We will also leverage on the existing 40 branches of Public Finance Ltd to cross-sell the banks products and services, Teh said. 

He added that PBB was also building its resources especially the sales force to aggressively penetrate the Chinese market to grow its loans.  

This was particularly in retail lending with emphasis on consumer financing such as personal loans, motor vehicle financing and mortgage financing. 

It will also focus on lending to middle market commercial businesses, particularly to small- and medium-sized enterprises. 

Looking ahead, PBB will continue to strengthen its overseas operations in Indochina and look into the feasibility of providing a wider range of financial products.  

This would be in in addition to the conventional loans and deposits.  

Teh said Indochina was a relatively untapped market with good potential to develop the financial and insurance services. 

CampuBank Lonpac, a joint venture between CampuBank, PBB and LPI Insurance Bhd commenced business operations on Aug 30 offering the full suite of general insurance products.  

We are very happy with the volume of business garnered so far in this short period of less than one month. 

Currently, there are no plans for any mergers and acquisitions. 

However, we are always open to financial-related business opportunities which have earnings sustainability and the potential to increase shareholder value, Teh said.  

As OSK Research banking analyst Chan Ken Yew puts it: PBB is not a sexy stock. It is a bit boring like any low beta (risk) stock.  

It grows slowly but very steadily and investors like it as a dividend cum growth stock. 

I can comfortably say that the group should continue to sustain its performance for the next two to three years at least.  

Its aggressive expansion overseas in Hong Kong, China and Indochina should also help boost the group's future financials. 

Such an outstanding track record raises the question of whether PBB's performance is sustainable in an increasingly competitive industry thus putting much pressure on the banking group to continue to perform. 

Chairman and founder Tan Sri Teh Hong Piow is unfazed and is confident PBB would not disappoint its shareholders. 

We intend to sustain our track record of delivering financial performance, enhancing shareholder value and rewarding shareholders with strong dividend policy.  

This will be underpinned by continued adherence to good corporate governance and transparency.  

We also see ourselves as providing more cutting edge, innovative and superior products and services supported by a well-trained and motivated sales team, he told StarBiz. 

Teh's vision is for PBB to remain the premier bank to be in the forefront of the Malaysian banking industry while expanding its regional presence particularly in the Asia-Pacific region. 

We believe in doing what we do best. Going forward, we will be driving our non-interest income by widening our suite of products and services. We intend to intensify our wealth management business, he said.  

One avenue is via Public Mutual Bhd. Presently, 22.6% of its fund is invested in the fast growing Asia-Pacific region, and 1.2% invested in Europe and the US.  

Teh expects Public Mutual to make further inroads to increase its market share backed by its strong distribution network and excellent fund performance track record. 

We will continue to be on the lookout for synergistic opportunities. In this light, we will be forging strategic alliances with the best in their own industries.  

We are in the midst of finalising a tie-up with a global insurance company to customise bancassurance products as unique propositions to our customers, he said. 

As part of its plan to expand its regional presence, PBB has aggressively expanded its branch network since it acquired Asia Commercial Bank Ltd (ACB) in May last year.  

ACB was subsequently renamed Public Bank (Hong Kong) Ltd. 

The total number of branches has almost doubled to 24 from 13, with 22 branches in Hong Kong and two branches in Shenzhen, China.  

17-Apr-2007

Public Bank first-quarter net profit up 23%

KUALA LUMPUR: Public Bank Bhd registered group net profit of RM476mil in the first quarter ended March 31, up 23% over the same period last year.  Turnover was up 31% to RM2.21bil from RM1.69bil, while pre-tax profit added 24% to RM675mil against RM545.7mil a year ago. 

Chairman Tan Sri Teh Hong Piow said in a statement that the improved profit was attributable to growth in net interest income, net income from Islamic banking operations and other operating income as well as lower loan loss allowances, partially offset by an increase in other operating expenses. 

The net profit attributable to shareholders for the quarter under review increased by 7% compared with the preceding quarter to Dec 31, 2006. Annualised net return on equity improved further to 22.9% from 21.9% previously.  Teh said Public Bank's earnings per share (EPS) increased by 20% to 14.2 sen in the first quarter of 2007 compared with 11.8 sen in the previous corresponding quarter.   The banking group's first quarter EPS was well above analysts' EPS estimates of 13.85 sen. The annualised consensus for Public Bank's EPS was 55.4 sen. 

