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PBBANK (1295) Public Bank 2Q net profit falls 4.5% on negative impact from OPR adjustment 

Chester Tay / theedgemarkets.com
August 14, 2019 13:54 pm +08

KUALA LUMPUR (Aug 14): Public Bank Bhd's net profit for the second quarter ended June 30, 2019 (2QFY19) declined 4.5% to RM1.33 billion, from RM1.4 billion a year ago, due to the negative effect of a 0.25% reduction in Overnight Policy Rate (OPR) in May 2019, compared to an OPR hike in January 2018.

Earnings per share fell to 34.34 sen, from 36.13 sen previously. The group declared a first interim dividend of 33 sen per share, with an EX-date on Aug 28, payable on Sept 10 this year.

In its filing with Bursa Malaysia today, Public Bank disclosed that net interest income for 2QFY19 fell by 1.5% year-on-year to RM1.85 billion, from RM1.88 billion.

Public Bank said gross loans grew by RM13 billion or 4.2% to RM323.7 billion in 2QFY19 from RM310.7 billion in 2QFY18, mainly driven by growth in property financing and corporate lending.

Total deposits from customers, meanwhile, increased 5.8% or RM19.2 billion to RM349.1 billion over the same period.

Public Bank said its gross impaired loan ratio continued to remain stable at 0.5% as at June 30, 2019.

For the first six months of the year (1HFY19), the group's net profit fell 2.1% to RM2.74 billion, from RM2.8 billion in 1HFY18, while net interest income also declined 1.23% to RM3.73 billion, from RM3.78 billion over the same period.

Moving forward, Public Bank said it will continue to be supported by ongoing demand for financing in residential properties, passenger vehicles as well as lending to the small and medium enterprises (SMEs).

The group said it will capitalise on its efficient customer service and extensive network to maintain its position as market leader in the domestic retail and SME segment, while focusing on sustaining its operational excellence and efficiency.

Public Bank said it is well-positioned to capitalise on opportunities in the residential property financing segment given its focus on home mortgages for own occupation and the broader mass market.

The group pledged to continue pursuing growth opportunities by developing proactive marketing strategies backed by competitive pricing and product packages, and it will also be supportive of the government's efforts in promoting affordable housing and home ownership.

"The Public Bank group is committed to enhance access to financing for all SMEs by offering innovative products and services to meet the needs of businesses.

"Aside from sustaining market leadership in the SME financing, the group will continue to expand its corporate lending business by targeting existing clients with good track record and credit ratings as well as diversify its lending portfolio to other viable business sectors," it said.

For the unit trust business, Public Bank said it will continue to focus on offering a wide range of investment products and enhance its services to meet the diverse needs of investors.

Meanwhile, the group also said it will continue to proactively collaborate with AIA Bhd to achieve higher penetration in the bancassurance segment as well as enhance the suite of bancassurance products to meet its customers' needs.

Amid challenges in the macro environment and market uncertainties, Public Bank said its treasury operations will remain vigilant while exercising caution in the execution of its growth strategy.

By leveraging its strong Public Bank brand and prudent management practices, the group said it remains committed to expand organically and strengthen its regional presence.

"For long-term sustainability, the Public Bank group will continue to improve its delivery standards and infrastructure, particularly in terms of technology, for simpler and seamless banking across multi-delivery channels and touch points.

"The group will further leverage on digital technology and innovation for continuous best-in-class customer service delivery," it said.

In a separate statement today, Public Bank's chairman emeritus and adviser Tan Sri Teh Hong Piow said in the face of increasing challenges from the moderating growth of the domestic banking sector and continued interest margin compression, maintaining cost efficiency and preserving strong asset quality is key to long-term business sustainability.

Public Bank's cost-to-income ratio was 34.2% in 2QFY19, versus 44.6% industry average.

"The economic and banking environment was increasingly challenging. In addition to this, arising from the reduction of OPR in May 2019, domestic banks were faced with a decline in net interest margins which affected the profit for 1HFY19.

"The Public Bank 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," he said.

For the overseas business, Teh said the group will continue to focus on growing its retail banking business particularly tapping on the growing opportunities in Indo-China.

"Besides Cambodia, the group is actively expanding its branch network in Vietnam. For the past two years, the group had opened 11 new branches in Vietnam, and the group is targeting to further expand its foothold in the country to 40 branches in the next three years," he said.

Public Bank's share price gained six sen or 0.29% to RM20.80 at market break today, giving it a market capitalisation of RM80.75 billion.

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