Public Bank’s 2Q earnings rise on higher NII

By MARK RAO

Public Bank Bhd recorded stronger margins for its second-quarter ended June 30 this year (2Q17), supported by higher net interest income (NII), healthy loan growth and stronger contributions from business segments.

In an exchange filing yesterday, the third-largest banking group in the country posted a net profit increase of 5.5% year-on-year (YoY) to RM1.33 billion for the quarter, while revenue also grew 3.8% to RM5.17 billion over the same period.

The higher earnings were mainly due to higher net interest income, lower loan impairment allowance and higher net fee and commission income, though partially offset by higher other operating expenses.

NII rose 7.2% YoY to RM1.49 billion in 2Q17, compared to the RM1.39 billion in 2Q16.

Public Bank founder and chairman Tan Sri Dr Teh Hong Piow said the group’s business strategy and prudent credit culture underpinned its consistent financial performance during the current challenging operating environment.

“With the improved profitability, the group achieved a net return on equity of 15.3%,” Teh said in a statement yesterday.

“The group’s financial strength was also attributed to its strong asset quality and efficient cost management, as reflected in its gross impaired loan ratio of 0.5% and cost-to-income ratio of 33.8% as at end of 2Q17.”

For the first-half of this year (1H17), the financial institution and asset manager’s total loans grew 3.1% annually to RM298.5 billion, with domes- tic loan growth above the industry average of 2.8% at 4.3%.

Teh said the focus on financing for residential property purchases, passenger vehicles and small and medium-sized enterprises (SMEs) remains a market niche for the group due to its continued large market shares in the segments despite the challenging lending market.

Public Bank’s deposit-taking also grew annually by 4.7% in 1H17 to RM317.3 billion, due to the bank’s wide market access and strong deposit franchise, with domestic deposits above the industry average by 0.2 points at 5.3%.

Net loan-to-deposit ratio stood at 93.6% at the end of the period under review.

Non-interest income for the bank was supported by its wholly owned subsidiary Public Mutual Bhd, which presently manages 135 unit trust funds with a total net asset value of RM76.9 billion.

Total assets managed under the group stood at RM391.06 billion in 2Q17.

In terms of capital position, the bank’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio stood at 11.8%, 12.6% and 16.4% respectively.

“Maintaining a healthy capital position provides Public Bank Group with good growth opportunities, while ensuring compliance with regulatory requirement,” Teh said.

Public Bank’s overseas operations also remain an important segment for the bank, contributing to 10.2% of the group’s RM3.37 billion in profit before tax (PBT).

Hong Kong-based Public Financial Holdings Ltd and Cambodian Public Bank plc were the main contributors for the overseas business.

The financial institution intends to focus on expanding in Vietnam with nine branches in operation and a further four to be launched in the near term.

Meanwhile, Public Bank’s business segments all noted growths for the quarter, except for investment banking, which posted a PBT drop by 1% YoY to RM12.7 million in 2Q17.

Going forward, Teh said the group will continue to be prudent, agile and flexible in the evolving operating environment and shifting trend in the banking landscape.

Public Bank declared a first interim dividend of 27 sen per share or a total payout of RM1.04 billion, payable on Aug 17 this year.