As at end-March, the group's total assets expanded by RM9.52bil, or 6%, to RM157.3bil. Its total loans and advances grew 4.4% to RM88.1bil, increasing its market share to 13.6% against 13.2% at end-2006.  The group's net non-performing loan ratio remained below 1.6% as at end-March, with loan loss coverage standing at 102%, which is the highest and most prudent in the Malaysian banking industry. Public Mutual Bhd's total assets under management increased by 14% to reach RM18.46bil while total sales of unit trusts reached a record high of RM2.22bil in the first quarter of 2007. 

On the group's prospects, Teh said Public Bank group would strive to increase its domestic market share in consumer financing and retail commercial lending to small and medium enterprises as well as its deposit-taking business by leveraging on its wide branch network, strong PB Brand and continuing to expand overseas operations.   It will also expand its fee-based activities particularly in fund management, bancassurance and other wealth management products.

thestar

thestar, January 23, 2007

PBB net profit up 18%

KUALA LUMPUR: Public Bank Bhd (PBB) reported a 18% jump in net profit to RM1.73bil as revenue soared 34% to RM7.84bil for the year ended Dec 31.  For the fourth quarter to Dec 31, its net profit grew to RM445.1mil on revenue of RM2.23bil, compared with RM392.7mil and RM1.54bil respectively in the previous corresponding period.  The group proposed a final dividend of 30 sen and special dividend of 10 sen per share, bringing the full year dividend to 60 sen. 

Chairman Tan Sri Teh Hong Piow said the growth was mainly due to growth in net interest income and net income from Islamic banking operations and higher operating income.  “The higher operating income is also partially offset by an increase in other operating expenses and higher loan loss allowances,” he said in a statement read by managing director Datuk Seri Tay Ah Lek at a media briefing yesterday. 

He said that for 2007, the group targets a 15% increase in domestic loans from a base of RM84.4bil in 2006. It recorded a domestic loan growth of 17.5% for 2006.  “We will continue to focus on the retail sector and consumer lending as retail forms 71% of our total loan portfolio,” Tay said.  He said for the consumer sector, the group would focus on residential mortgagesand hire purchase for car financing.  On retail commercial loans, the focus would be on small and medium enterprises.  On the group’s deposit growth, Tay said the bank would continue to aggressively promote growth in current and savings accounts, which would be supplemented by wholesale deposits such as negotiable interest deposits.  On overseas operations, Tay said the group would open at least 10 branches in Cambodia and 15 more in Hong Kong. He added that the group would open its second branch in Shenzhen next month. 

Its loan and deposit growth forecast for Hong Kong is 30%, with continued efforts to strengthen its marketing team there, he added. For 2006, the group recorded a 23.9% loan growth in Hong Kong. 

Tay also said PBB expected increased competition in the industry to have great pressure on net interest margins.  “We will continue to generate high volumes in lending activities, increase and promote deposit-taking activities to offset pressure on margins,” he said.  This will involve aggressive promotion of unit trust funds, bancassurance products and improved cost efficiency. 

Tay added that to sustain profitability, PBB would continue to pursue its strategy of high organic loan and deposit growth, improved cost efficiency and maintaining strong asset quality. 

thestar, Wednesday October 18, 2006

Public Bank Q3 net profit up 24% on strong loans growth

KUALA LUMPUR: Public Bank Bhd reported a 24% rise in third-quarter net profit as loans grew strongly for financing small and medium enterprises (SMEs), vehicle hire purchase and residential mortgages. The group was expecting further improvement in its market share of loans, deposits and unit trusts, especially in the consumer and SME markets in the final quarter, the bank said in a statement to Bursa Malaysia yesterday. 

In its filing, Public Bank reported a net profit of RM432.4mil, or 13.04 sen a share, during its third quarter ended Sept 30, compared with RM347.9mil, or 10.6 sen a share, during the previous comparative period. Revenue improved by 40% to RM2.14bil from RM1.53bil and pre-tax profit jumped 20.2% to RM601.4mil from RM500.4mil. 

For the nine months to Sept 30, net profit improved by 20% to RM1.27bil, or 38.44 sen a share, from RM1.06bil, or 32.34 sen a share, in the previous comparative period. 

