Public Bank is among one of the biggest success stories in Bursa Malaysia

Summary

A shareholder who had bought 1,000 Public Bank shares in 1967 (the year it was listed) and held on to them, would be holding 148,938 shares as at end-2016 valued at RM2.94mil. In 

addition, that shareholder would have received a total gross dividends of RM1.2mil.

Trading at 2.3 times book value, Public Bank is easily the most expensive financial institution in the region with rivals commanding valuations of between 0.4 times and 1.4 times.

Its return on equity at 15.6% stands above the industry average of 11.6%, while its return on assets is 1.4%.

The announcement of Teh’s departure some 17 months ahead of the real schedule underlines the strategy of the banking group in putting in place a succession plan and making it public.

Public Bank is the country’s second-most valuable bank and third largest in terms of assets known for its conservative business approach.

So far, Public Bank has earned itself the track record of being among one of the biggest success stories on the local stock exchange.

Saturday, 5 August 2017

Public Bank game changer

BY GURMEET KAUR

The expected retirement of Teh could herald a new beginning for the bank

THERE are several items which are a fixture in Public Bank Bhd.

For instance, try walking into any Public Bank branch and you will find the familiar photograph of Tan Sri Teh Hong Piow, the 87-year-old founder, framed on the wall of the banking hall.

Another fixture is the number of millionaires that the banking group has created. Every year, a segment of the annual report will be dedicated to the number of shares an early investor of Public Bank would be holding now.

In the latest annual report, it was illustrated that a shareholder who had bought 1,000 Public Bank shares in 1967 (the year it was listed) and held on to them, would be holding 148,938 shares as at end-2016 valued at RM2.94mil.

In addition, that shareholder would have received a total gross dividends of RM1.2mil.

That is the winning tagline that has endeared the bank and its founder to both shareholders and staff.

Teh is no ordinary head of a financial institution. He is the face of Public Bank and is credited with building the bank to what it is now. The bank’s asset size and branch network belies the value the market attaches to it.

Trading at 2.3 times book value, Public Bank is easily the most expensive financial institution in the region with rivals commanding valuations of between 0.4 times and 1.4 times.

The valuation is largely due to the returns that the bank has given to shareholders consistently.

Its return on equity at 15.6% stands above the industry average of 11.6%, while its return on assets is 1.4%.

When Teh announced last week that he would be taking a backseat in January 2019, it hardly created any ripples because his departure has been speculated about in the last three years.

The tycoon will retire as chairman come that year, but will not be totally out of the picture.

He will remain as the bank’s adviser and assume the title of “chairman emeritus” in recognition of his contributions to the bank he founded at the age of 35 in 1965.

The announcement of Teh’s departure some 17 months ahead of the real schedule underlines the strategy of the banking group in putting in place a succession plan and making it public.

Overhang due to Teh’s shareholding

Despite the group’s constant assurance of a smooth transition should Teh leave one day, a Public Bank without the patriarch is a scenario that nobody can dare predict with certainty.

It is only to be expected.

None of Teh’s children are with the bank. And his 24% stake, valued at RM19.24bil, makes it an elusive takeover target.

Based on Public Bank’s expensive valuation, it is hard to find a buyer for his block of shares.

It is not only the valuation that would limit buyers.

Any party wanting to buy that block would need Bank Negara’s approval.

So, there are limited buyers.

Under banking regulations, individuals are not allowed to own more than a 5% stake each in a financial institution and in the event it happens, they are to get approval from the central bank.

In the case that happens, they are required to get approval from the central bank.

Currently, there is an unwritten “grandfather rule” that applies to Teh and two others bankers, namely, Tan Sri Azman Hashim of AMMB Holdings Bhd and Tan Sri Quek Leng Chan of Hong Leong Financial Group Bhd.

These individuals are allowed to hold their current stakes in a bank, as their personal stakes in the respective banks were acquired before the Banking and Financial Institution Act 1989 or Bafia – the Financial Services Act 2013’s predecessor – was implemented in 1989.

