KUALA LUMPUR: Public Bank Bhd posted record earnings for the first quarter ended March 31, 2018 with net profit attributable to shareholders rising nearly 12.6% to RM1.405bil from RM1.248bil a year ago.
The banking group said on Wednesday its pre-tax profit grew by 10% to RM1.79bil over the same period. Revenue was up 6.4% to RM5.35b from RM5.028bil.
Earnings per share rose to 36.39 sen from 32.32 sen.
The founder and chairman Tan Sri Teh Hong Piow said: “The Public Bank Group has set a positive start for the year” with the strong set of results.
He said profit growth continued to be underpinned by the sustained growth of 4% in the group’s net interest income, complemented by a strong growth of 15.6% in non-interest income.
“This resulted in a continued favourable set of financial performance indicators, as reflected in the group’s net return on equity of 15.2%, gross impaired loans ratio of 0.5%, and cost-to-income ratio of 32.6%, which have remained the best in the domestic banking industry,” he said.
Public Bank's core revenue continued to be underpinned by its healthy growth in loans and deposits business.
In Q1 of FY18, the group's total gross loans increased at an annualised rate of 3%, with domestic loans growing faster at an annualised rate of 5%.
The group continued to capture major domestic market share in the financing of residential properties and commercial lending to small and medium enterprises.
As for the deposit-taking business, it recorded an annualised 8.3% growth in total customer deposits for the first quarter of 2018. Domestic deposits grew at an annualised rate of 10.2%.
“Competition in the financing and deposit market had remained intense. However, the Public Bank Group was able to sustain a favourable market position, which continued to generate revenue contributing to the Group’s profit growth.”
“As reflected by its gross loan to fund and equity ratio of 79.9%, the Group’s financing growth has remained well supported by its healthy funding structure.
“Further, the group has remained vigilant and placed great emphasis on maintaining a healthy liquidity position, in the face of the challenging operating environment and stringent liquidity regulatory requirement.” said Teh.
As for the non-interest income, it recorded strong growth of 15.6% mainly due to the commendable growth of income in the group’s unit trust business and foreign exchange business. It was also boosted by higher investment income coupled with a healthy growth of banking transactional fee income.
“In the first quarter of 2018, Public Mutual, the Public Bank Group’s wholly-owned unit trust management subsidiary, recorded an impressive pre-tax profit growth of 16.6%.
“The favourable performance was underpinned by its strong market position, supported by a total number of 142 unit trust funds under its management, with a total net asset value of RM81.9bil, capturing 41.1% of retail market share in the domestic private unit trust industry,” Teh pointed out.
Meanwhile, the banking group's cost-to-income ratio was sustained at 32.6%, which was well below banking industry’s average cost-to-income ratio of 44.8%.
“In the face of rising prices and cost of compliance, increasing expenses are inevitable. However, the Public Bank Group’s long-embedded prudent cost management has built buffers and strong foundation to meet the challenges, and enabled the Group to sustain a track record of efficiency and productivity,” he said.
The Public Bank Group recorded a stable gross impaired loans ratio of 0.5% as at the end of March 2018 compared with the industry’s gross impaired loans ratio of 1.6%.
On the plans for 2018, he said Public Bank Group would continue to emphasise on sustaining its superior asset quality.
“Resilient asset quality has long formed the cornerstone of the group’s robust fundamentals. Prudent credit risk management has provided stakeholders with long term confidence on the Group’s business sustainability,” he said.
With effect from Jan 1, 2018, it had adopted the Malaysian Financial Reporting Standard 9 (MFRS 9) which is a more forward-looking based provisioning.
Due to the strong asset quality, the group’s credit cost remained low at 0.09% in Q1 FY18.
As at end-March 2018, it recorded a healthy loan loss coverage ratio of 125.2%. Including additional regulatory reserves set aside of RM2bil, the group’s loan loss coverage ratio would be 261.0%.
The Public Bank Group’s overseas operations continued to contribute to the group’s profits.
“For the first quarter of 2018, overseas operations contributed 8.1% of the Public Bank Group’s pre-tax profit, with Public Financial Holdings Ltd Group in Hong Kong and Cambodia Public Bank Plc being the main contributors to the Group’s overseas business profits.”
The Public Bank Group’s capital position remained stable with common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio at 12.2%, 12.8% and 15.8% respectively as at the end of March 2018.
It pointed out the implementation of MFRS 9 on Jan 1, 2018 did not result in any adverse impact to the capital position of the group due to the group’s large regulatory reserves that has been set aside.
“Strong balance sheet and capital position have always been pillars of public confidence. The Public Bank Group’s capital position has remained healthy and well above regulatory requirement. The group will continue to exercise prudent capital management to support its growth strategies, while maximising its long term shareholder value,” Teh added.
Below is the performance of the various segments in Q1, FY18:
Retail Operations – Pre-tax profit increased by RM40.6 million (4.7%) to RM900.2 million mainly due to higher net interest income on higher average loan and deposit balances and higher fee and other operating income, partially offset by higher other operating expenses and higher loan impairment allowance.
Hire purchase – Pre-tax profit decreased marginally by RM1.7 million (-1.9%) to RM88.7 million mainly due to lower net interest income on lower average loan balances, partially offset by lower loan impairment allowance.
Corporate lending – Pre-tax profit increased by RM7.5 million (5.8%) to RM137.4 million mainly due to higher net interest income on higher average loan balances.
Treasury and capital market operations – Pre-tax profit increased by RM17.7 million (10.2%) to RM190.6 million mainly due to higher net interest income on treasury gapping, funding and liquidity management activities and higher investment income.
Investment banking – The increase in pre-tax profit of RM1.5 million (14.0%) to RM12.5 million was mainly due to higher brokerage income from stock-broking activities, partially offset by higher other operating expenses.
Fund management – Pre-tax profit increased by RM25.1 million (16.6%) to RM176.1 million mainly due to higher management fee earned on higher average net asset value of funds under management and higher fee income from sale of trust units, partially offset by higher other operating expenses which was in tandem with higher sales volume.
Overseas operations – Pre-tax profit decreased by RM16.3 million (-10.1%) to RM145.5 million mainly due to overall unfavourable foreign exchange movements.
Other operating segments – Pre-tax profit increased by RM88.1 million (>100.0%) to RM143.0 million mainly due to higher net interest income and higher investment income.