“The higher profit was mainly attributable to the increase in net interest income and net income from Islamic banking operations, as well as higher other operating income, partially offset by the increase in other operating expenses and higher loan loss allowances,” said chairman Tan Sri Teh Hong Piow. He said Public Bank adopted a more stringent provisioning for its non-performing loans (NPLs) in its third quarter by making a 20% specific allowance on NPLs, which were three to less than six months in arrears, resulted in an additional specific allowance of RM12mil being recognised in the quarter. 

Excluding the loans arising from the acquisition of Public Bank (Hong Kong) Ltd (formerly Asia Commercial Bank Ltd) of RM4.3bil, the group achieved an annualised loans growth of 18%. Net NPL ratio improved to below 1.6% in September 2006 compared with 1.7% at Dec 31, 2005. 

“The group’s lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and transport vehicles as well as commercial lending to SMEs accounting for 71% of the group’s total loan portfolio as at Sept 30,” Teh said. 

Loans for residential properties grew by 24% to RM22.2bil while loans for the purchase of transport vehicles increased by 14% to RM22.6bil at Sept 30. 

Teh said that in the first nine months of 2006, the group expanded its customer deposits by 28% to RM107.5bil and that the higher deposit growth improved the group’s liquidity, as reflected by the loans to deposits ratio of 74.5% as at Sept 30 as compared with 79.4% as at Dec 31, 2005. 

Public Bank on aggressive expansion in HK and China

Public Bank Bhd, which reported a 24% increase in its second quarter net profit from a year earlier, is embarking on an aggressive expansion of its banking business in Hong Kong and China. It aims to double the loan book of Public Bank (HK) Ltd within the next two years and expand the number of branches by 10.  Public Bank (HK), which has a loan book of HK$10bil currently, is also seeking to add a branch in Shenzhen. Proposals to add branches in Hong Kong and China are awaiting approval from regulators. Public Bank (HK), formerly known as Asia Commercial Bank Ltd, has 12 branches in Hong Kong and one in Shenzhen. “We are not happy with the past growth rate and are taking an aggressive approach to grow the business by focusing on the retail market,'' said Public Bank managing director Datuk Seri Tay Ah Lek at the announcement of the group's first half year financial results yesterday. Tay said Public Bank (HK) would be more aggressive in the consumer segment, mid-market enterprises and would look at strengthening its deposit taking activities. The targeted increase in the loan book of Public Bank (HK) is from the existing branch network of 12 and not based on the enlarged operations. New revenue-generating staff was being recruited, while existing staff of the bank would be more proactively managed, Tay said, adding that there would be no layoffs. 

He said Public Bank's other unit in Hong Kong, Public Financial Holdings Ltd, would also be leveraged upon to grow the business of Public Bank (HK).  Public Bank (HK)'s proposal to expand its network would be via the conversion of 10 existing Public Financial Holdings branches into Public Bank (HK) branches.  The group is also seeking approval from regulators is to conduct the business of Public Bank (HK) at Public Financial Holdings branches. Tay said Shenzhen would be the stepping stone of the Public Bank group into China and the group would pursue growth opportunities as the market liberalised. 

The group submitted its proposals some time ago and hoped to get the nod from regulators during the current half year. The opening of a second branch in Shenzhen, subject to approval and manpower availability, is slated for the first half of next year. Public Bank yesterday reported a 24% rise in net profit to RM452.7mil, or 13.68 sen a share, in the second quarter ended June 30 from RM366.2mil, or 11.19 sen a share, from the previous corresponding quarter. 

Revenue increased to RM1.8bil from RM1.4bil a year ago and pre-tax profit improved by 17% to RM609.7mil from RM521.3mil.  The group also announced an interim dividend of 20% less tax, which would see the group pay RM477mil to shareholders.  “The improved profit was mainly contributed by the increase in net interest income, net income from Islamic banking operations as well as higher other operating income. This was partially offset by the increase in other operating expenses and higher general allowance on loans,'' said Public Bank chairman Tan Sri Teh Hong Piow in a statement. 