Azman’s AMMB is currently in merger talks with RHB Bank Bhd and if he stays as a shareholder in the enlarged group, his stake would be diluted to less than 6% from 13% now.

If that’s the case, it would leave Teh and Quek as the first-generation bankers with more than 5% in their respective financial institutions.

According to banking sources, the question of Teh putting his block of shares in a trust is also remote because any movement of more than 5% would need Bank Negara’s approval.

Banks are different compared with other large companies where their substantial shareholders can put their wealth in a trust.

“Banking is a highly regulated industry and any movement of shares of 5% would need regulatory approval,” says a corporate lawyer.

He says the “grandfather rule” exemption would likely stop with these founder bankers and cannot be passed on to their children.

Going forward, institutionalising banks’ shareholding is inevitable. And it applies more in the case of Public Bank because of the concentration in the shareholding with Teh.

Till now, the octogenarian has shown no inclination to part with his block of shares, and the prerogative to do so is entirely his.

One way to go around this, say some, is to break up the block to less than 5% each as what happened in Alliance Financial Group Bhd (AFG) last year.

In that case, Langkah Bahagia Sdn Bhd’s effective 14.8% interest in AFG’s, held through Vertical Theme Sdn Bhd (AFG’s single largest shareholder), was sold to three individuals. Essentially, the emergence of these individuals as owners of the 14.8% stake in AFG circumvented Bank Negara’s ruling and allowed the deal to be done without the regulator’s approval.

Besides Public Bank, Teh also controls about 44% in insurer LPI Capital Bhd where he is chairman.

Business as usual for now

Monday’s announcement hardly ruffled investor sentiment, albeit for a knee-jerk 26-sen fall in share price. Its shares have since rebounded to close at an all-time high of RM20.76 yesterday, giving it a market capitalisation of RM80.16bil.

For now, it appears to be business as usual for the country’s second-most valuable bank and third largest in terms of assets known for its conservative business approach.

Strong and stable: Earnings-wise, the bank can boast of over five decades of unbroken profitability, even during the height of the 1997/98 Asian Financial Crisis that saw many companies going belly up.

While Teh is a central figure where Public Bank is concerned, the running of the bank has been left largely to professional managers, led by the banker’s most trusted lieutenant, Tan Sri Tay Ah Lek, who has been managing director and chief executive officer (CEO) since 2002.

“You can say the bank is on auto-pilot mode ... it has the process in place with the day-to-day undertakings residing in the hands of professional managers,” quips a banking executive.

Still, there is a perception that there appears to be too much dependence on the old guards.

Also, is Public Bank changing the way it runs to cope with future challenges in the financial sector? With the growing challenges in the banking landscape due to disruptive technology, will it be able to move fast enough?

So far, Public Bank has earned itself the track record of being among one of the biggest success stories on the local stock exchange.

The numbers speak for themselves.

Public Bank’s strong franchise among the smaller businesses with its network of branches has allowed it to capture a large size of the retail and small and medium-sized loan market segment that accounted for a large portion of its total loans as at financial year 2016 (FY16).

Earnings-wise, the bank can boast of over five decades of unbroken profitability, even during the height of the 1997/98 Asian Financial Crisis that saw many companies going belly up.

For FY16 ended Dec 31, it made a record RM5.2bil in net profit, while in the first half of FY17, net profits already rolled in at RM2.58bil.

The bank’s stability in asset quality is a major appeal, not forgetting the attractive dividend payouts it dishes out.

Its cost-to-income ratio – a measure of how efficiently a bank is run – at 32.3% is amongst the lowest as opposed to its peers.

While shareholders of the bank have nothing to complain about, Public Bank is seen as lagging behind in facing the future challenges of the financial landscape.

New players are coming in and operating at a cheaper cost compared to traditional banks.

For the longest time, the financial sector was seen as being insulated from disruptive technologies.However, fintech service providers such as Peer-2-Peer operators are ready to take away market share from banks.

