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Public Bank Bhd : Public Bank's 47th Annual General Meeting Held On 18 March 2013

03/18/2013 | 06:41am US/Eastern
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In conjunction with Public Bank's 47th Annual General Meeting held on 18 March 2013, 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 2012.

Performance Review

Tan Sri Teh said, "The Public Bank Group achieved another new milestone in 2012 with a record pre-tax profit of RM5.10 billion, crossing the RM5 billion mark for the first time. The Group's net profit for the full year amounted to RM3.87 billion."

Tan Sri Teh highlighted that, "As a result of the retrospective application of MFRS 139, the comparative pre-tax profit and net profit for 2011 were restated upwards by  RM267 million and RM200 million respectively to RM4.88 billion and RM3.68 billion respectively. The Group's pre-tax profit and net profit for 2012 were 4.6% and 5.0% higher than the restated corresponding profits in 2011. Excluding the effects of these restatements, the Group's pre-tax profit and net profit for 2012 increased by 10.7% and 11.1% respectively."  

Tan Sri Teh further added, "In 2012, the Public Bank Group's gross loans grew by 11.3% to RM197.8 billion as at the end of 2012, with domestic loans growing at a faster pace of 12.5%. The loan growth was funded mainly by customer deposits which also reported a steady growth of 12.3%, with domestic customer deposits increasing by 13.0% in 2012."

Tan Sri Teh highlighted, "As a result of the Group's consistently strong performance, a second interim single-tier dividend of 30 sen was paid on 5 March 2013. Together with the first interim single-tier dividend of 20 sen which was paid in August 2012, the total dividend for 2012 was 50 sen." The total dividend paid for 2012 amounted to RM1.75 billion and represented a total payout of 45.3% of the Group's net profit for 2012.

Healthy Loan Growth

Lending to the retail banking segment remained the main strategic focus of the Public Bank Group with concentration in lending to small- and medium-sized enterprises ("SMEs"), financing of residential properties and purchase of passenger vehicles. As at the end of 2012, the Group's retail loan portfolio collectively accounted for 85.9% of its total loans.

Tan Sri Teh said, "The Public Bank Group sustained its market leadership position in domestic lending for residential mortgages, commercial property financing and passenger vehicles financing with market shares of 19.1%, 33.7% and 26.4% respectively as at the end of 2012."

Excellent Asset Quality

"The Public Bank Group continued to maintain its top ranking position in terms of asset quality amongst its domestic peers with gross impaired loan ratio of 0.7% as at the end of 2012, from 0.9% a year ago, which was approximately one-third that of the industry average of 2.0%." commented Tan Sri Teh. The Group's asset quality has consistently remained the best in the banking industry, a testimony to the Group's prudent credit policies and effective credit assessment, approval, monitoring as well as prompt and timely recovery efforts.

"The Public Bank Group's loan loss coverage ratio stood at 126.0%, which was higher and more prudent than the banking industry's coverage ratio of 100.9% despite the write-back of excess collective assessment allowances due to the full adoption of MFRS 139." Tan Sri Teh further added.

Steady Customer Deposit Growth

Tan Sri Teh said, "The Public Bank Group's funding position remained robust, supported by its strong retail franchise and large domestic depositor base of over five million customers. Domestic customer deposits grew by 13.0%, higher than the domestic banking industry's growth of 8.4%." The strong domestic deposit growth was mainly due to healthy expansion of fixed deposits and low cost demand and savings deposits of 14.4%, 14.0% and 8.2% respectively, outperforming the banking industry's growth rates of 8.8%, 12.1% and 7.0% respectively.

The Group's net loan to deposit ratio remained stable and healthy at 87.1% as at the end of 2012.

International Operations

In 2012, the Public Bank Group's overseas operations contributed 6.4% of the Group's overall pre-tax profit. Cambodian Public Bank Plc ("Campu Bank"), a wholly-owned subsidiary of Public Bank, reported a strong pre-tax profit growth of 22.2% from RM88.9 million in 2011 to RM108.5 million in 2012. Campu Bank achieved loans and deposit growth of 11.1% and 17.6% respectively in 2012 and continued to be one of the top three largest banks in Cambodia.

