Harimau Capital

Wednesday July 21, 2010
By LEONG HUNG YEE
hungyee@thestar.com.my

Bank posts 14% higher revenue at RM2.68bil
KUALA LUMPUR: Public Bank Bhd’s net profit jumped 20.2% to RM734.1mil for the second quarter ended June 30, from RM610.7mil a year ago, on the back of strong loans and deposits growth and improved asset quality.
Its revenue for the quarter was 14% higher at RM2.68bil from RM2.35bil a year ago. It reported earnings per share of 20.96 sen versus 17.70 sen a year ago.The bank also announced a first interim dividend of 25% less 25% taxation, which will result in a total payout of RM657mil.
For the first six months, Public Bank’s net profit was higher at RM1.42bil, or 40.66 sen per share, on revenue of RM5.19bil.
"We expect the economy to grow by 6% this year, exceeding official forecast": PUBLIC BANK BHD MD TAN SRI TAY AH LEK . According to chairman Tan Sri Teh Hong Piow, the bank is expected to continue to record satisfactory performance for the rest of 2010 barring unforeseen circumstances.
“We expect that the first half performance will carry forward into the second half given the very stable interest rate conditions, as well as the strong loans approval in the first half of this year,” chief operating officer Leong Kwok Nyem said at a briefing yesterday.
Managing director Tan Sri Tay Ah Lek said interest rates were expected to remain accommodative, low and stable to support economic growth.“We expect the economy to grow by 6% this year, exceeding official forecast,” he said.The total loans and advances of the group grew by RM10bil to RM146.7bil as at end-June, particularly driven by strong lending growth in the domestic market at an annualised rate of 16.8%.
The bank’s domestic core customers deposits grew at an annualised rate of 15.2% while total assets increased to RM219bil as at June 30.Public Bank’s gross impaired loans ratio remained low at 1.2% compared with the industry gross impaired loans ratio of 3.5% and an improvement from the gross impaired loans ratio of the group of 1.3% as at end-2009.

Tay expects its loan impairment to remain low. Leong Kwok Nyem ... “We expect that the first-half performance will carry forward into the second half ...”
He added that the further improvement from its operations in Hong Kong and Cambodia contributed to its low loans impairment ratios. Tay said the group had adopted a more stringent criteria on the classification of impaired loans under FRS139.
“Under the more stringent criteria, certain loans which are less than three months in default are now classified as impaired,” he added. Tay said based on the strong loan growth for the first half of 2010, the group was on track and well positioned to achieve its targeted loan growth rate of 15% for 2010. Public Bank’s core capital ratio and risk-weighted capital ratio remain at 10% and 13.9% respectively as at June 30, after the payment of the first interim dividend. Tay said the recent increase in overnight policy rate by 0.25% should result in further improvement to the group’s net interest margin in the second half of the year.
For the first half of 2010, Public Bank continued to promote SME activities with the approval of RM5.5bil of loans to domestic SMEs, accounting for more than 20% of the group’s total domestic loans approved of RM26.9bil in the same period. The bank’s loan impairment allowances decreased by 7% despite the strong loan growth in the first half due to continued improvement in asset quality, particularly in the group’s operations in Hong Kong.
Commenting on its dividend, Tay said the bank would maintain dividend payout of 50% to 55% this year, the same level achieved in previous years. Tay said Public Bank continued to proactively monitor the latest developments in regards to the Basel III proposals and to address its potential impact to the group’s capital requirements by realigning existing capital management strategies from time to time.
Leong said the group was well prepared to meet the requirements of Basel III international standards for banks. He said the group would pursue continued proactive capital management in order to maintain a healthy level of capital at all times to support the group’s business growth whilst maximising shareholders’ returns. Going forward, Public Bank would continue to pursure strong organic growth in its lending and deposit taking businesses, accelerate its fee-based revenue and further improve its productivity and cost efficiency, Tay said.
According to Thomson Reuters, Public Bank’s first half profit accounted for about 48% of consensus estimates for the full-year. Bloomberg consensus estimates expect Public Bank to post RM2.9bil in net profit for the full year. Meanwhile, Public Bank hit an intra-day high of RM12.24 – also a record high – before closing up 10 sen, or 0.83%, to RM12.20 yesterday.