The solid foundation upon which Public Bank Bhd built its business over the decades remained stable even when the Covid-19 pandemic struck.
Despite the tougher operating environment, the country’s third-largest bank by total assets continued to send its shareholders dividend cheques as the group saw net profit grow 3.6% over the last three years to RM5.7 billion in the financial year ended Dec 31, 2021 (FY2021), from RM5.5 billion in FY2019. It paid out a dividend per share of 14.6 sen, 13 sen and 15.2 sen in those respective years.
While there was pressure on return on equity (ROE), a measure of profitability, Public Bank still chalked up a weighted three-year ROE of 11.8% for FY2019 to FY2021 — the period considered for this year’s The Edge Billion Ringgit Club (BRC) corporate awards — the best among peers.
For a fifth consecutive year since 2018, the group’s unwavering financial performance helped it clinch the BRC award for highest ROE over three years in the financial services sector for companies with a market capitalisation of RM10 billion and above. Public Bank also came out tops on ROE in 2017 as well as between 2010 and 2013.
Public Bank did more than maintain its profitability, even though economic headwinds weighed on business performance in 2021, with modification loss arising from loan repayment assistance under the National People’s Well-Being and Economic Recovery Package (Pemulih) also affecting earnings for the year.
In 2021, the group achieved total loans growth of 3.6%, with its consumer lending segment for the purchase of residential properties growing by 8.7% and domestic SME (small and medium enterprise) loans growing by 1.7%, with total financing totalling RM67.9 billion at year’s end.
For the first six months of FY2022, its net profit stood at RM2.8 billion, marginally lower than the RM2.9 billion garnered in the corresponding period last year, on the back of a 0.9% decrease in revenue to RM9.86 billion.
Public Bank’s net profit for the second quarter ended June 30, 2022 (2QFY2022) rose 2.35% to RM1.42 billion, from RM1.38 billion posted last year.
In an Aug 30 note, MIDF Research said Public Bank’s 1HFY2022 core net profit of RM2.82 billion made up 48% of both consensus and its full-year forecasts respectively.
“However, earnings slipped by 3.4% year on year, though this was due to elevated tax expenses as a result of Cukai Makmur (Prosperity Tax), as well as weaker non-interest income (NOII). Otherwise, [the group] reported a far stronger profit before tax on the back of higher net interest income (NII) and lower loan provisions. Meanwhile, 2QFY2022’s earnings of RM1.42 billion rose 2.4% y-o-y on the back of lower loans provisioning and stronger NII, offsetting higher operating expenditure and tax expenses, as well as lower NOII. On a sequential quarter basis, it rose 1.3% q-o-q, owing mostly to improved NII,” the research house said.
It is worth noting that Public Bank’s resilient loan portfolio and reserves for loan losses provided the group with a buffer to weather potential challenges in asset quality, which had a gross impaired loans ratio of 0.3% as at end-2021 compared with the banking industry’s 1.4%. The group’s total deposits, which grew 4% during the year, was attributed to its core deposits growth.
Meanwhile, NOII continued to complement its profit growth. In 2021, Public Mutual, the group’s wholly-owned subsidiary managing its unit trust business, recorded profit growth of 22.8% and maintained its leading market position with the largest market share of 34.6% in the retail private unit trust industry.
MIDF Research, which has a “buy” call on Public Bank and a RM5.67 target price, wrote in a recent note that its optimism about the group’s long-term prospects was due to its “excellent asset quality and buffers reducing the possibility of unwelcome credit cost surprises, retail SME loan growth seeing a high jump in 2HFY2022, its unit trust segment continuing to steadily capture retail market share as well as its foray into sustainability practices setting the group up to be more attractive as a viable environmental, social and corporate governance alternative within the industry”.