“Is Public Bank ready for the challenging banking landscape post the Teh era?” asks a banker.

“It is very much reliant on the traditional lending business. It does not have much wholesale and corporate loans.

“The rates it gives for deposits are not competitive. When corporates look at financial institutions to place their deposits, Public Bank is not usually on their list,” says the banker.

Seasoned team of bankers

While the banking group has some young faces in its management team, some reckon that there is still a big gap in terms of getting new blood in the top echelon.

Based on the group’s information on its website, the average age of its board members is 72.

Its oldest board member is Teh himself, followed by the bank’s deputy chairman Datuk Seri Lee Kong Lam, who is 75.

Tay, meanwhile, is 74 years old, followed by directors Lai Wan, 73, and Tang Wing Chew, 72.

The directors below the age of 70 are its female representatives, namely Lai Wai Keen and Cheah Kim Ling.

Bankers say the most obvious successor to the chairman’s role is Tay.

Having been a pioneer staff of the group, Tay is in tune with Teh’s vision, they say. The bank’s deputy CEO is Datuk Chang Kat Kiam.

Recall that 62-year-old Chang was appointed as deputy CEO early last year, following the departure of accountant Quah Poh Keat.

Quah was seen as a successor to Tay but opted for early retirement in January 2016 three years after his appointment as deputy CEO.

Chang is seen as one of the bankers in the mould of Teh and Tay. A seasoned banker, he has been with the banking group since 1975.

Beyond Chang, the line of succession in Public Bank is not so visible.

New and young blood could provide the impetus to take the bank to the next level, reckon some.

Whatever the case, a scenario without Teh in Public Bank will certainly be a game changer for the bank.

Read more at http://www.thestar.com.my/business/business-news/2017/08/05/public-bank-game-changer/#L0mQIqzUDOdT0W2r.99

Public Bank Berhad

Saturday, 5 August 2017

From conservative to fastest growing bank

BY JAGDEV SINGH SIDHU

THEIR story is one that is long and rich in history. Chinese entrepreneurs have been instrumental in setting up the foundation of the banking industry in Malaysia, which has blossomed during the boom times and withstood many recessions.

With a steady pace of growth and a unique style of doing business, which is said to lean on conservatism, Chinese banks grew at a steady pace that saw them snare a chunk of the Malaysian financial market. The going was good until the Asian Financial Crisis.

Steeped in lending to small and medium enterprises, the number of Chinese-owned banks shrank after the crisis during the consolidation of the banking system by the government.

There was an unwritten policy that there should be two Chinese-owned banks in Malaysia, and the structure of the consolidation kept to that thinking. Public Bank Bhd and Hong Leong Bank Bhd (HLB), which is the metamorphosis of the oldest bank in Malaysia, are the two that have survived till today. Helmed by Tan Sri Teh Hong Piow and Tan Sri Quek Leng Chan, respectively, Public Bank and HLB were consolidated with other Chinese-owned banks. Public Bank was paired with Hock Hua Bank Bhd, while HLB merged with Wah Tat Bank Bhd. Malayan Banking Bhd (Maybank), meanwhile, swallowed Pacific Bank Bhd and PhileoAllied Bank (M) Bhd.

While not all Chinese banks were run at the same level of efficiency prior and during the Asian Financial Crisis, those that did exemplify a level of prudence stood the best chance of gaining market share during such a tumultuous time.

And that bank was Public Bank. Prior to the Asian Financial Crisis, Public Bank was a conservative bank. While others fed the appetite for credit by stretching their balance sheets in search of profit, Public Bank took a very conservative stance.

“Its loan-to-deposit ratio before 1998 was at around 60%, which was very low at that time,” recalls a banking analyst. That unadventurous approach saw the bank’s shares almost plateau at a low, which long-time market watchers say hovered between RM2 and RM3 a share when others were soaring.

