Public Bank 1Q net profit at RM1.33b


  • Banking
  • Friday, 22 May 2020

Public Bank founder, chairman emeritus Tan Sri Teh Hong Piow said 2020 will be exceptionally challenging and earnings will be under pressure for banks. Public Bank Group’s resilient capital position, as well as its strong asset quality and large loan loss reserves, continue to provide a strong buffer to the group in navigating any challenges.

KUALA LUMPUR: Public Bank Bhd's net profit fell by 5.7% to RM1.33bil in the first quarter ended March 31,2020 from RM1.41bil a year ago as the banking industry faced heightened earnings pressure.

It announced on Friday its revenue dipped by 0.9% to RM5.51bil from RM5.56bil a year ago. Earnings per share were 34.24 sen compared with 36.32 sen.

The Public Bank Group recorded a pre-tax profit of RM 1.73 billion in the first quarter of 2020, representing a 5.1% decline as compared to RM1.82 billion achieved in the corresponding period last year. Net profit attributable to shareholders was 5.7% lower at RM 1.33 billion. As a result, the Group posted a lower net return-on-equity of 12.5%.

Its founder, chairman emeritus Tan Sri Teh Hong Piow said the global economy started 2020 with major challenges stemming from the Covid-19 pandemic.

Downside pressure on the economy was further compounded with the steep fall in global oil prices. Coupled with the reductions in Overnight Policy Rate which have weighed on net interest margins, domestic banks faced heightened earnings pressure in the first quarter of 2020, he said.

“However, the Public Bank Group maintained its resilient fundamentals, as reflected in the Group’s stable gross impaired loan ratio of 0.5% and efficient cost-to-income ratio of 35.7% in the first quarter of 2020, ” he said.

Teh said although economic activities were affected by the outbreak and its containment measures, the group was able to achieve continued loan and deposit growth in the first quarter of 2020, albeit at more moderate growth rates.

It recorded an annualised rate of 2.9% growth in total loans, supported by residential properties financing, commercial property financing, and passenger vehicle financing. Total customer deposits posted an annualised growth rate of 2.0%.

Public Bank’s non-interest income continued to be supported by its unit trust related income, banking fee income, investment income and brokerage income.

“The Public Bank Group’s unit trust business, managed by its wholly-owned subsidiary, Public Mutual, remained the major contributor of the group’s non-interest income.

“As at March 31, Public Mutual maintained its market leadership in the retail private unit trust industry, with a market share of 34.3%. It managed a total of 158 unit trust funds with a net asset value of RM78.4bil, ” he said.

Teh said while interest margins were under pressure, it continued to record an efficient cost-to-income ratio.

In 1Q, the group’s cost-to-income ratio stood at 35.7%, which was significantly better than the domestic banking industry’s cost-to-income ratio of 44.7%.

He said rising costs are increasingly putting pressure on profitability.

“However, the Public Bank Group continues to stand out amongst its peers in cost efficiency. With the current economic challenges and the moderating revenue growth, the Group has placed greater focus on broad-based cost efficiency to protect its profitability, ” he said.

Its gross impaired loan ratio stood at 0.5% as at the end of March 2020, reflecting its stable asset quality despite the significant challenges in the operating environment.

It maintained a high loan loss coverage ratio which stood at 131.9% as at the end of March 2020. Including the RM2bil regulatory reserves that the Group had set aside, its loan loss coverage was higher at 261.7%.

Teh also said 2020 will be exceptionally challenging and earnings will be under pressure for banks.

He pointed out the Public Bank Group’s resilient capital position, as well as its strong asset quality and large loan loss reserves, continue to provide a strong buffer to the group in navigating any challenges.

“In terms of liquidity management, the Public Bank Group has been constantly managing its funding and liquidity profile diligently to ensure sufficient liquidity buffer is maintained at all times. The group’s liquidity coverage ratio stood at a healthy level of 135.1% as at the end of March 2020, ” he said.

Breakdown of operations

Retail operations – Pre-tax profit increased marginally by RM5.2mil (+0.6%) to RM899.8mil mainly due to higher net interest income arising from higher average loan balances and higher fee income.

These were partially offset by loan impairment allowance made in the current period as compared to a net writeback in the previous year corresponding period and higher other operating expenses.

Hire purchase – Pre-tax profit decreased by RM9.6mil (-10.9%) to RM78.6mil mainly due to higher other operating expenses and higher loan impairment allowance partially offset by higher net interest income.

Corporate lending – Pre-tax profit increased by RM20.3mil (+13%) to RM175.8mil mainly due to higher net interest income and higher net writeback of loan impairment allowance.

Treasury and capital market operations (including funding center) – Pre-tax loss of RM10.1mil in the current period as compared to pre-tax profit of RM118.1mil a year ago, which was mainly due to the negative effect on net interest income of the funding center operations as a result of the 0.50% OPR reductions in the current period.

Excluding the funding center operations, the pre-tax profit of treasury and capital market operations grew by 8.8%.

Investment banking – The increase in pre-tax profit of RM6.7mil (+84.3%) to RM14.7mill was mainly due to higher stock-broking income and higher net interest income.

Fund management – Pre-tax profit increased by RM3.6mil (+2.3%) to RM162.2mil mainly due to higher management fee from higher average net asset value of funds under management and higher fee on sale of trust units. These were partially offset by higher other operating expenses.

Head office and others – Pre-tax profit increased by RM41mil (19.6%) to RM249.5mil mainly due to higher net interest income and higher investment income partially offset by higher other operating expenses.

Overseas operations – Pre-tax profit decreased by RM31.1mil (-16.6%) to RM156.7mil mainly due to higher loan impairment allowance and higher other operating expenses.

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