Group Audited Financial Results for the Year Ended 31 December 2008 Analysts Briefing By Tan Sri Dato Sri Tay Ah Lek Managing Director 20 January 2009
22% Growth in Net Profit to RM2.58 billion RM million 3,500 3,379.2 Sen 80 3,000 3,003.6 76.9 70 2,500 2,416.4 63.3 2,581.2 60 52.1 2,123.9 50 2,000 1,726.7 40 1,500 2006 2007 2008 30 PBT PAT EPS 2
Quarterly Net Profit 800 600 400 RM million 476 717 200 517 524 594 544 616 580 654 200 0 07 08 07 08 07 08 07 08 Mar Jun Sep Dec ING Goodwill 3
Market Capitalisation Ranking Banks Market Capitalisation (RM bil) Share Price (RM) @ 31 Dec 08 1 PBB 31.2 8.85 2 MBB 24.9 5.10 3 CIMB 20.9 5.85 4 RHB 8.4 3.90 5 HLB 8.1 5.10 6 AMMB 6.7 2.47 4
Financial Performance Net profit up 22% to RM2.58b 4Q08 RM mil 3Q08 RM mil % q-o-q 2008 RM mil 2007 RM mil % y-o-y Net Income 1,117.3 1,100.9 1 4,285.7 3,721.8 15 Other Operating Income 313.2 269.2 16 1,453.5 1,389.5 5 Other Operating Expenses 468.2 460.6 2 1,791.1 1,693.7 6 Operating Profit 962.3 909.5 6 3,948.2 3,417.6 16 Loan Loss Allowances 150.2 106.9 41 548.6 407.2 35 -of which General allowances 38.6 50.8 (24) 232.1 210.3 10 Pre-Tax Profit 812.9 804.0 1 3,379.2 3,003.6 13 Net Profit 654.0 616.3 6 2,581.2 2,123.9 22 EPS (sen) 19.5 18.4 6 76.9 63.3 21 5
Key Financial Ratios Net ROE 30.4% 2008 2007 4Q08 3Q08 Net Return on Equity* (%) 30.4 26.3 28.9 27.7 Return on Assets (%) 1.8 1.9 1.7 1.7 Cost Income Ratio (%) 31.2 33.1 32.7 33.6 Overheads / Avg. Assets (%) 1.0 1.1 1.0 1.0 Net Interest Margin on Yielding Assets** (%) 3.2 3.2 3.2 3.2 * Based on average equity after deducting proposed dividend ** Excluding Negotiable Instrument of Deposits and Money Market Deposits which are on-lent to interbank. 6
Net Interest Margin 4 % 3.4 3.2 3.2 3 2.6 2.5 2.5 2 1 0 2006 2007 2008 Net Int Margin (Exclude funds from MMD and NIDS Issued) Net Int Margin Net interest income and financing income grew by RM570.8 m or 15% due to : steady loan growth (19% for the year) steady deposit growth (17 % for the year) continued improvement in asset quality Net interest margin will continue to be under pressure 7
Sustaining Growth of Net Interest and Financing Income RM million 1,150 1,099.0 1,116.5 1,050 950 866.5 850 901.2 4.0% 948.5 5.2% 992.3 4.6% 1,016.5 2.4% 1,047.4 3.0% 1.6% 4.9% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 8
Continued Improvement in Productivity & Efficiency 2004 2005 2006 2007 2008 Gross Loan per Employee (RM mil) 4.5 5.3 6.3 7.1 7.5 Deposit per Employee (RM mil) 5.7 6.6 8.3 9.7 10.0 PBT per Employee (RM 000) 149 161 180 210 209 % RM '000 40 300.0 35 149 161 180 210 209 200.0 30 100.0 25 35.3 33.8 32.7 33.1 31.2 2004 2005 2006 2007 2008 0.0 Cost income ratio PBT per employee 9
PBT of Major Group Companies (excluding dividend from subsidiaries) Dec 2008 RM mil Dec 2007 RM mil Variance RM mil % Public Bank & Public Islamic Bank * 2,603.0 2,343.0 260.0 11 Public Mutual 183.3 182.9 0.4 0.1 Public Investment Bank 33.3 96.4 (63.1) (65) Public Bank (L) 25.0 28.1 (3.1) (11) Overseas Operations 321.0 451.5 (130.5) (29) * The Islamic Banking business of PBB was vested to Public Islamic Bank on 1 Nov 2008. 10