But when the crisis struck, Public Bank was the one bank that had the ability and means to lend when everyone was clamping up while trying to stave off a flood of bad loans that were threatening the survival of a number of banks.

It was during that time, and some might say after a tongue-lashing by the Prime Minister back then, that Public Bank laid the foundations for the bank it is today.

It started to lend aggressively and saw huge growth in loans in the ensuing years after the Asian Financial Crisis. From a conservative bank, Public Bank became the country’s fast-growing bank for years after the crisis.

From a loan base of RM19.7bil in 1998, it grew to RM66.8bil by 2005. Its return on equity in that year too crossed 20% after being in the mid-teen levels before. By last year, its gross loans had hit RM294bil.

A huge loan growth kept non-performing loans in check and profits soaring. Public Bank’s big advantage in cheap saving and current account deposits offered it the ability to price its loans competitively.

Furthermore, it was its link to local industries and businesses that helped it to not only snare new customers, but also reap the rewards of an organisational structure that no other bank has managed to replicate.

While most of the modern institutionalised banks today have centralised back-room operations, Public Bank’s method of relying on branch managers to drive its business is unique.

“It has a simplified and clearly defined goals and reward system,” says an analyst on how Public Bank manages to run its business through its branch network.

While some might say that has been the way of Public Bank, others might point to the fact that Public Bank is not just a Chinese-run bank but an owner-run bank.

“In some ways, the business has been institutionalised, but he (Teh) has been instrumental in setting the tone,” he says.

But some of the risks associated with Public Bank are that its exco board is old, with an average age of more than 70, and its IT infrastructure could do with an expensive upgrade.

The allure of Chinese-owned banks for banking groups in Malaysia is the valuable franchise that they have. Should Public Bank or even HLB end up for sale or a merger, the chance is that many would look at them seriously. The one problem is that it will be expensive, as Public Bank’s price-to-book ratio is 2.3 times, while Maybank, the country’s largest bank, is trading at 1.4 times.

CIMB Group Holdings Bhd chairman Datuk Seri Nazir Razak did say that one of the reasons the group wanted to acquire Southern Bank Bhd, another of the Chinese-run banks that survived the consolidation phase, was for its Chinese customers.

He praises the way Public Bank is managed.

“Public Bank has had a fantastic track record through all sorts of operating conditions built on its organisation culture, which enabled a high degree of quick and decentralised decision-making for small businesses that most institutionalised banks found hard to challenge,” he says.

“It is amazing that it could do it at its scale, but I am not sure how much more scalable it can be.”

Read more at http://www.thestar.com.my/business/business-news/2017/08/05/from-conservative-to-fastest-growing-bank/#FSIcwL12jU4sD4XC.99

Mergers and Acquisitions: Which banks are next?

Saturday, 10 June 2017

BY YVONNE TANandGURMEET KAUR

After the RHB-AMMB proposed merger, talk of more M&As in the sector has resurfaced

WITH the ongoing merger talks between RHB Bank Bhd and AMMB Holdings Bhd, coupled with Bank Negara’s push for the institutionalisation of banks, the question of which banks will be the next merger and acquisitions (M&A) candidates has resurfaced.

Going by their size as the smallest banks in the country, could Alliance Bank Malaysia Bhd and Affin Bank Bhd be next?

This is the question that is making the rounds in banking circles.

According to banking analysts, there is a possibility of Alliance merging with Affin as they are very small banks.

“They will eventually feel the pressure to merge, given the market forces,” says one analyst.

Also, Affin is controlled by the Armed Forces Fund Board (LTAT), which is known to want to cast its net wider in the banking field.

“Additionally, Affin’s recent financial results demonstrate that its transformation plan is working out, while Alliance is a well-managed outfit and is doing well in its niche segment of small and medium enterprises. It makes sense for both entities to merge,” he adds.

However, recall, three years ago, Affin’s parent Affin Holdings Bhd had acquired Hwang-DBS Investment Bhd for RM1.36bil, edging out AMMB Holdings from the deal.

