10 things we learned from the 2018 Public Bank AGM

At the 2017 Public Bank AGM, founder and non-executive chairman, Tan Sri Dato’ Seri Dr. Teh Hong Piow, announced that he would be resigning from his role in January 2019 and the appointment of a new chairman would be announced when the right successor has been identified. So at this year’s Public Bank AGM, we wanted to find out whether if a successor has been found, or if the chairman has changed his mind on retirement.

As usual, the AGM was packed with shareholders and proxies who were keen to gain more valuable insights on the company — we estimated that there were over 5,000 people in the crowd! Even with insufficient seats, shareholders were willing to stand to witness the whole meeting.

Here are 10 valuable insights we learned from the 2018 Public Bank AGM:

1. When founder Tan Sri Dr. Teh Hong Piow entered the hall, shareholders stood up and gave a standing ovation to welcome him. Tan Sri Dr. The has gained the utmost respect from his shareholders due to his commitment and leadership of Public Bank. Today, the company has total assets of RM395.3 million and is third largest company listed on Bursa Malaysia with a market cap of RM87.4 billion (as at 9 July 2018).

2. In March 2018, Tan Sri Dr. Teh was awarded ‘The Greatest Malaysian Banker of All Time’ by the Asia Pacific Brands Foundation. It brings Dr. Teh’s total number of personal awards to 45. In a brief video of the awards event shown at the AGM, president of The BrandLaurette, Dr. KK Johan, eulogised:

“For the past 50 years, there is no other banker extraordinaire that has steadfastly grown the bank to record breaking feats, positive growth year after year and for 2017, achieved a net profit to RM5.47 billion reached through organic growth and brilliant strategic moves. without Teh, Malaysia’s banking industry and the country’s economy would not be what it is today. He defines banking leadership and with his principles and philosophy has set standards of good banking practices, which is emulated and respected by his peers.”

After the video, everybody in the room stood up once again to applaud Tan Sri Dr. Teh’s lifetime achievement. Even though Tan Sri was not physically fit, he stood up to bow to all the shareholders.

3. Several shareholders came in, including from far-flung states around Malaysia like Negeri Sembilan, Penang, and Sarawak, just to show their appreciation and gratitude towards Tan Sri Dr. Teh for his lifetime efforts in leading Public Bank and growing shareholder returns. Many pleaded with Tan Sri to withdraw his resignation and stay on the board. Some commented that age isn’t an issue and Tan Sri would still be able to assume his role even at the age of 88. One shareholder raised his concerns on Public Bank’s succession plan and asked whether a successor had been identified to succeed Tan Sri Dr. Teh. The management answered that Tan Sri will stay as an advisor to guide the board after his resignation in January 2019 and a successor has already been identified which they will announce it at an appropriate time.

4. Public Bank posted a record high in pre-tax profit of RM7.1 billion in 2017, compared to RM6.6 billion in 2016. Net profit attributable to equity holders and earnings per share both rose 5.1% to RM5.5 billion and 141.7 sen respectively. Return on equity (ROE) decreased from 16.5% in 2016 to 15.8% in 2017. Despite the drop, Public Bank’s ROE is still significantly higher than the average return on equity in the local banking industry, which is only at 10%.

5. Public Bank has paid an increasing dividend since 2013. Dividend per share has increased from 58.0 sen in 2016 to 61.0 sen in 2017. Public Bank returned a total of 24% in 2017 including capital gains and dividends. If a shareholder bought 1,000 shares of Public Bank in 1967 and subscribed to all subsequent rights issues, his stake would now be worth RM4.6 million (148,938 shares at RM22.50 per share plus RM1.3 million in gross dividends) – a compound annual growth rate of 19% over the last 50 years.

6. Public Bank has maintained a low cost-to-income ratio at 32% for many years, compared to the industrial benchmark of 44.8%. Since 2015, Public Bank has also maintained a gross impaired loan ratio of only 0.5% compared to its peers which have a much higher gross impaired loan ratio of 1.5%. This is due to Public Bank’s prudent lending policy when it comes to giving out loans. A high non-performing loan ratio can affect profitability and impact investors’ returns.

