PETALING JAYA: Public Bank Bhd’s net profit for the first quarter ended March 31, 2020 fell 5.7% to RM1.33 billion from RM1.41 billion a year ago, on the back of lower net interest income as a result of the negative effect of the Overnight Policy Rate (OPR) reductions.
Its revenue dipped marginally by 0.9% to RM5.52 billion compared with RM5.57 billion in the first quarter last year.
As a result, the group posted a lower net return-on-equity of 12.5%.
Its founder, chairman, director and adviser Tan Sri Dr Teh Hong Piow (pix) said downside pressure on the economy, coupled with the reductions in OPR which have weighed on net interest margins, domestic banks faced heightened earnings pressure in the first quarter of 2020.
“However, the Public Bank group maintained its resilient fundamentals, as reflected in the group’s stable gross impaired loan ratio of 0.5% and efficient cost-to-income ratio of 35.7% in the first quarter of 2020,” he said in a statement today.
It recorded an annualised rate of 2.9% growth in total loans, supported by residential properties financing, commercial property financing, and passenger vehicle financing. The group’s total customer deposits posted an annualised growth rate of 2.0%.
Its non-interest income continued to be supported by its unit trust related income, banking fee income, investment income and brokerage income. The group’s unit trust business, managed by its wholly-owned subsidiary Public Mutual, remained the major contributor of the group’s non-interest income.
Despite pressure in net interest margins, its cost-to-income ratio stood at 35.7%, significantly better than the domestic banking industry’s cost-to-income ratio of 44.7%.
“With the current economic challenges and the moderating revenue growth, the group has placed greater focus on broad-based cost efficiency to protect its profitability.”
The group’s gross impaired loan ratio stood at 0.5% as at the end of March 2020, reflecting its stable asset quality underpinned by its prudent risk management as well as lending policies and practices, along with its proactive efforts to engage with borrowers on loan recoveries.
Further, Public Bank has been maintaining a high loan loss coverage ratio which stood at 131.9% as at the end of March 2020. Including the RM2.0 billion regulatory reserves that the group had set aside, its loan loss coverage was higher at 261.7%.
As at the end of March 2020, its common equity Tier 1 capital ratio stood at 13.3%, Tier 1 capital ratio at 13.3% and total capital ratio at 16.5%.
“The group’s resilient capital position, as well as its strong asset quality and large loan loss reserves, continue to provide a strong buffer to the group in navigating any challenges.”
The group’s liquidity coverage ratio stood at a healthy level of 135.1% as at the end of March 2020.”
On prospects, Teh said the operating environment for the banking industry is poised to be more challenging this year. With the extremely difficult economic conditions in 2020 and the reductions in OPR, banks will face higher earnings pressure this year.
“Under the prevailing weaknesses of the current economy and the uncertainties arising from the still evolving economic landscape, Public Bank will focus on enhancing its core strengths in terms of risk management and productivity. The group’s strong fundamental and resilience will position the group in good stead to overcome any challenges, and to pursue further business growth when the economy recovers from the outbreak.”