While the acquisition has given Affin a platform to carve its own niche with a stronger market presence in investment banking, some reckon that the return on the investment is still at the low end.

Then, there is the factor of Bank of East Asia Ltd (BEA), which is Affin’s second-largest shareholder with a 23.5% block.

image: http://www.thestar.com.my/business/business-news/2017/06/10/which-banks-are-next/~/media/26a0e83e176048c7b2fc9ddedab03cf2.ashx?h=305&w=500

 

Any M&A involving Affin would have to get the nod from the Hong Kong-listed BEA, where tycoon Tan Sri Quek Leng Chan has a strategic 14% stake.

In Alliance’s case, there were some changes in the shareholding structure of Alliance Financial Group Bhd (AFG)last year – the bank’s parent company – which suggested that there could be M&A-related developments for the bank.

Recall that last year, three individuals – financial corporate adviser Seow Lun Hoo, Singapore property tycoon Ong Beng Seng and one Ong Tiong Sin, who owns Singapore-based private equity firm RRJ Capital, had bought into Langkah Bahagia Sdn Bhd from Lutfiah Ismail, an associate of former finance minister Tun Daim Zainuddin.

The trio purchased the entire equity interest in Langkah Bahagia, which previously owned a 51% stake in Vertical Theme Sdn Bhd, the single largest shareholder in AFG with a 29.5% stake.

The remaining 49% stake in Vertical Theme is controlled by Duxton Investments Pte Ltd, which, in turn, is owned by Temasek Holdings Pte Ltd, Singapore’s sovereign wealth fund.

Via Vertical Theme, Temasek effectively has a 14.2% indirect stake in the financial group and thought to have management control of AFG.

It is to be noted that yesterday, Bank Negara approved AFG’s earlier proposed reorganisation, which included Alliance Bank taking over the listing status of AFG.

Meanwhile, industry observers reckon that the three individuals, who are well-known in corporate circles, are parties friendly to Temasek.

Beng Seng, who owns the Four Seasons and Hilton hotels in Singapore had previously joined hands with Temasek to buy up properties in London.

Nevertheless, owning stakes in banks has become all the more challenging, given that financial institutions are making frequent capital calls to boost their capital needs in order to meet international regulatory standards.

image: http://www.thestar.com.my/business/business-news/2017/06/10/which-banks-are-next/~/media/3227d904947e49678e6af34ad66a8a56.ashx?h=516&w=500

 

Capital-raising exercises are always an issue, especially for individuals. In this respect, the view is that because three individuals hold strategic stakes in AFG, it is ripe for a merger.

And a good fit could be Affin, which is small but has a strong institutional shareholder in LTAT.

“Whether this pans out is left to be seen. Because of the RHB-AMMB merger, all possible match-ups are coming up again,” says an investment banker.

There are eight local banking groups in Malaysia, namely, Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, Public Bank Bhd, Hong Leong Bank Bhd (HLB), RHB Bank Bhd, AmBank Group, Affin Holdings and Alliance Bank Bhd.

Of the groups, Maybank, thanks to its strong capital levels due to its recent dividend reinvestment plan, has the financial war chest to initiate an M&A.

Public Bank and HLB remain the only two that have yet to court or be courted in recent times. In the case of Public Bank, its high valuations make it difficult for it to be swallowed up. Based on its last traded price of RM20.38 per share, Public Bank is trading at a massive 2.29 times price-to-book.

“It’s going to be difficult for any one bank to swallow Public Bank at its current valuations. One scenario could be to break down the units within the bank just like what happened between Affin and Hwang-DBS and sell these one by one.”

However, given its financial strength, Public Bank is likely to be the predator rather than the prey.

As for HLB, it last courted and bought EON Bank for RM5.1bil in 2010 after a long shareholder battle, valuing the deal at 1.4 times price-to-book.

Move to institutionalise

It is no secret that Bank Negara, especially in recent years, has sought to limit the ownership of individuals in local banks.