For the half-year ended June 30, Public Bank's domestic loans and advances increased by 8.4% or RM5.5bil to RM70.7bil. This resulted in the group's market share of domestic loans rising to 12.6% from 12% at the end of 2005.  Loans to the retail sector, with consumer loans for residential properties and motor vehicles, along with commercial lending to SMEs, amounted to 71% of the group's total loan portfolio at end-June. 

Together with the acquisition of Public Bank (HK), loans growth for the six months to end June was 14.9%. The group is targeting its loans to grow by a minimum 15% this year and 13% for its 2007 financial year. 

Net non-performing loans ratio improved to 1.6% from 1.7% at the end of December while loan loss coverage increased to 98% at end-June from 92% at the end of last year. 

On the group's prospects, Teh said the Malaysian economy was expected to maintain its growth momentum despite challenges from higher global interest rates and oil prices.  “Public Bank group will continue to build on the momentum of its strong loans growth, whilst maintaining strong asset quality by keeping to the group's uncompromising prudent credit standards and practices,'' he said in the statement. 

Extracts fm UOB Kay Hian Report dated 18-Jul-06,

Banking
More competition from foreign banks with shared-ATM service

Four foreign banks have jointly launched a shared automated teller machine (ATM) service to provide their banks customers with access to more than 300 ATMs in Malaysia. Foreign banks are now not only allowed to open more branches, they are also setup its owned share ATM service to improve their accessibility and locality. Shared ATM service was launched by four (4) key foreign players, i.e. HSBC, Stanchart, UOB and OCBC.

Foreign banks are now competing at the same level playing field with the local banks with the launched of the shared ATM service and allowance to open new branches. Since the liberalisation on branches in Dec 06, HSBC and Citibank have taken the lead to open a new branch in non-urban area, i.e. Semenyih, Selangor (HSBC) and Bukit Tengah, Seberang Prai (Citibank).

Advantage of the accessibility of the local banks via their wide nationwide branches and ATM network is diminishing. To be competitive, local banks are now required to be more creative in introducing new products at a competitive rate and services to maintain their market share. Although, local banks have increased their market shares after the first merger, foreign banks with wider coverage now could easily leverage on its parentage for capital and talent supports to role our new products and services.

Local banks that show greater potential to compete with the foreign banks are those with strong parentage to provide them the capital and talent support. Banks with strong shareholders are Maybank (Permodalan Nasional Berhad), Bumiputra-Commerce Holdings (Khazanah) and Malaysian Plantations (Alliance Bank, owned by Temasek)

More branches for foreign banks

Locally incorporated foreign banking institutions (FBIs) are now allowed to open more branches in non-urban areas. This liberalistion came after allowing four additional branches within a year announced on 29 Dec 06. Earlier liberalisation is to allow the FBIs to open four additional branches at a predetermined ratio of 1 (market centres): 2 (semi-urban): 1 (non-urban).

Currently there are 13 FBIs in Malaysia but only five are aggressive players, i.e., Citibank, HSBC, OCBC, Stanchart and UOB. Currently, these five FBIs are capturing 18-20% of the total loan and consumer loan market share in Malaysia. New branches from the FBIs are expected to kick off in 2H06.

Rising competition. Currently, FBIs have mitigated the limitations of distribution network by relying on aggressive marketing, outsource sales, mobile sales force and internet banking. With more branches to come to expand their distribution network coupled with their aggressive marketing, competition in the banking sector will be more intense. This will continue to suppress the banks' net interest margin and earnings growth. This will also drive the local banks to improve their innovative and efficient to compete with the foreign players who have the advantage of capital support from their strong parent company and international banking network (for products and management talent).

Local banks are increasing their presence too. Local banks also have showed improvement in efficiency and competitiveness. They have increased their loan market share significantly from 58% in 2001 to 66% in 2005. The greatest improvement came from Public Bank and Bumiputra-Commerce Holdings (BCHB).

Competition to drive M&As. With the acceleration in the liberalisation in the financial sector, there will be more speculations on potential M&As after the merger of BCHB and SBB. The aggressiveness of the FBIs has put a lot of pressure on local banks to build up their competitiveness and capability. Thus, M&As could be driven by local banks looking to lower cost, expand market share, enter new business segments or venture into the region for future growth. The acquirer is likely to be choosy in selecting the right partner at the right price. The advantage will lie with banks that have strong institutional shareholders to provide the capital support. Among local banks, BCHB and Malaysian Plantations (MPlant) have the strong parentage to support (Khazanah and Temasek respectively) for the expansion.

