This article first appeared in The Edge Financial Daily on April 23, 2019

KUALA LUMPUR: Any cut in the overnight policy rate (OPR) will have an “insignificant” impact on Public Bank Bhd, said its managing director (MD) Tan Sri Tay Ah Lek (pic).

“There will be a small temporary impact on our net interest margin, which is insignificant on the overall earnings of the bank,” Tay said when queried on the matter at the bank’s annual general meeting yesterday.

“The temporary impact would be due to the time lag on the repricing of the existing fixed deposits, so there is a very insignificant impact to our earnings,” he said.

Tay said the bank maintained a variable rate portfolio of 78% as at Dec 31, 2018, with the balance comprising a fixed rate portfolio.

“The fixed rate portfolio, to a good extent, would mitigate any impact from a downward revision of the OPR,” he said.

On the bank’s  small and medium enterprise (SME) financing activities, Tay said the group is looking to disburse RM50 billion in housing loans and RM40 billion in SME loans over the next three years.

“With a lending portfolio for residential properties and SMEs of RM110.5 billion and RM69.5 billion respectively as at the end of 2018, the group is the largest domestic financier for these two key segments,” he said.

Tay said the bank had approved more than 42,000 housing loans worth RM16 billion last year and RM11 billion in SME loans — which constituted 20% of the group’s 2018 loan disbursement.

The bank’s  total gross loan grew 4.2% to RM317.3 billion in 2018 from RM304.45 billion in 2017.

Tay said there was a compound annual growth rate (CAGR) of 25% to 2.4 million users for its internet banking platform from 2014 to 2018, while its mobile banking application had a CAGR of 85% to 1.1 million users.

Over the next three years, he said, the group is looking to invest RM600 million to enhance its information and communication technology infrastructure, digital capability and knowledge capacities.

The group had invested RM400 million over the past three years in information technology-related investments, of which RM90 million was dedicated to its financial technology operations, said Tay.

Tay also updated shareholders that as of April 19, if one were to have subscribed to 1,000 shares and all rights issues since the bank’s listing in 1967, the investor would have 148,938 shares worth RM3.3 million with a gross dividend of RM1.3 million.

This gives a combined value of RM4.6 million, constituting a CAGR of 19% per annum over the 51-year period.

On the outlook for the group, Public Bank founder and chairman emeritus Tan Sri Teh Hong Piow, who retired from his non-executive chairman position at end-2018 while remaining as director and adviser, said the operating environment for the industry is expected to be more challenging.

“To achieve sustainable growth, the Public Bank group will continue to drive business and digital innovation to support operational efficiency and improve responsiveness,” he said in a statement,

“With the group’s resilient financial performance track record and having overcome all the challenges faced in its 52-year journey, the group is positive that its sound business model focusing on organic growth strategy in the retail banking business and prudent credit practices will enable the group to continuously deliver long-term value to all its stakeholders,” he said.