PBT of Overseas Operations PBT of Overseas Operations decreased by RM130.5 million or 29% mainly due to: Additional provision made on impaired loans of the Group s Hong Kong operations, largely on loans granted prior to the acquisition of Public Bank (Hong Kong) Higher overhead expenses as a result of expansion of branch network and sales force, as well as active promotion of the PUBLIC BANK brand name in Hong Kong. RM73 million of non recurring income in respect of sales of investment and a corporate loan recovery was recognised in 2007. 11
Profit Contribution By Segments 2008 2007 Variance RM mil % RM mil % Retail Operations 2,731.2 76 2,201.5 67 24 Treasury & Capital Market Operations 291.1 8 290.7 9 # Hire Purchase 224.4 6 267.5 8 (16) Fund Management 183.3 5 182.9 6 # Corporate Lending * 96.7 3 151.9 5 (36) Investment Banking 74.9 2 166.5 5 (55) Others 15.4 # 5.7 # >100 3,617.0 100 3,266.7 100 11 General allowances (232.1) - (210.3) - Share of Results of Associates 12.5-5.4 - Head Office Expenses (18.2) - (58.2) - Profit Before Tax 3,379.2-3,003.6-13 * Decrease in profit due to additional provision made on impaired loans of the Group s Hong Kong operations and SP made on certain corporate loan accounts secured by properties exceeding 7 years whereby full provision is made with zero value assigned to collateral. 12 # Less than 0.5% %
Fund Management Business RM billion 30.0 26.3 27.6 33.5 40.0 28.39 39.0 23.32 % 40 30 20.0 10.0 0.0 16.19 12.08 13.12 9.88 7.64 2.06 3.07 4.10 2004 2005 2006 2007 2008 Gross New Sales Net Asset Value Market Share (%) 20 10 0 13
Wealth Management A) Bancassurance Product launched Type of Product Dec 08 Target 09 Single Premium 4 6 Regular Premium 4 8 Others 2 4 Total 10 18 B) Structured Deposits & Other Deposits 3 Principal Protected Investment Products launched in 2008 Launched Gold Investment Account in 2008. C) Staff Strength 2007 2008 Bancassurance Sales Executive 0 229 Personal Financial Executive (PFEs) 109 209 14
Other Operating Income Dec 2008 Dec 2007 % 4Q08 3Q08 % RM mil RM mil y-o-y RM mil RM mil q-o-q Fee Income 508.8 439.8 16 126.3 126.4 1 Unit Trust Income 396.5 485.8 (18) 75.7 97.6 (22) Of which Unit Trust Management Fee 331.6 285.3 16 69.8 83.2 (16) Fee on Sale of Trust Units 64.9 200.5 (68) 5.9 14.4 (59) Stockbroking Income 69.5 102.8 (32) 13.1 13.5 (3) Investment Income * 78.5 155.5 (50) 24.0 15.3 57 Forex /Revaluation Gain 172.2 179.5 (4) 61.6 14.7 >100 Goodwill from ING 200.0 - >100 - - - Others 28.0 26.1 7 12.5 1.7 >100 Total 1,453.5 1,389.5 5 313.2 269.2 16 * Included in the previous year ended 31 December 2007 were exceptional gain recognized on the sale of shares (including debt converted shares) amounting to RM85 million. 15
Other Operating Expenses 2008 2007 % 4Q08 3Q08 % RM mil RM mil y-o-y RM mil RM mil q-o-q Personnel Costs 1,061.7 960.6 11 300.8 273.3 10 Establishment Costs 338.4 306.4 10 81.9 90.4 (9) Marketing Expenses 223.9 278.8 (20) 39.0 58.3 (33) Administration Expenses 167.1 147.9 13 46.5 38.6 20 Total 1,791.1 1,693.7 6 468.2 460.6 2 16
