Public Bank's 4Q net profit down 5.4% on higher expenses, forex loss

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KUALA LUMPUR (Feb 20): Public Bank's net profit fell 5.4% in the fourth quarter ended Dec 31, 2018 (4QFY18), despite a corresponding rise in revenue, as the group incurred higher other operating expenses and higher non-operational foreign exchange loss during the period.

The previous corresponding quarter had also recognised certain non-recurring income, the bank said, though higher net interest income and higher income from Islamic banking business in the current quarter helped to partially offset the effects of the above-mentioned dampeners on earnings.

Its 4QFY18 net profit retreated to RM1.41 billion compared with RM1.49 billion in the corresponding quarter last year, and earnings per share slipped to 36.2 sen from 38.47 sen. Revenue came in at RM5.63 billion, versus RM5.35 billion previously.

The bank declared a second interim dividend of 37 sen a share — 3 sen higher than the 34 sen declared in the same quarter last year — to be paid on March 14. This brings its full-year payout to 69 sen a share, versus 61 sen in FY17.

For the cumulative FY18 period, net profit was up 2.2% to RM5.59 billion compared to RM5.47 billion in the previous year, as revenue climbed 6% to RM22.04 billion from RM20.86 billion.

In a separate statement, Public Bank founder and chairman emeritus, director and adviser Tan Sri Dr Teh Hong Piow said 2018 was marked by a more moderate economic growth, with increased headwinds on both the global and domestic fronts as banks were faced with a more challenging business climate.

"Against this backdrop, the Public Bank Group was able to sustain stable profitability due to its continuous efforts to drive its loans and deposits business, coupled with the group's strong asset quality and prudent cost management.

"With that, the group continued to sustain its leading position amongst domestic banks with lowest gross impaired loan ratio of 0.5% and most efficient cost-to-income ratio of 33.0%, leading to net return-on-equity ratio of 14.8% for 2018," he said.

As at the end of 2018, Public Bank kept a low gross impaired loans ratio of 0.5%, which it said is "well below" the domestic banking system's gross impaired loans ratio of 1.5%.

The group's loan loss coverage ratio also stood high at 126% as at the end of 2018, Teh said. "Including the RM1.8 billion regulatory reserves that the group had set aside, the group's loan loss coverage ratio would be 237.5%. This has provided the group a strong buffer to weather any uncertainties ahead," he added.

In 2018, loan growth grew 4.2%, contributed by consumer financing for the purchase of residential properties and passenger vehicles, as well as extension of credit to small and medium enterprises for purchase of commercial properties and working capital.

Total customer deposits grew 6.2% to RM339.2 billion in 2018. "This deposit growth contributed to the group's strong funding position, as reflected in its gross loan to fund and equity ratio of 79.0% as at the end of 2018," said Public Bank.

On overseas operations, Teh said it contributed 9.7% to the group's overall pre-tax profit, largely contributed by Public Financial Holdings Ltd Group in Hong Kong (PFHL) and Cambodian Public Bank Plc (Campu Bank).

"In addition to PFHL and Campu Bank, the group is also actively expanding its business in Vietnam. With the opening of five new branches in 2018, the group has expanded its branch network to a total of 18 branches in Vietnam as at the end of 2018, with plans to open more branches in 2019," he added.

Moving forward, Teh said the overall outlook for the domestic banking sector is likely to remain stable, underpinned by the resilience in private sector activity.

"There will be continued growth opportunities for the domestic banking industry underscored by ongoing demand for affordable housing and the growing small and medium enterprises," he added.

Public Bank shares closed six sen or 0.2% higher at RM25.06, for a market capitalisation of RM97.29 billion. Some 4.4 million shares were traded.