“As banks become bigger, there would be greater demand for capital that may not be met by individual owners... institutionalising the shareholdings of banks is seen as the right way to go, as is the case of mature markets like Singapore and Hong Kong,” says a banker.

Under Bank Negara’s Securities Industry (Reporting of Substantial Shareholding) Regulation 1998, individuals are not allowed to own more than a 10% stake each in a financial institution.In the case that happens, they are required to get approval from the central bank.

However, there is an exception or what is termed as the “grandfather rule” in the banking sector.

This is the unwritten rule that was first applied to the three seasoned bankers of Malaysia – Tan Sri Azman Hashim of AMMB Holdings, Quek of Hong Leong Financial Group Bhd and Public Bank’s Tan Sri Teh Hong Piow.

The individuals are allowed to hold more than a 10% stake in a bank, as their personal stakes in the respective banks were acquired before the Banking and Financial Institution Act 1989 or Bafia – the Financial Services Act 2013’s predecessor – was implemented in 1989.

In the case of the RHB-AMMB merger, if it materialises, analysts believe that Azman’s current 12.97% stake in AMMB will be diluted to about 6% in the enlarged entity, assuming he stays on as a shareholder.

Meanwhile, in terms of domestic institutions owning stakes in local banks, the Employees Provident Fund currently has a large stake of 40.7% in RHB Bank and is a substantial shareholder in all the other banks in Malaysia.

Permodalan Nasional Bhd, the country’s largest fund manager, is a controlling shareholder in Maybank with 48%, while LTAT owns a 35.4% direct stake in Affin Holdings.

Notably, Affin Holdings is working on a restructuring plan to transfer its listing status to Affin Bank.

In terms of the Islamic banks, pilgrim fund Lembaga Tabung Haji controls 52.5% of BIMB Holdings Bhd, which owns Bank Islam (M) Bhd.

Other government-linked investment funds, including the Retirement Fund Inc or KWAP, also have a presence in local banks.

Valuation issues

It is unlikely that banking mergers will take place at historical valuations of the past.

In a recent note to clients, CIMB Research says it believes that the price-to-book value for future banking M&As will be significantly lower than the historical average, given the decline in banks’ return on equity ratios arising from higher capital requirements under new financial regulations and thinning net interest margins.

Under the RHB-AMMB merger, RHB has proposed an all-share deal in order to acquire the assets and liabilities of AMMB at a potential pricing based on AMMB’s book value of one time. Gone are the days when banking transactions were done at a book value of more than three times.

The norm is probably closer to 1.4 times book value now. A year ago, most financial institutions here were trading at less than their book values.

Elsewhere in Europe, banks are still trading at less than book values, making Asean banks, which have seen their share prices rise this year, unattractive in terms of valuations.

As Europe’s economy is recovering, it is unlikely that foreigners would fork out hefty premiums for a stake in a bank that is based in the Asean region and which valuations are relatively higher when they can do the same for less in Europe.

Taking this into consideration, the only mergers in the local banking scene, going forward, are likely to be between domestic players. And that is what the central bank would like to see.

The question now is how long will the market have to wait before another merger comes into play. That could reignite an M&A theme in the banking industry – something that the local stock market can very well do with.

Read more at http://www.thestar.com.my/business/business-news/2017/06/10/which-banks-are-next/#RmmWIhuqLMxKcqoD.99

Public Bank advances to new all-time high again

Friday October 11, 2013
Public Bank advances to new all-time high again


KUALA LUMPUR: Shares of Public Bank Bhd rose to an all-time high in early Friday trade, helping to underpin the FBM KLCI’s advance as investors remained upbeat about the prospects for the banking group.

At 9.48am, Public Bank was up 12 sen to RM18.20 with 205,700 shares done while its foreign shares rose 14 sen to RM18.20 with 77,600 shares traded.

The KLCI rose 9.91 points to 1,785.83. Turnover was 484.44 million shares done valued at RM245.56mil. There were 317 gainers, 111 losers and 212 counters unchanged.