7. Minority Shareholder Watchdog Group (MSWG) highlighted that deposit growth for Public Bank as a whole and its domestic segment stood at 3% and 3.6% respectively — below the banking industry average of 3.9% in 2017. They asked how the management planned to improve its deposit growth and it domestic market share which was averaged between 16.6% and 16.9% in the past three years. The management said that competition is intense in Malaysia as banks offer preferential rates to win new fixed deposits. In response, Public Bank is doing its best to balance between the cost of winning new deposits and deposit growth. In addition, the bank will increase cross-selling activities by tapping on its internet banking platform.

8. MSWG also asked if Bank Negara Malaysia decision to increase its overnight policy rate by 25 basis points to 3.25% would impact Public Bank. The management answered that Public Bank has likewise increased its fixed deposit rates and price of floating rate loans by 25 basis points. There would also be some positive impact on net interest margin as Public Bank will still pay a lower rate on existing fixed deposits until they mature.

9. Since Public Bank Vietnam became a wholly-owned subsidiary in 2016, the number of branches has almost doubled from seven in 2016 to 13 in 2017. MSWG asked about the challenges in the Vietnamese banking industry and the management’s mid to long-term plan to overcome competition there. The management said that human resource – recruiting and training local talent – is their biggest challenge. Public Bank Vietnam is working to understand the local culture and business environment further while adopting its parent company’s business strategy and prudent banking practices. Public Bank has a well-recognized brand in Vietnam due to its long presence in the country and the management plans to open six new branches in 2018 to expand its branch network and customer reach.

10. MSWG asked the management to elaborate on Public Bank’s digital roadmap. The management answered that they’ve been actively promoting and improving its mobile and internet banking services. As a result, transactions and customer base for mobile banking and internet banking increased by more than 50% and 25% respectively in 2017. The bank has a three-year digital road map and a team to drive digital initiatives and technology innovations according to customers’ needs. At the moment, Public Bank is exploring artificial intelligence and big data analytics. Public Bank also won ‘Best e-Payment Bank’ in 2017 along with other awards at the Malaysian e-Payment Excellence Awards.

With additional article contributions by Calvin Soon.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Mitra Chen is a value investor since 2008. Prior to that, she had over 20 years experience in human resources in the recruitment industry. She strongly believes that everyone can achieve financial independence when they use the right financial methods and tools for their investments.

1 Comment

  1. Gursharan Singh

    July 9, 2018 at 12:14 pm

    The Pubic Bank AGM had little discussion on the financial statements of banking operations as most were very happy with the performance and the accolades well deserved. However the AGM was more to give praises to the Chairman than for Agenda items.
    Also the Chairman had been voted additional large Director’s Fees in addition to the normal Director’s Fees paid to other Directors which was about RM30.0M [2017] RM38.0M [2016] and equally high in 2015. [Source: Annual Reports]

    Many attending shareholders faced major problems in voting due to poor WIFI in the venue Shangri La Hotel resulting in many having to wait for hours to vote and consequently getting their ‘gift coupon’ which was distributed only after casting their vote. The hundreds of senior citizens felt tired and in their frustration many were heard cursing the Chairman [they had praised at the AGM] and PBB Management for not being attending shareholders’ friendly. I was one of those and could understand as I am of 80 yrs of age.
    E-P0LL systemd of voting on resolutions has EMASCULATED 50% less 1 SHAREHOLDERS as all resolutions are passed if voted FOR by 50% plus 1 EQUITY OWNERS.
    PBB Management can learn from some other listed companies regarding treatment of attending shareholders and the way of conducting the E-POLL system which may be just a formality as it may give total control to 50%+1 equity owners on the resolutions.
    However I do agree that the founding Chairman of PBB deserves the high fees he receives as the continued sterling financial performance of PBB is mainly due to Tan Sri. May he live healthy and long.

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