A 25bp-Rise in Overnight Policy Rate

Bank Negara Malaysian (BNM) has announced an increase in the Overnight Policy Rate (OPR) by 25bp from 3.25% to 3.50%.

Another round of lending rates hike. We expect at least a 20bp adjustment in BLR by all banks in the next few days. There will be a positive impact on banks' interest margins in the short term. But in the longer term, stiff competition will continue to pressure interest margins.

Benefit banks with high variable-rate loans and low-cost deposits. Variable- rate loans will respond immediately to the expected 20bp change in BLR vs fixed-rate loans (mostly hire purchase loans). HP loans tend to take at least three years to see the re-price impact. Thus, banks with a higher exposure to variable loans will benefit. Banks with more low-cost deposits will also stand better in a rising interest rate environment. Among the banks with a higher exposure to variable-rate loans and more than 30% of low-cost deposits are Malaysian Plantations, RHB Capital, Bumiputra Commerce (BCHB) and Hong Leong Bank.

Loan
Deposit Structure

As at Dec 05
Fixed Rate
Variable Rate
Low Cost
High Cost


(% of total)
(% of total)
(% of total)
(% of total)

MPlant
17.3
82.7
31.0
69.0

RHB Cap
21.4
78.6
40.9
59.1

BCHB
36.8
63.2
40.3
59.7

Hong Leong Bank
42.7
57.3
31.4
68.6

Maybank
44.2
55.8
21.4
78.6

EON Cap
52.5
47.5
21.0
79.0

Affin
55.2
44.8
31.8
68.2

Public Bank
56.2
43.9
48.6
51.4

AMMB
61.6
38.4
17.5
82.5
Sector's Valuation






Price
Market
Net Profit
PER

NTA
Price/NTA

Company

@26/4/06
Cap.
2005
2006F
2007F
2005
2006F
2007F
ROE
ps
ps



(RM)
(RMm)
(RMm)
(RMm)
(RMm)
(x)
(x)
(x)
(%)
(RM)
(x)

Maybank
Buy
11.10
42,029
2,502.5
2,701.2
2,923.5
16.2
15.6
14.4
16.1
4.45
2.5

Public Bank
Hold
6.70
22,923
1,450.3
1,578.9
1,769.0
15.8
14.5
13.0
16.9
2.26
3.0

BCHB
Buy
6.30
19,757
826.8
1,241.0
1,461.1
20.9
15.4
13.1
8.9
3.29
1.9

Hong Leong Bank
Sell
5.15
8,138
519.7
585.2
634.9
15.5
13.9
12.8
11.8
2.77
1.9

AMMB
Sell
2.90
6,178
393.1
416.0
433.0
15.7
14.9
14.3
4.6
2.38
1.2

RHB Capital
Sell
2.45
4,468
315.8
366.9
381.5
14.1
12.2
11.7
7.2
1.82
1.3

MPlant
Buy
2.20
3,397
(169.5)
265.1
390.4
n.m
12.8
8.7
11.6
1.27
1.7

Sector


113,395
6,357.5
7,703.5
8,575.2
14.4
12.9
13.9
10.7

2.1

Extracts fm AMResearch dated 24-Jan-06, 

FY05 Finals : In Line

BUY Target Price: RM7.20

• FY05 net profit of RM1.45bn (EPS of 42.4 sen) is in line with our estimate of RM1.44bn (EPS of 42.2 sen) and consensus forecast of RM1.42bn. The Group’s 4Q05 net profit of RM391m was the highest in its history.
  
  
• The Bank has proposed a final gross dividend of 20 sen and special gross dividend of 15 sen, bringing total gross dividend for FY05 to 55 sen, slightly below our forecast of 60 sen. The total GDPS of 55 sen represents a net payout ratio of 90% of its net earnings of RM1.45bn in FY05.
  
  
• Net interest income grew +7% YoY to RM2.48bn on the back of a +20% YoY increase in gross loans, but this was mitigated by a continued squeeze in net interest margin (NIM) to 2.48%-points from 2.90%-points in FY04.
  