The Public Bank Group remains committed to expand its overseas business. As at the end of 2012, the Group has 122 overseas branches, with 83 branches in Hong Kong, 3 branches in Shenzhen in the People's Republic of China, 24 branches in Cambodia, 7 branches in Vietnam, 4 branches in Laos, a branch in Sri Lanka and 3 representative offices in Shanghai, Shenyang and Taipei.

Sustaining Growth in Fee-based Income

The Public Bank Group continued to grow its fee-based income from unit trust, bancassurance and transactional banking services to further enhance the Group's revenue stream.

"The Group's unit trust management business, which is undertaken by its wholly-owned subsidiary, Public Mutual, achieved a pre-tax profit growth of 15.6% in 2012. Public Mutual remained the market leader in the private unit trust business with 100 funds under its management. Total net asset value of funds under management grew strongly by 22.0% from RM44.8 billion as at the end of 2011 to RM54.6 billion as at the end of 2012. Public Mutual captured 40.8% of the overall market share, with 60.1% and 53.2% market share in the equity and Islamic unit trust fund sectors respectively." Tan Sri Teh commented.

On the bancassurance front, ING reached an agreement with AIA Group Ltd ("AIA") for the sale of ING's insurance operations in Malaysia to AIA on 11 October 2012. With the completion of the sale, the Public Bank Group's strategic bancassurance tie-up with the enlarged AIA will continue and is expected to contribute positively to the Group's long-term fee-based revenue.

Healthy Capital Position

The Public Bank Group's capital position remained healthy, with its Tier 1 capital ratio and risk-weighted capital ratio standing at 10.8% and 14.1% respectively as at the end of 2012. The Group's Common Equity Tier 1 capital ratio calculated based on Basel III requirements stood at 8.5% as at the end of 2012.

Tan Sri Teh further commented, "The Group is well positioned to meet the new regulatoryrequirements under Basel III. The Group will continue to assess its capital requirements to ensure that it is sufficient to support the Group's business growth strategies by balancing the need for higher capital retention in view of the implementation of Basel III standards and maximising its shareholders' return."

Second Largest Listed Company by Market Capitalisation

Tan Sri Teh highlighted, "Since the end of 2008, Public Bank's market capitalisation has increased by 85% to RM57.52 billion as at the end of 2012. Public Bank is currently the 2nd largest listed company on Bursa Malaysia and remains the largest non-government-linked company by market capitalisation."

Superior Returns to Shareholders

The Public Bank Group continues to deliver superior returns to its shareholders, both over the medium-term and the long-term.

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 have 135,398 Public Bank shares worth RM2.17 million based on the current share price of Public Bank (Local) shares of RM16.00. In addition, he would have received a total gross dividend of RM843,836. This translates into a total value of RM3.0 million representing remarkable compounded annual rate of return of 19.5% for each of the 45 years since 1967."

"Over the medium-term of 5 years since the beginning 2008, an investor would have enjoyed a total return of 79.3% or an annual rate of return of 13.3% over the 5-year period."

Over the 12-month period from 1 March 2012 to 1 March 2013, a Public Bank shareholder would have enjoyed a total return of 21.3% taking into account the 50 sen dividend declared for 2012 and the share price appreciation during the period." said Tan Sri Teh.

Outstanding KPIs

Tan Sri Teh commented, "Public Bank continued to be in the forefront amongst the 5 largest banking groups in Malaysia in terms of profitability, cost efficiency and asset quality with the highest net return on equity of 24.5% and lowest gross impaired loan ratio of 0.7% as well as lowest cost to income ratio of 30.5%."

When benchmarked against leading banks in the Asia Pacific region, Public Bank also ranks amongst the top in terms of return on equity and cost efficiency.