StarBiz reported Public Bank looked to have settled one aspect of its succession planning when it recently appointed Quah Poh Keat as deputy chief executive officer II.

The appointment of Quah, a former independent director of the bank, suggests he could be a leading candidate to succeed managing director and chief executive officer Tan Sri Tay Ah Lek when he retires.

StarBiz also reported that the recent price gains were linked to rumours that may include the prospect of allowing Chinese banks to acquire stakes in Malaysian banks.

Public Bank - Malaysia's strongest bank in 2012

Public Bank has leapfrogged both CIMB Group Holdings Bhd and Malayan Banking Bhd to the top spot in 2012 as Malaysia’s strongest bank, according to the Asian Banker 500 2012 (AB500) report.

“This was largely due to the cost and risk management as a result of the conservative approach of the bank,” the report said.

Further, the report also said that the Asia Pacific banking sector is expected to remain resilient as economies in the region continue to expand in 2011 albeit at a slower pace than last year.

Singapore-based financial services community strategic business intelligence provider Asian Banker said the Asia-Pacific regional banks saw a significant acceleration in asset growth in 2011 while the largest 500 banks from the US and the European Union did not grow as fast.

“If the momentum holds, Asia-Pacific regional banks are likely to overtake their Western peers by 2014.

“This is primarily due to a combination of resilient economic performance of the region’s economies, increasing private wealth and growth in the number of Asian highnet- worth individuals and continual retrenchment of some Western banks from Asia and growing regional expansion by Asia-based banks,” it said in a statement.

Asian Banker said key performance indicators of the banking sector in the Asia-Pacific region such as assets, loans, deposits and net profit grew over 15% last year.

“In particular, net profit growth remains staggering at 43% to US$315.9 billion (RM958.3 billion) albeit slower than 2010’s growth rate of 53%,” it said.

Asian Banker said 2011 has been a good year for banks in Malaysia, achieving weighted average asset growth of 21.7% year-on-year (YoY) which was among the top in the Asia-Pacific region.

“The growth was mainly fostered by the strong and resilient gross domestic product growth of the Malaysian economy and Islamic banking growth of 5.1% YoY and 33% YoY in 2011 respectively as Malaysian banks embark on a regional expansion strategy in an attempt to increase their regional presence and to diversify their geographical revenue sources,” it said.

Asia-Pacific regional banks have been shoring up their capital positions as implementation of the new Basel III requirements draws near, it said. “Asset-weighted average Tier 1 and total capital adequacy ratio (CAR) grew much stronger to 14% and 16.5% in 2011 from 9.1% and 12.3% in 2010 respectively.

“For this iteration, Singapore and Philippine banks rank among the highest for Tier 1 and total CAR respectively,” it said. Asian Banker said lack of sovereign debts deter Asia-Pacific regional banks’ compliance to Basel III liquidity requirements.

“Although banks are able to withstand long-term stress to their operations as reflected in their strong capital positions, short-term risks such as liquidity continue to be one of the top issues for Asia-Pacific regional banks,” it said.

AB500 research manager Doron Foo said some regional banks in countries such as Australia, Singapore and Hong Kong are still unable to satisfy Basel III liquidity requirements due to the lack of sovereign debt in their domestic countries.

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Public Bank ranked as strongest bank in M’sia

Thursday, 18 October 2012 16:22 Farah Adilla

Public Bank has leapfrogged both CIMB Group Holdings Bhd and Malayan Banking Bhd to the top spot in 2012 as Malaysia’s strongest bank, according to the Asian Banker 500 2012 (AB500) report.

“This was largely due to the cost and risk management as a result of the conservative approach of the bank,” the report said.

Further, the report also said that the Asia Pacific banking sector is expected to remain resilient as economies in the region continue to expand in 2011 albeit at a slower pace than last year.

Singapore-based financial services community strategic business intelligence provider Asian Banker said the Asia-Pacific regional banks saw a significant acceleration in asset growth in 2011 while the largest 500 banks from the US and the European Union did not grow as fast.

