Public Bank 3Q net profit higher at RM1.39b


Teh Hong Piow Nov20 Public Bank

KUALA LUMPUR: Public Bank posted net profit of RM1.39bil in the third quarter ended Sept 30,2020, a slight increase of 2.2% from RM1.36bil a year ago, underpinned by higher income from investments, stock broking, fund management and Islamic banking.

It reported on Friday while its revenue fell by 8.5% to RM5.13bil from RM5.61bil, its pre-tax profit rose by 2.3% to RM1.80bil from RM1.76bil a year ago.

Its net profit increased mainly due to higher investment income of RM102.9mil and also higher net fee and commission income of RM89.1mil on higher income from stock-broking and fund management.

Public Bank also recorded higher Islamic banking income of RM63.6mil, higher net interest income of RM48mil and higher other operating income of RM25.2mil.

“These were partially offset by higher loan impairment allowance of RM285.4mil in anticipation of the potential effect of Covid-19 pandemic, ” it said.

Public Bank said its retail operations recorded an 8% increase in pre-tax profit profit of RM1.01bil mainly due to higher net interest income, higher fee and other income, partially offset by higher loan impairment allowance in anticipation of the potential effect of Covid-19 pandemic.

As for its hire purchase business, pre-tax profit increased by 1.4% to RM83.9mil mainly due to lower loan impairment allowance and lower other operating expenses, partially offset by lower net interest income.

Other comprehensive loss (net) of the group for the current quarter was RM39.7mil as compared to other comprehensive income (net) of RM119.7mil a year ago mainly due to the loss on foreign currency translation in respect of foreign operations.

Its corporate lending's pre-tax profit fell by 76.% to RM35.5mil mainly due to higher loan impairment allowance in anticipation of the potential effect of Covid-19 pandemic, partially offset by higher net interest income.

Treasury and capital market operations reported an 88.4% increase in pre-tax profit of RM146.5mil mainly due to higher net interest income and higher investment income.

As for its investment banking, pre-tax profit jumped by 318% to RM38.4mil mainly due to higher stock-broking income arising from higher business volume in the equity market.

Public Bank said its fund management business reported pre-tax profit of RM191.2mil, an increase of 15.8% mainly due to higher management fee from higher average net asset value of funds under management and higher fee on sale of trust units arising from higher equity sales achieved.

It reported its head office, funding centre and others posted pre-tax profit of RM149.3mil, up by 3.2% mainly due to higher investment income and lower other operating expenses, partially offset by lower net interest income.

However, its overseas operations reported pre-tax profit decreased by 28% to RM146.5mil mainly due to higher loan impairment allowance and lower net interest income due to lower net interest margin, partially offset by higher other income.

3Q vs 2Q

When compared with the second quarter, Public Bank's pre-tax profit jumped by 40.8% to RM1.80bil from RM1.28bil. Its net profit was up by 39% to RM1.39bil mainly due to the one-off Day One net modification loss related to Covid-19 relief measures amounting to RM498.4mil recognised in 2Q and lower negative effect of OPR reductions in 3Q.

Underpinning the stronger 3Q profit when compared with 2Q were higher overall net interest income and net income from Islamic banking business, treasury and capital market operations, its fund management business and aso its head office, funding center and others. However, corporate lending and overseas operations recorded lower profit

“Other comprehensive loss (net) of the group for the current quarter was RM39.7mil as compared to other comprehensive income (net) of RM423.2mil in the immediate preceding quarter.

“This was mainly due to lower gain on revaluation of financial investments, higher loss on foreign currency translation in respect of foreign operations and loss on remeasurements of defined benefit plans in the current quarter as compared to a gain recorded in the preceding quarter. These were partially offset by gain on cash flow hedges in the current quarter, ” it said.

Nine months financial performance

For the nine months, Public Bank's net profit declined by 9.3% to RM3.72bil from RM4.10bil in the previous corresponding period. Its revenue declined by 8.3% to RM15.38bil from RM16.78bil.

It said the lower profit was mainly due to the moderating revenue growth arising from the Covid-19 pandemic, the effect of the Overnight Policy Rate (OPR) reduction during the year, as well as the one-off net modification loss of RM498mil incurred in the second quarter due to the Covid-19 relief measures offered to individuals and businesses.

Tan Sri Teh Hong Piow, who is the founder, chairman emeritus, director and adviser of Public Bank, said: “The Covid-19 pandemic continued to pose significant uncertainties to the economic landscape and the business environment on all fronts.

“Further, a total of 125 basis points cut in the OPR this year and the higher provisions set aside in anticipation of the Covid-19 pandemic effect had continued to weigh on profitability.

“However, as the economy gradually reopened and supported by the various government relief and stimulus measures, the economic environment in the third quarter of 2020 had shown an improvement, ” he said.

Public Bank recorded higher loan growth in 3Q as compared to the earlier quarters. Total loans grew by an annualised rate of 4.8% in the first nine months of 2020.

Domestic loans grew by an annualised rate of 5.6%, which was higher than the domestic banking industry’s annualised loan growth of 4.0%. On funding side, the Group posted annualised growth rate of 3.9% in both total deposits and domestic deposits.”

Non-interest income continued to support the group’s financial performance, with 17.8% growth in the first nine months of 2020, mainly driven by higher investment income, as well as higher income from unit trust and stockbroking businesses. Public Mutual remained the main contributor to the group’s non-interest income.

“Despite the various challenges faced in 2020, the group recorded a resilient net return on equity of 11.3% in the first nine months of 2020. Cost-to-income ratio stood at 35.2%, as compared to the domestic banking industry’s cost-to-income ratio of 44.7%.”

“Meanwhile, impaired loan ratio remained low at 0.3%, which was significantly better than the domestic banking industry’s impaired loan ratio of 1.4%. In addition, the Group maintained a high loan loss reserves of 209.1%. Including the RM1.7bil regulatory reserves that the group had set aside, total reserves for loan losses were even higher at 362.0%, ” Teh said.

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