Loan Loss Allowances RM million 400 1.0% 320 240 160 80 0 316.5 261.4 221.3 201.9 196.9 0.39% 0.35% 0.34% 0.29% 0.21% 2004 2005 2006 2007 2008 Credit Charge Credit Charge off % 0.8% 0.6% 0.4% 0.2% 0.0% The higher loan loss allowance in the year 2008 is mainly due to additional provision made on impaired loans of the Group s Hong Kong operations and SP made on certain corporate loan accounts secured by properties exceeding 7 years with zero value assigned to collateral. 17
Loan Loss Allowances (cont.) Credit Charge Off Ratio Loan Loss Allowances Variance 2008 2007 2008 2007 RM mil Group 0.29 0.21 316.5 196.9 119.6 Of which: domestic 0.16 0.13 162.3 113.3 49.0 (1) overseas 1.37 1.03 154.2 83.6 70.6 (2) (1) (2) The increase in domestic loan loss allowance mainly due to full provision made on certain corporate loans secured by properties exceeding 7 years with zero value assigned to collateral and also the inclusion of certain major loan recoveries in previous year. The increase in overseas loan loss allowances mainly due to additional specific provision made on certain impaired corporate loans of the Group s Hong Kong operations which were granted prior to the acquisition of Public Bank (Hong Kong), as well as the inclusion of a major corporate recovery amounting to RM25 million in 2007. 18
Loan Loss Allowances (cont.) 2008 RM mil 2007 RM mil Variance RM mil Hire Purchase 92.1 98.1 (6.0) Retail Operations 181.8 175.3 6.5 Corporate Lending 43.1 (49.7) 92.8 - of which domestic 22.0 (22.0) 44.0 overseas 21.1 (27.7) 48.8 Investment Banking (0.5) (26.8) 26.3 Total 316.5 196.9 119.6 19
Summary of Balance Sheet 2008 2007 Variance RM bil RM bil RM bil % Total Assets 196.2 174.2 22.0 13 Gross Loans and Advances: - including Islamic Financing Sold to Cagamas 120.7 101.4 19.3 19 - excluding Islamic Financing Sold to Cagamas 120.3 101.0 19.3 19 Domestic Gross Loans and Advances 106.8 90.5 16.3 18 Deposits from Customers 162.3 138.8 23.5 17 Shareholders Funds 9.5 9.3 0.2 2 Net Assets per Share (RM) 2.84 2.79 Net Loans to Deposits Ratio (%) 73.0 71.6 20
Loans Growth 2008 (%) PBB 19 Industry Average* 11 Market Share: Nov 2008-14.9% 2007-14.4% 2006-13.2% * Industry year-on-year loan growth as at 30 Nov 2008. 21
Loans Approved RM billion 50 40 39.0 41.8 30 20 10 10.9 9.6 8.4 7.0 15.0 14.4 4.7 10.8 0 Total Vehicle Housing Other Retail Corporate 'Dec 08 'Dec 07 Vehicle Financing Housing Loans Other Retail Corporate - RM1.3 billion or 14.3% increase - RM1.4 billion or 19.9% increase - RM0.6 billion or 3.0% increase - RM6.1 billion or 56.7% decrease 22
Loan by Purpose 2008 RM bil % of total loans 2007 RM bil % of total loans Growth (%) Purchase of Landed Properties 56.0 46 45.2 44 24 - Residential 32.2 26 26.7 26 21 - Non-residential 23.8 20 18.5 18 29 Purchase of Transport Vehicles 29.3 24 26.1 26 12 Working Capital 18.8 16 17.2 17 9 Personal Use 7.3 6 6.3 6 16 Others 9.3 8 6.6 7 41 120.7 100 101.4 100 19 Islamic Financing Sold to Cagamas (0.4) (0.4) 120.3 101.0 23
Fixed Rate & Floating Rate Loans 63% RM3.0b 2% RM41.7b 35% RM76.0b Fixed Rate Floating Rate Initial fixed rate, thereafter floating rate Duration : Modified duration is 1.5 years. 24
Asset Quality 3-months classification 2008 2007 Gross NPL (RM mil) 1,210 1,404 Gross NPL Ratio (%) 1.00 1.38 Net NPL Ratio (%) 0.86 1.23 New NPL Formation (%) 0.37 0.44 GP Ratio (%) 1.5 1.5 Loan Loss Coverage (%) 159.7 119.5 25