  
• Non-interest income showed a strong +18% YoY growth to RM1.32bn due mainly to unit trust management fees (+17% to RM136m) and gain on sale of trust units (+52% to RM133m). The former was in turn largely due to the launch of 7 new unit trust funds by subsidiary Public Mutual in FY05. However, these two income streams are relatively volatile and may not be sustainable in FY06. Included in non-interest income was unrealized gain on revaluation of securities held-fortrading of RM21m (FY04 : RM11m).

Public Bank keen to expand into China

KUALA LUMPUR: Public Bank Bhd, which announced yesterday record profits for another year, signalled its intention to venture into China.  The bank, with the second largest amount of loans in the country, wants 100% stake in a bank in China but will consider owning less if there are synergies to be found with a joint-venture partner, according to managing director Datuk Seri Tay Ah Lek.  “We are looking at directly expanding into greater China,'' Tay told a media conference to announce Public Bank's 2005 financial year results.  He said Public Bank was ready to venture into China but would not use unit JCG Finance Co Ltd, now known as Public Finance Ltd, for the purpose. Public Finance has an asset base of HK$4.4bil but must have an asset base of US$6bil in order to qualify. “It will most probably be through a direct acquisition,'' he said. 

Although Public Bank has sufficient asset base to qualify for a branch in China, it must satisfy other conditions before it may be considered.  Funding any acquisitions in its China move can be through a number of ways, given the bank's strong capital base and it might consider issuing a hybrid Tier-1 capital. 

Plans for such an expansion was unveiled after the bank announced it had recorded a net profit of RM1.45bil, or 44.23 sen a share, for its financial year ended Dec 31, 2005, compared with a net profit of RM1.27bil, or 39.5 sen a share, a year earlier.  Revenue rose to RM5.9bil from RM5.04bil while pre-tax profit crossed the RM2bil mark for the first time in its history to RM2.05bil from RM1.85bil.  The bank also announced a final dividend of 20 sen a share less tax and a special dividend of 15 sen a share less tax. Including an interim dividend of 20 sen a share, total dividend for the year was 55 sen a share less tax.  Total dividend payout amount to RM1.3bil. 

“Total assets surpassed the RM100bil mark to stand at a record RM111.6bil, which is two-and-a-half times the group's asset size of RM45.3bil at end-2000,'' Public Bank chairman Tan Sri Teh Hong Piow said in a statement. 

Public Bank's net interest income and net Islamic banking financing income expanded by 7% to RM2.89bil. Other operating income grew 24% to RM918mil as a result of higher sales of unit trusts following the launch of seven new funds.  The bank’s loans grew by 20%, or RM11.2bil, to RM68.1bil at end-2005. Its loans had been growing at or above 20% each year since 2001 and that had enabled the group to become the second largest lender in the country with a 12% share, Teh said. “The group's lending activities continued to be focused on the retail sector, with consumer loans for the financing of residential properties and vehicle hire-purchase as well as commercial lending to SMEs accounting for 72% of the group's total loan portfolio and 76% of total new loans approved of RM27bil in 2005,'' he said. 

Public Bank has forecast loans to grow in the “high teens” in 2006, mainly due to the huge growth in the bank loans base over the past few years.  Tay said loans for the purchase of vehicles, which account for 25% of the bank's loans at RM16.7bil, would see “stable growth” this year and would be linked to car sales, which are expected to rise marginally this year.  He said the bank should also see “steady growth” in residential property loans, which account for 26%, or RM17.8bil, of the bank's loans base. 

Tay said Public Bank, which had made a bid for Asia General Holdings Ltd (AGHL) along with Southern Bank Bhd (SBB), was still interested in buying a life insurance company.  “Life insurance in Malaysia is relatively untapped and there is a business case for an insurance arm,'' he said. 

With SBB having aborted the RM2bil acquisition of AGHL after failing to obtain approval from Bank Negara, Public Bank senior general manager Leong Kwok Nyem said the bank now “intends to make a go at it (AGHL)''. 

On the outlook for Public Bank, Teh said it would continue to record “satisfactory performance” in 2006, adding that the implementation of the new accounting standards was expected to have a positive impact on the bank's bottom line.  “The Public Bank group's strong lower-cost deposit structure will provide it with the capacity to remain competitive in the lending business,'' he said. “Rising interest rates will also be a positive for interest margins, as loans re-price faster than deposits in the rising interest rate environment.''