Public Bank posts lower Q2 earnings on higher expenses

PETALING JAYA: Public Bank Bhd’s net profit for the second quarter ended June 30, 2019 fell 4.5% to RM1.33 billion from RM1.40 billion a year ago mainly due to higher interest and operating expenses.

Its revenue, however increased 3% to RM5.60 billion from RM5.44 billion previously.

The bank has declared a first interim dividend of 33 sen per share, translating into a total dividend payout of RM1.28 billion.

For the six-month period, its net profit was 2.1% lower at RM2.74 billion as compared with RM2.80 billion in the previous corresponding period due the negative effect of Overnight Policy Rate (OPR) reduction of 0.25% in May 2019 versus an OPR hike in January 2018 of the previous year corresponding period.

Its revenue however jumped 3.5% to RM11.17 billion from RM10.79 billion a year ago.

Public Bank founder and chairman emeritus Tan Sri Dr Teh Hong Piow said arising from the reduction of the OPR in May 2019, domestic banks were faced with a decline in net interest margins which affected the profit for the half year ended June 30, 2019.

“However, excluding the negative effect of the OPR reduction, Public Bank was able to sustain stable profitability underpinned by its healthy loans and deposits growth, stable asset quality and prudent cost management,” he said in a statement.

During the period, Public Bank’s total loans grew by an annualised rate of 4.0% to RM323.7 billion, mainly attributed to the healthy growth in its core financing business in residential and commercial properties. Its gross impaired loans ratio stood at 0.5% as at end-June, 2019, well below the banking industry’s gross impaired loan ratio of 1.6%.

On funding side, the group’s deposits saw an annualised growth rate of 5.9% to RM349.1 billion.

In the first half of 2019, the group achieved 8.1% growth in non-interest income, mainly arising from higher investment income and higher banking fee income.

“The group’s unit trust management business through its wholly-owned subsidiary, Public Mutual, continued to be the largest contributor, making up 35% of the group’s total non-interest income.”

Public Bank’s cost-to-income ratio came in at 34.2%, as compared with the banking industry’s 44.6%.

“The group’s effective management of cost efficiency has helped to cushion the impact of interest margin pressure. The group’s long term track record of prudent cost management will also continue to be its competitive advantage when rising cost pressure is expected to persist,” said Teh.

As at the end of June 2019, the group’s common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio were at 13.2%, 13.6% and 16.0% respectively.

Its loan loss coverage stood at 116.0%, well above the banking industry’s 91.1%. Including additional regulatory reserves set aside of RM1.9 billion, it would be higher at 226.5%.

Overseas operations contributed 10.5% to the group’s pre-tax profit, mainly contributed by Public Financial Holdings Limited Group in Hong Kong and Cambodia Public Bank Plc.

Going forward, Teh said Public Bank will remain on a cautious stance in growing its business and closely monitor the changes in the operating environment and undertake appropriate measure to fine-tune its operational strategies for continued business growth.

“In addition, as the group continues to sustain its fundamental strength, it will proactively seek to develop new initiatives, such as banking digitalisation as well as innovative and distinctive financial products for long term business growth.”

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