Consistently Improving Asset Quality % 1.2 1.09 Net NPL Ratio 1.0 0.93 0.87 0.86 0.8 1Q08 2Q08 3Q08 4Q08 % 2.8 2.0 1.2 0.4 2.7 2.1 1.9 1.38 2.1 1.7 1.6 1.23 1.00 0.86 2004 2005 2006 2007 2008 Gross NPL ratio(%) Net NPL ratio (%) 26
NPL Ratio for Key Lending Sectors Dec 2008 Sep 2008 Dec 2007 Gross NPL Gross NPL Gross NPL RM mil % RM mil % RM mil % Housing Loans 523 1.6 529 1.7 648 2.4 Hire Purchase 188 0.6 186 0.6 230 0.9 SMEs 222 1.1 216 1.1 250 1.3 27
Deposit Growth 2008 (%) PBB Total Deposit Core Deposit Industry Average* Total Deposit Core Deposit 16.9 17.7 9.3 4.7 Market Share: Total Deposit** Core Deposit Nov 2008-14.8% 15.2% 2007-14.8% 13.7% 2006-14.1% 12.1% * Industry annualized deposit growth is based on position as at 30 Nov 2008. ** Market share is computed inclusive of repo. 28
Total Deposits 2008 2007 Growth RM bil RM bil RM bil (%) Demand Deposits 15.8 14.0 1.8 12.5 Savings Deposits 19.0 16.9 2.1 12.4 Fixed Deposits 77.6 64.5 13.1 20.2 Money Market Deposits 33.5 24.5 NIDs 15.1 18.1 112.4 95.4 17.0 17.7 2008 2007 Average Cost of Deposits 2.41% 2.41% 6.0 14.3 Others 1.3 0.8 0.5 68.5 Total 162.3 138.8 23.5 16.9 (exclude Negotiable Instrument Deposits & Money Market Deposits Issued) 29
Overseas Operations 2008 mil 2007 mil Variance mil % Loans Growth Public Bank (HK) Ltd - (HKD) 20,124 15,464 4,660 30 Public Finance Ltd (HKD) 4,246 3,624 622 17 Cambodian Public Bank Ltd - (USD) 644 363 281 77 Deposit Growth Public Bank (HK) Ltd (HKD) 21,671 20,438 1,233 6 Public Finance Ltd (HKD) 3,755 2,532 1,223 48 Cambodian Public Bank Ltd - (USD) 373 300 73 24 30
Overseas Operations (cont.) Expansion of Branch Network Number of Branches as at May 06* Dec 07 Dec 08 Target 09 Hong Kong/China: 53 66 73 76 Public Finance - Hong Kong 40 41 42 42 PB(HK) - Hong Kong 12 23 28 31 - China 1 2 3 3 Cambodia 5 9 12 19 Laos 1 1 3 5 Vietnam 5 6 7 9 Sri Lanka 1 1 1 2 * Date of acquisition of Public Bank (Hong Kong) 31
Dividend Proposed: Cash dividend 25% less 25% tax Share dividend 1 for every 35 shares 32
Dividend (cont.) Cash Dividend: Gross (sen) 2008 Net (sen) Interim (paid in Aug 08) 30.0 22.2 Proposed: Final Proposed: 25.0 18.8 55.0 41.0 Share Dividends (1 for every 35 shares) ** 33.7 * 25.3 Total 88.7 66.3 * ** The value of the share dividend is derived based on market value of PBB local shares of RM8.85 as at 31 December 2008. The 33.7 sen is the equivalent value of a gross cash dividend. 33
Dividend (cont.) Value Enhancement from Treasury Shares: Total treasury shares held @31/12/2008 Average cost per treasury shares Average period of holding of treasury shares Value enhancement per treasury share (EPS less holding cost) Total value enhancement (approximately) 176.3 million RM7.23 3 year RM1.20 RM 200 mil 34
Dividend (cont.) Share Dividend Distribution: Part of PBB Group s prudent capital management strategy to preserve more equity capital whilst maintaining high dividend payout Resulted in RM850 million of current year s earnings being retained to add to equity capital Translate to 0.8% increase in core capital ratio and riskweighted capital ratio Total of 95.9 million treasury shares out of the existing treasury shares of 176.3 million to be distributed, leaving a balance of 80.4 million treasury shares. 35
