Established in 1966, Public Bank Berhad (KLSE:PBBANK) has withstood the test of times. For over 50 years, Tan Sri Dato’ Sri Dr. Teh Hong Piow has remained at the helm of Public Bank Bhd’s leadership. Ever since it survived the Black Monday in 1987, the Asian Financial Crisis in 1997, the Dotcom Bubble in 2000 and the Global Financial Crisis in 2008. Today, Public Bank Bhd is the third largest banking group in Malaysia.
In this article, I’ll share Public Bank Bhd’s key income contributors, several challenges it faces and its targets for the financial year 2017. They are:
#1: Stock Symbol
Ticker Symbol: KLSE:PBBANK / KLSE: 1295
Market Cap: RM 79.5 Billion (4 September 2017)
Share Price: RM 20.60 (4 September 2017)
Syariah Compliant: No
Today, Public Bank Bhd derives income from four main business divisions. They include:
Domestic Consumer Banking and SME Lending
This division offers financing for the purchase of residential properties, passenger vehicles, credit cards, share margin financing, working capital and trade financing to small and medium enterprises (SMEs). In the financial year 2016, this division has made RM 3.92 Billion in profits and thus, is currently the largest contributor of profits to Public Bank Bhd.
Fund management is undertaken by Public Mutual Bhd, a wholly-owned subsidiary of Public Bank Bhd. As at 31 December 2016, Public Mutual Bhd manages 133 unit trust funds worth RM 70.3 Billion in assets under management (AUM). It has made RM 967.5 Million and RM 572.9 Million in operating revenues and profits before tax (PBT) in the financial year 2016.
In 2012, Public Bank Bhd has forged a 10-Year Partnership with AIA Group Ltd to sell and distribute a wide range of insurance products. Presently, Public Bank Bhd has established approximately 500 licensed sales staffs and 2,700 licensed staff for credit-related life insurance products. In 2016, Public Bank Bhd has achieved RM 224.6 Million in domestic annualised new premium (ANP).
Public Investment Bank Bhd provides a wide range of corporate finance and advisory services and stockbroking services to both retail and institutional customers. In 2016, it has completed 28 corporate exercises comprising of initial public offerings (IPOs), privatisation exercises, equity fund raises, and debt funding programmes. In 2016, it has contributed RM 48.5 Million in profits before tax (PBT).
Public Bank Bhd operates 130 overseas branches located in Hong Kong, China, Cambodia, Laos, Vietnam and Sri Lanka. Today, Hong Kong remains the largest contributor to its international operations. Overall, in 2016, Public Bank Bhd’s international operations have contributed RM 620.7 Million in profits before tax (PBT).
#3: Targets for 2017
For 2017, Public Bank Bhd has set the following key performance targets:
- Net Return on Equity = 14% – 15%
- Total Capital Ratio > 13%
- Gross Impaired Loans Ratio < 1%
- Cost to Income Ratio = 33% – 34%
- Gross Loans Growth = 6% – 7%
- Customer Deposits Growth = 5% – 6%
#4: Major Announcement
On 31 July 2017, Public Bank Bhd has announced that Tan Sri Dato’ Sri Dr. Teh Hong Piow wishes to relinquish his position as non-executive Chairman of Public Bank Bhd with effect from 1 January 2019. Upon retirement, Tan Sri Dato’ Sri Dr. Teh Hong Piow will be bestowed the title of Chairman Emeritus and will stay on as an Adviser to Public Bank Bhd.
Public Bank Bhd has identified several risks and is active in monitoring and managing them to minimize their impact on its business performances. To name a few, they include:
Credit risk is the potential loss of revenue as a result of loan defaults by its borrowers. In 2016, Public Bank has recorded Gross Impaired Loans Ratio of 0.5%. It is among the lowest in the local banking industry. This means Public Bank Bhd has maintained superior asset quality with better quality of customers as it has implemented a more stringent credit management practices compared to its peers.
Market Risk is the risk of loss arising from movements in several market variables such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. Public Bank Bhd intends to mitigate the impact of market risks through regular reviews on market and economic conditions and implement processes on hedging activities to protect from adverse movements in these market variables.
Public Bank Bhd faces cyber threats and threats of electronic payment frauds. To enhance cyber security, Public Bank Bhd has engaged the relevant consultants and services to keep abreast of the latest cyber threats, strengthening information security, and to ensure resilience on its IT infrastructure and technology. As for electronic payment frauds, Public Bank Bhd collaborates with Bank Negara Malaysia to enhance fraud prevention through the deployment of automated fraud detection systems.
Capital Adequacy Risks
Capital Adequacy Risk is the risk of insufficient capital to meet the capital required to satisfy regulatory capital adequacy requirements set by Bank Negara Malaysia. In 2016, Public Bank has recorded Total Capital Ratio of 16.0%. It is above the minimum of 8% and additional capital conservation buffer of 2.5% introduced by Bank Negara Malaysia starting in the financial year 2019.
As at 4 September 2017, Public Bank Bhd is trading at RM 20.60 a share. Based on 2016 Earnings per Share (EPS) of RM 1.348, its current P/E Ratio works out to be 15.28. As at 30 June 2017, Public Bank Bhd has reported having RM 9.20 in net assets a share. Thus, Public Bank Bhd’s current P/B Ratio works out to be 2.24. For the financial year 2016, Public Bank Bhd has declared and paid out RM 0.58 in Dividends per Share (DPS). If it maintains DPS of RM 0.58 in the financial year 2017, its expected dividend yield is 2.82% a year.
#7: Investors Relations
For further enquiries on Public Bank Bhd’s Investor Relations matters, please contact:
Tan Sri Dato’ Sri Tay Ah Lek
Investor Relation Department
Telephone: +603-2176 6000
#8: Major Shareholders
As at 27 January 2017, the top three shareholders of Public Bank Bhd are:
– Tan Sri Dato’ Sri Dr. Teh Hong Piow – 23.54%
– Employees Provident Fund Board – 12.27%
– JPMorgan Chase Bank, National Association (U.S.A) – 2.40%
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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ian’s personal capacity. It does not in any way represent those of his employer and other related entities. Ian does not own any companies mentioned.