Tan Sri Teh said, "For 2013, the Group targets to sustain net return on equity of more than 20% and cost to income ratio of below 32% whilst maintaining gross impaired loan ratio of below 1%."

Corporate Responsibility

To further contribute to the environment's sustainability, the Public Bank Group adopted the "green" concept in the construction of Public Mutual Berhad's new head office building in Kuala Lumpur, which incorporates a host of green features in the design and layout of the building.

Other key corporate responsibilities initiatives undertaken included providing continued financial assistance for the setup of a dormitory to house families of needy patients undergoing treatment at Institute Jantung Negara, the continued support of the Universiti Tunku Abdul Rahman in its research studies in the field of banking and finance and the contribution of two mobile police stations to the Royal Malaysian Police.

Tan Sri Teh explained, "The Public Bank Group continued to support SMEs, which play a crucial role in the economic growth of the country by 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 tax payments totalling RM4.22 billion for the past 5 years."

An Award Winning Bank

Tan Sri Teh highlighted that, "In 2012, the Public Bank Group was recognised with a total of 36 awards and recognition of excellence from various international organisations and publications." The awards received include:

  • Best Retail Bank in Malaysia by The Asian Banker (9th time)
  • Strongest Bank in Malaysia by The Asian Banker (1st time)
  • Best Bank in Malaysia by FinanceAsia (14th time)
  • Best Asian Bank by FinanceAsia (4th time)
  • Best Bank in Malaysia by Alpha Southeast Asia (6th time)
  • Domestic Retail Bank of the Year - Malaysia by Asian Banking and Finance (4th time)
  • Best Banking Group in Malaysia by World Finance (4th time)
  • Best Domestic Bank in Malaysia by The Asset (11th time)

Tan Sri Teh   further added, "For the tenth consecutive year, Public Mutual remained the most awarded fund manager in The Edge-Lipper Malaysia Fund Awards with a total of 14 awards won in 2013."

Some of the other awards, which Public Mutual received in 2012, are:

  • 2 awards at the Asia Asset Management Awards 2011
  • 2 awards at the 2012 Morningstar Malaysia Fund Awards
  • Best Asian Equity Fund in the 10-year category at the Failaka Islamic Fund Awards 2011
  • The Asset Triple A Islamic Finance Awards 2012 for the Best Islamic Retail Asset Management House in Malaysia
  • Reader's Digest Trusted Brand 2012 Platinum Award for the Investment Fund Company category in Malaysia (3rd time)
  • The BrandLaureate Award 2011-2012 for Best Brands in the Financial Services - Unit Trusts Category (6th time)

Corporate Governance Awards

Tan Sri Teh said, "Public Bank Group's pursuit of excellence in good corporate governance and its long entrenched culture of transparency and integrity continued to be recognised with the receipt of awards from respected international publications."

Public Bank was awarded the Corporate Governance Asia's 2nd Asian Excellence Recognition Awards 2012 for Best Corporate Social Responsibility, Best Investor Relations by a Malaysian company and the Corporate Governance Asia Recognition Award 2012.

Public Bank was also awarded the Alpha Southeast Asia's Institutional Investor Corporate Awards 2012 for Strongest Adherence to Corporate Governance.

Outlook

On the outlook for 2013, Tan Sri Teh viewed, "We are optimistic that the domestic economy, in which the Group largely operates, will continue to be stable and supportive of growth that will mainly be spurred by domestic demands. However, intense competition for both loans and deposits market share is expected to continue to erode net interest margin."

On the strategic directions for the Public Bank Group, Tan Sri Teh remarked that, "The Public Bank Group will continue to focus on its core retail banking and financing business, whilst maintaining its prudent credit policies, as well as upholding strong corporate governance to support long term sustainable growth. The Group will continue to leverage on its strong PB brand and its wide and efficient branch network as well as its excellent customer service to deliver continuous revenue growth. The Group is expected to maintain its earnings momentum and record satisfactory performance in 2013."

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