Dividend (cont.) Inclusive of share dividend 2008 2007 Gross Dividend* (sen) 88.7 75.0 Net Dividend payout (RM million) 2.22 1.86 Dividend payout ratio (%) 86.1 87.4 Dividend yield (gross) (%) 10.0 6.8 * Deemed value of share dividend is derived based on the market value of PBB share of RM8.85 as at 31 December 2008 36
Capital Adequacy Ratio Before Proposed Dividend 2008 2007 Variance RM mil RM mil RM mil % - Equity Capital 8,157.2 7,626.6 530.6 7 - Hybrid Capital 1,439.5 1,345.9 93.6 7 Total Tier 1 Capital 9,596.7 8,972.5 624.2 7 - General Allowance 1,759.5 1,523.0 236.5 16 - Subordinated Notes 3,968.8 2,469.8 1,449.0 61 - Hybrid Capital Securities 450.6 512.4 (61.8) (12) Total Tier 2 Capital 6,178.9 4,505.2 1,673.7 37 Total Capital Base 15,774.7 13,477.7 2,297.0 17 Risk-Weighted Assets 115,281.7 99,092.4 16,189.3 16 Capital Adequacy Ratio Group Bank Before (%) After (%) Before (%) After (%) Risk-Weighted Capital Ratio 13.7 13.1 13.4 12.8 Core Capital Ratio 8.3 7.7 10.9 10.1 37
Impact of Adoption of FRS 139 and Basel II-IRB After Proposed Dividend Adjusted Capital Adequacy Ratio* Group Risk-Weighted Capital Ratio 13.1 13.9 Core Capital Ratio 7.7 10.2 Bank Risk-Weighted Capital Ratio 12.8 13.7 Core Capital Ratio 10.1 12.8 * Adjusted with the following: Impact of FRS 139 & Basel II-IRB General allowances are reclassified from Tier-2 to Tier-1 (in line with international rating agencies basis) 38
Capital Management PBB Group is closely monitoring its capital position to ensure healthy capital at all times. The Group s overall capital and core capital are expected to be further enhanced with the following: (i) (ii) (iii) (iv) Further issuance of debt capital, particularly non innovative Tier-1 capital and subordinated debt Adoption of FRS 139 with effect from 1 January 2010 Adoption of Basel II-Internal Ratings Based Approach Treasury shares available for sale or distribution 39
Prospects for Year 2009 To maintain earnings growth momentum leveraging on: continued loans growth above industry growth; to further expand depositor base; sustainable low NPL leveraging on PBB s prudent lending policy and proactive initiatives on loan recoveries & loan restructuring/rescheduling. To build on existing strengths (strong brand, market positions, capital strength and asset quality). Loan growth will continue to focus on SME, mortgage loans and HP financing. To grow other operating income, particularly on fund management, bancassurance business with ING, various other wealth management products and remittances. Further improve the productivity and operational efficiency. Continued expansion of overseas business particularly in Hong Kong & Indo-China. Continue to remain prudent and uphold its strong corporate governance and risk management policies. Continue to maintain strong liquidity at the current level. Proactive capital management to ensure healthy level of capital whilst maintaining high return to shareholders. 40
Thank you