KUALA LUMPUR (Nov 7): Public Bank Bhd net profit for the third quarter ended Sept 30, 2019 (3QFY19) slipped marginally to RM1.36 billion from RM1.38 billion a year earlier, due to the negative effect of Overnight Policy Rate (OPR) reduction of 0.25% in May 2019.
In a filing to the stock exchange today, Public Bank said revenue for the quarter was flat at RM5.61 billion against RM5.62 billion previously.
Earnings per share slipped to 35.10 sen, from 35.64 sen earlier.
For the nine months ended Sept 30 (9MFY19), Public Bank posted a net profit RM4.11 billion against RM4.19 billion, on the back of revenue RM16.78 billion versus RM16.41 billion a year earlier.
In a separate statement, Public Bank founder, Chairman Emeritus, Director and Adviser, Tan Sri Dr. Teh Hong Piow, said recent developments in the operating environment posed further challenges to the banking industry.
He said while macro headwinds remain, the reduction in OPR in May 2019 had also resulted in the decline in net interest margins for the banking sector, which affected profit for the first nine months ended September 2019.
Teh said despite these concerns, Public Bank Group was able to sustain stable profit performance, mainly on account of the stable interest income from its growing financing and deposit business.
He explained that the group’s profitability was also complemented by its non-interest income which grew by 5.8% in the first nine months of the year.
“During the financial period, the Group also retained its competitive strength, as reflected in its efficient cost-to-income ratio of 34.3% and low gross impaired loans ratio of 0.5%. As a result, the Group sustained a resilient net return on equity of 13.3%,”he said.
On Public Bank’s loans and deposits, Teh said the group adopted a strategy to optimise its funding position and balance between deposit growth and cost of funding, whilst ensuring sufficient liquidity buffer.
As at the end of September 2019, he said the group’s funding position remained healthy, with its gross loan to fund and equity ratio standing at 79.8%.
Teh said Public Mutual, the Public Bank Group’s wholly-owned unit trust management subsidiary, remained the main contributor to the group’s total non-interest income.
“In the first nine months of 2019, Public Mutual managed a total of 152 unit trust funds, representing net asset value of RM84.2 billion. Public Mutual also sustained its market leader position in the domestic private unit trust industry, with a retail market share of 35.3%,” he said.
On asset quality, Teh said as consumers face increased challenges from the macro environment, the banking industry is expected to experience higher impaired loans.
“The Public Bank Group is able to sustain a strong and stable asset quality, despite its growing loan portfolio. This is supported by the Group’s consistent practices in prudent lending and proactive recoveries,” he said.
Meanwhile, on its foreign operations, Teh said Public Bank’s overseas operations have remained an important revenue source.
“For the first nine months of 2019, the Group’s total profits from its overseas business recorded a growth of 14.4%, mainly contributed by the growing profits from its Indo-China business, particularly Campu Bank and Public Bank Vietnam Limited,” he said.
On its prospects, Teh said the Public Bank Group will maintain a cautious stance amid the growing downside risks.
“However, this does not hinder the Group from pursuing continued business expansion. Pockets of opportunities remain for banks to explore in the growing Malaysian and regional economies.
“These include sustained demand for affordable housing and new growth opportunities arising from the advancement of digital banking,” he said.
At midday break, Public Bank was unchanged at RM19.80 for a market capitalisation of RM76.87 billion.