Public Bank’s Q2 profit rises to RM610mil

Source: The Star Online

Group declares an interim dividend of 30 sen a share

KUALA LUMPUR: Public Bank Bhd posted a modest rise in net profit to RM610.7mil, or 17.7 sen a share, in its second quarter ended June 30 as a still vibrant business in Malaysia was dragged down by a weaker performance from its overseas operations.

It recorded a net profit of RM593.5mil, or 17.69 sen a share, in the previous corresponding period.

The group, however, sees its loans growth and non-performing loans (NPLs) to be at industry leading levels as it forecast yet another year of record profit on a recurring basis.

“The Public Bank group will continue to pursue its strategy of strong organic business growth, as well as maintain a high quality loan portfolio and improved productivity,” chairman Tan Sri Teh Hong Piow said in a statement.

The group declared an interim dividend of 30 sen a share less tax, which amounts to around RM777mil.

The payout remained constant from the previous corresponding period.

Revenue for the latest quarter was RM2.35bil compared with RM2.52bil previously while pre-tax profit was RM819.8mil compared with RM791.6mil.

Net NPLs were below 1%.

In a media briefing yesterday, managing director Tan Sri Tay Ah Lek said the bank was still on track to achieve a loans growth of 14% to 15% by year-end supported by the bank’s staple lending activity to small businesses and house and car buyers. Loans grew by 7.2% in the first half.

“Our loans are competitively priced and our people work a lot harder,” said chief operating officer Leong Kwok Nyem as to why Public Bank’s loans grew much faster than the industry average of 1.2% in the first five months of this year.

“We have been expanding our loans marketing resources despite the weakening economy.”

The record low overnight policy rate will put pressure on Public Bank’s net interest margins but the repricing of deposit rates, in which Public Bank has a market share of 15.2%, should help to partly mitigate the pressure on lower margins from its loans. A higher volume of business has also offset the pressure margins have come under.

Whereas net interest margins will remain under some pressure, Public Bank is looking to non-interest income as a boost. The group sees non-interest income, such as fees, to account for 26% of total income.

Tay said its non-interest margin was expected to rise in the second half mainly due to an increase in sales on unit trusts by unit Public Mutual Bhd.

Public Mutual is the leader in the private unit trust industry as it now claims to have 44% of that business in Malaysia as at end-June.

Bancassurance and wealth management are two segments of businesses that Public Bank is now focusing on growing and has now expanded a sales workforce for those businesses to 529.

Public Bank chief operating officer Wong Jee Seng said it expected meaningful numbers for its bancassurance business from 2011 when that segment is forecast to account for 3% to 4% of revenue.

Leong said Public Bank’s customer base, which has doubled in under eight years, would offer good channels for its sales executives to access.

Public Bank is expanding its overseas network, in particular in Hong Kong and Cambodia, by opening more branches but profit from abroad, especially Hong Kong, has come off.

It, however, expects the performance of its Hong Kong operations to be relatively stable as bankruptcies and asset quality have improved.

Public Bank will also look to enhance its capital ratios in the second half of this year.