10 things I learned from the 2019 Public Bank AGM

Listed in 1967, Public Bank is the third largest banking group in Malaysia in terms of asset size and has over 10 million customers.

Public Bank has been a darling stock among many Malaysian investors for years. As founder Teh Hong Piow entered the meeting hall, he was given a standing ovation by shareholders. The entire annual general meeting was never short of compliments and applause from floor. Shareholders were even invited to give Teh another round of standing ovation in the midst of the meeting. Why the adulation?

Here are 10 things I learned from the 2019 Public Bank AGM:

1. Revenue increased 5.7% year-on-year to RM22.0 billion in 2018, while net profit increase 2.2% year-on-year to RM5.6 billion in 2018. The management attributed this improvement to steady growth and a stable performance. Dividend per share increased from 61 sen in 2017 to 69 sen in 2018, which translates to total dividends of RM2.7 billion and a payout ratio of 47.9%.

2. Public Bank registered a net return on equity (ROE) of 14.8% in 2018, which falls within its targeted range of 14% to 15%. Although its ROE reached a five-year low in 2018, its ROE is still higher than the industry average of 10%. The management attributed the ROE decline to higher capital conservation to meet stricter regulatory demands in order to mitigate a potential financial crisis like the one seen 2008/09. Public Bank also lowered its ROE target to between 13% and 14% in 2019.

3. Public Bank maintained its gross impaired loan ratio at 0.5% in 2018, which is far below the industry average of 1.5%. The low ratio is a testament to the banks good asset quality and prudent lending practices.

4. Cost-to-income ratio stood at 33.0% compared to the industry average of 44.8%. Public Bank is well-known for being disciplined in managing costs and is the most cost-efficient bank in Malaysia.

5. Total gross loans and total customer deposits grew 4.2% to RM317.3 billion and 6.2% to RM339.2 billion in 2018 respectively. Public Bank achieved slower loan and deposit growth compared to the industry, which grew at 5.6% and 7.5% respectively as pointed out by Minority Shareholder Watch Group. CEO Tay Ah Lek attributed the industry’s higher loan growth partly to corporate loan growth. In terms of deposit growth, Public Bank will continue to grow low-cost deposits by leveraging on its strong deposit franchise, while supported by enhanced cross-selling activities and internet banking. It holds the second largest market share in Malaysia for loans and deposits at 17.6% and 16.5% respectively.

6. In 2018, Public Bank approved more than 42,000 housing loans worth RM16.2 billion — 62.3% of which comprised affordable houses purchased at RM100,000 to RM500,000. A total of RM11.1 billion worth of loans were approved for small and medium enterprises (SMEs) in Malaysia, which account for 20.7% of the bank’s total domestic loans approved in 2018. The management said household and SME financing growth is in line with the industry. Over the next three years, Public Bank is targeting to reach RM50 billion and RM40 billion for housing and SME loans respectively. Public Bank will continue to play a part in providing financial support to first-time home buyers and SMEs.

7. Over the last four years, Public Bank internet banking users have increased at a compounded annual growth rate (CAGR) of 25% to 2.4 million to 2018. Over the same period, mobile banking users increased at a CAGR of 85% to 1.1 million users.

8. Public Bank has invested RM400 million on information technology over the past three years. Of that amount, RM90 million was spent on financial technology initiatives such as big data analytics and blockchain. It plans to spend another RM600 million in the next three years to enhance its IT infrastructure as well as digital capability and knowledge.

9. Public Bank will continue to expand in the fast-emerging Indo-China countries. Its wholly-owned subsidiary, Cambodian Public Bank, is the largest foreign bank in Cambodia.In Vietnam, it has increased the number of branches from seven in 2015 to 18 in 2018 through its wholly-owned subsidiary, Public Bank Vietnam. The bank will open another eight new branches in 2019 and aims to hit 40 branches in Vietnam in the medium term.

10. As a response to a media representative, Tay foresees only a small temporary impact on Public Bank’s net interest margin if Bank Negara Malaysia decides to reduce its overnight policy rate. The CEO believes its 20% fixed-rate loan will be able to cushion the impact on its overall earnings.

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

Shak Chee Hoi

Chee Hoi is an investor and research analyst at The Fifth Person. He was previously involved in wildlife conservation work with a non-governmental organisation as well as sustainability consultancy work. He personally believes in impacting society and the environment for the greater good.

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