Public Bank’s 3Q18 earnings down 1.4% to RM1.4b on a one-off gain

However, 3Q revenue is 5.8% higher at RM5.6b compared to RM5.3b registered in 2017


Public Bank Bhd’s net profit declined 1.4% to RM1.38 billion in the third quarter ended Sept 30, 2018 (3Q18), from RM1.4 billion recorded a year ago.

However, 3Q revenue was 5.8% higher at RM5.62 billion compared to RM5.31 billion registered in the previous year.

In an exchange filing yesterday, the group stated that the previous corresponding quarter’s results included a one-off capital gain of RM42.9 million in respect of investment.

“If excluding this one-off capital gain on investment in the previous year corresponding quarter, the operational pretax profit and net profit attributable to equity holders of the bank for the current quarter would have grown by 0.6% and 1.6% respectively,” the filing read.

Operational pretax profit growth was mainly due to lower loan impairment allowance, higher income from the Islamic banking business and higher net interest income, partially offset by higher other operating expenses and lower foreign-exchange (forex) income.

Other comprehensive income for 3Q18 rose by RM175.8 million to RM181.1 million, mainly due to foreign currency translation gain in respect of foreign operations and higher gain on revaluation of financial investments in the current quarter.

For the nine months ended Sept 30, 2018 (9M18), the bank’s net profit rose 5.3% to RM4.19 billion from RM3.98 billion reported last year, while revenue climbed 5.8% to RM16.41 billion from RM15.51 billion achieved the year before.

According to Teh, the group has always emphasised on maintaining strength in its asset quality (Pic: TMRpic)

The bank’s chairman Tan Sri Dr Teh Hong Piow said the group’s profitability was driven largely by its organic growth strategy in its loans and deposits businesses coupled with strong asset quality and cost efficiency, in an environment “marked by rising uncertainties and persistent volatility”.

“Net return on equity stood at 14.7%, cost-to-income ratio was at 33% and gross impaired loans ratio was at 0.5%,” he said in a statement yesterday.

Financing for the purchase of residential property, commercial property and passenger vehicles continued to drive the group’s interest income.

Total gross loans for 9M18 grew at an annualised rate of 4.4% to RM314.5 billion, while domestic loans also grew 4.4% on an annualised basis to RM291.6 billion.

Total customer deposits rose at an annualised rate of 6.5% to RM334.9 billion, while domestic deposits increased by 6.3% on an annualised rate to RM307 billion.

“As a result of this performance, coupled with prudent liquidity management, the group sustained a gross loan to fund and equity ratio of 79.4% as at end-September 2018,” Teh said.

He added that competition for loans is stiff, though the group continues to maintain loan loss coverage of 110.2%, with regulatory reserves of RM2 billion.

“While the Public Bank Group is faced with intense competition in growing its financing portfolio and has always strived for sustained profitability growth, the group has always emphasised on maintaining strength in its asset quality,” Teh added.

Non-interest income in 9M18 was mainly underpinned by the bank’s unit trust business, banking transactional income and forex related business.

Its wholly owned unit trust management subsidiary, Public Mutual Bhd, remained the largest contributor with a 5.3% increase in pretax profit to RM509 million recorded for 9M18.

As at end-September 2018, Public Mutual had 146 unit trust funds under management representing a net asset value of RM83.4 billion, and a retail market share of 40.6%.

The banking group’s overseas operations made up 9.5% of its overall pretax profit in 9M18, with Public Financial Holdings Ltd in Hong Kong and Cambodian Public Bank plc remaining the largest contributors.

Pretax profit from overseas operations excluding forex effects grew 8.8% in 9M18, with Cambodian Public Bank’s pretax profit climbing 21.3% year-on-year.

Going forward, Public Bank expects economic growth to moderate in the short term, given lingering uncertainties and an increasingly challenging macro environment.

“Taking cognisance of the challenges in the operating environment, the group will reinforce its prudent balance sheet management to sustain profitability. The group’s long-term practice of cost efficiency, prudent risk management and agility to capture opportunities will continue to lead the group for sustainable business growth,” Teh said.