tan Sri Teh highlighted that, “A total of 53 awards and recognition of excellence were conferred on Public Bank in 2011.”  The Group continued to be accorded best bank or best managed company awards by various international organisations and publications in 2011, which include:

Tan Sri Teh further added, “For the ninth consecutive year, Public Mutual again emerged as the biggest recipient of The Edge-Lipper Malaysia Fund Awards with a total of 8 awards won in 2012.”

Corporate governance
Tan Sri Teh said, “Public Bank’s publicly recognised record of excellence in corporate governance continued to be validated in 2011 by several corporate governance awards and recognition by international publications and surveys.”

Tan Sri Teh further added, “In recognition of Public Bank’s top performance on the Malaysian Corporate Governance Index 2011, the Bank was awarded the Top Overall Award, Best Conduct of AGM Award, the Distinction Award and the Industry Excellence Award for the Finance Sector by the Minority Shareholder Watchdog Group”

Public Bank was also awarded the Malaysian Business-CIMA Enterprise Governance Awards 2011 by Malaysian Business as the Overall Winner for the fourth consecutive year as well as Best Returns to Shareholders Award and the Corporate Social Responsibility Award.
 
Public Bank was awarded the Corporate Governance Asia’s 1st Asian Excellence Recognition Awards 2011 for Best Corporate Social Responsibility, Best Investor Relations by a Malaysian company and the Corporate Governance Asia Recognition Award 2011.

Public Bank was also ranked top for Best Corporate Governance and Best Corporate Social Responsibility in FinanceAsia’s Asia’s Best Managed Companies 2011 Poll, as well as ranked top 3 in the Alpha Southeast Asia’s Institutional Investor Corporate Awards 2011 for Strongest Adherence to Corporate Governance and Most Organised Investor Relations.

Outlook

Tan Sri Teh commented, “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 by enhancing productivity. In the light of the uncertainties in the global economy, the Group remains, more than ever, committed to its tradition of prudence and belief in strong corporate governance.  While it is clearly a time to be cautious, the Group is also aware of the importance of balancing challenges with the need to continue to invest in creating long-term value for shareholders. The Group will continue to leverage on its wide branch network, superior PB Brand and service standards. The Group’s solid performance in 2011 reaffirms the continued soundness of its proven business strategies and the Group is confident that it is well placed to grasp opportunities when they arise.

The outlook of the Malaysian banking sector, in which the Group largely operates, continues to be stable and supportive of growth. Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2012.”

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

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Chairman's Review

The Founder and Chairman of Public Bank, Tan Sri Dato’ Sri Dr. Teh Hong Piow said, “The Public Bank Group delivered yet another strong set of results in 2011 with record net profit of RM3.48 billion, representing a 14.3% improvement as compared to 2010. Pre-tax profit increased by 12.8% to RM4.61 billion.

With a clear lead of having the highest net return on equity of 26.8% amongst the Malaysian banking groups, the Group continues to maintain its top ranking in asset quality and cost efficiency in the banking industry with notably lower gross impaired loan ratio of 0.9% and cost-to-income ratio of below 30%”

Tan Sri Teh remarked that, “The Public Bank Group’s sound financial results for 2011 are a validation of the Group’s effective organic growth strategies and sustainable business model. We have benefited from our disciplined execution of our growth strategies whilst preserving prudent risk management practices to ensure sustainable and stable returns.

Our balance sheet growth indicators remained healthy. Gross loans as at the end of 2011 stood at RM177.7 billion, representing a growth of 13.5% as compared to a year ago. Domestic loan book grew at a faster pace of 14.1%. Customer deposits grew by 13.3% to reach RM200.4 billion as at the end of 2011, while domestic customer deposits grew at a stronger rate of 14.7%.

We are confident that with our healthy loans pipeline coupled with our strong liquidity position and PB Brand franchise, we will continue to strengthen our core revenue streams.”

Tan Sri Teh added, “In view of the Public Bank Group’s strong performance for the year, we are pleased to announce that the Board of Directors has declared a second interim single-tier dividend of 28 sen. Together with the first interim single-tier dividend of 20 sen which was paid in August 2011, the total dividend for 2011 is 48 sen.” The total dividend paid and payable for 2011 amounts to RM1.68 billion and represents a total payout of 48% of the Group’s net profit for 2011. The Board of Directors does not propose any final dividend for 2011.

Growth & Profitability Intact
The lending activities of the Public Bank Group remained focused on the retail sector which accounted for 85% of the total loan portfolio of the Group, mainly comprising loans to mid-market commercial enterprises as well as loans for the financing of residential properties and purchase of passenger vehicles. Domestic retail pre-tax profit grew by RM365 million or 12.3% year-on-year, due to 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 18.1%, 33.0% and 25.8% respectively. The Group’s residential properties grew by 17.5% during the year, compared to the industry’s annualised growth of 13.1%.”

Tan Sri Teh added, “The Group remained supportive in promoting small- and medium-sized enterprise activities particularly for working capital and investment financing. In particular, loans for working capital financing expanded strongly by 24.0%.”

“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 by 14.7%, compared to the domestic banking industry’s growth of 11.8%,” said Tan Sri Teh. The strong domestic deposit growth was mainly attributed to steady inflows of fixed deposits and savings deposits which grew by 10.4% and 10.4% respectively, outperforming the Malaysian banking industry’s growth of 9.8% and 7.9% respectively.

Growth in Fee-based Income
Non-interest income of the Public Bank Group grew by 7.2% compared to 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 17.5% in 2011, and maintained its pole position in private unit trust business with RM44.8 billion of net assets under management, accounting for an overall market share of 44% as at the end of December 2011, and with market shares in the equity and Islamic unit trust fund sectors of 60% and 58% 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 below 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 at a slower pace of 5.2%, as compared to the total income growth of 8.3%. Increase in operating expenses was mainly attributed to increase in personnel costs which 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 1.1% as at the beginning of the year to 0.9% as at the end of 2011, significantly lower than the Malaysian banking industry’s gross impaired loan ratio of 2.7%,” 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.

Tan Sri Teh further added, “The Public Bank Group's loan loss coverage ratio continued to remain one of the highest at 189%, compared to the banking industry's coverage ratio of 96% 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 Group’s high loan loss coverage was a result of setting aside additional collective assessment allowance for strong loan growth while the level of impaired loans remained stable. New impaired loans formation for the year improved to 0.34% from 0.51% in 2010. As a result, the Group’s loan impairment allowances improved by 10% as compared to 2010, despite setting aside 1.5% collective assessment for loan growth.

Expansion of Overseas Operations
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, Cambodian Public Bank Plc, a wholly-owned subsidiary of Public Bank, reported a strong growth in pre-tax profit of 55% to USD29.0 million compared to USD18.8 million in 2010.

Capital Position Remains Healthy
The Public Bank Group’s capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio improved to 10.1% and 15.3% respectively as at the end of 2011, after deducting second interim dividend, as 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 year was mainly due to the issuance of RM3 billion subordinated notes under the existing subordinated Medium Term Note programme in August 2011.

Based on Bank Negara Malaysia’s latest circular on the Basel III implementation, the Public Bank 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. 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 shareholder value.”

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. 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. Barring unforeseen circumstances, the Group is expected to maintain its earnings momentum and continue to record satisfactory performance in 2012.”

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