“If the momentum holds, Asia-Pacific regional banks are likely to overtake their Western peers by 2014.

“This is primarily due to a combination of resilient economic performance of the region’s economies, increasing private wealth and growth in the number of Asian high net- worth individuals and continual retrenchment of some Western banks from Asia and growing regional expansion by Asia-based banks,” it said in a statement.

Asian Banker said key performance indicators of the banking sector in the Asia-Pacific region such as assets, loans, deposits and net profit grew over 15% last year.

“In particular, net profit growth remains staggering at 43% to US$315.9 billion (RM958.3 billion) albeit slower than 2010’s growth rate of 53%,” it said.

Asian Banker said 2011 has been a good year for banks in Malaysia, achieving weighted average asset growth of 21.7% year-on-year (YoY) which was among the top in the Asia-Pacific region.

“The growth was mainly fostered by the strong and resilient gross domestic product growth of the Malaysian economy and Islamic banking growth of 5.1% YoY and 33% YoY in 2011 respectively as Malaysian banks embark on a regional expansion strategy in an attempt to increase their regional presence and to diversify their geographical revenue sources,” it said.

Asia-Pacific regional banks have been shoring up their capital positions as implementation of the new Basel III requirements draws near, it said. “Asset-weighted average Tier 1 and total capital adequacy ratio (CAR) grew much stronger to 14% and 16.5% in 2011 from 9.1% and 12.3% in 2010 respectively.

“For this iteration, Singapore and Philippine banks rank among the highest for Tier 1 and total CAR respectively,” it said. Asian Banker said lack of sovereign debts deter Asia-Pacific regional banks’ compliance to Basel III liquidity requirements.

“Although banks are able to withstand long-term stress to their operations as reflected in their strong capital positions, short-term risks such as liquidity continue to be one of the top issues for Asia-Pacific regional banks,” it said.

AB500 research manager Doron Foo said some regional banks in countries such as Australia, Singapore and Hong Kong are still unable to satisfy Basel III liquidity requirements due to the lack of sovereign debt in their domestic countries.

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Maybank IB keeps 'buy' on Public Bank on 'solid fundamentals'

Maybank IB keeps 'buy' on Public Bank on 'solid fundamentals'

Written by Ho Ching-Ling
Friday, 19 October 2012 11:48

KUALA LUMPUR (Oct 19): Maybank Investment Bank (IB) has maintained its “buy” call for PUBLIC BANK BHD [] and raised its target price by 70 sen to RM16.70 based on the group’s stable growth and
solid fundamentals.

Public Bank's net profit for the third quarter ended Sept 30, 2012 rose to RM983.29 million versus RM931.95 million a year ago.

Revenue for the quarter rose to RM3.58 billion from RM3.27 billion a year earlier. Earnings per share was 28.08 sen while net asset per share was RM4.83.

In a research report on Friday, Maybank IB said Public Bank continues to perform within guidance with a domestic loan growth of 13% in line with management’s 12% to 13% target for the year.

“At the heart of the loan growth domestically is residential and commercial property lending, which rose at an annualised rate of 17% and 22% respectively. Hire purchase growth trailed at 9%,” it said.

According to Maybank IB, the banking group still maintains a dominant position with market shares of 18.8%, 33.4% and 26.3% in residential property, commercial property and passenger vehicle financing
respectively.

However, the research house highlighted that the group’s overall loan growth lagged at 11%, mainly due to a contraction in its Hong Kong loan book.

“Competition remains stiff for Public Bank (Hong Kong), which has 32 branches in Hong Kong, three in China and is involved primarily in commercial loan disbursements, as well as Public Finance (42 branches), which mainly provides personal financing to maids,” said Maybank IB.

Having said that, Maybank IB does not expect a large earnings impact from Public Bank’s Hong Kong operations since its overseas operations only accounts for just 6% of its profit before tax.


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