April 20, 2017 8:35 pm JST

Public Bank's first quarter net profit rises 1.6%, seeks to raise fee income

KUALA LUMPUR (NewsRise) - Public Bank, Malaysia's third-largest bank by assets, said Thursday its net profit grew 1.6% in the first quarter from a year earlier thanks to higher net interest income and better Islamic banking business.

Net profit for the three months ended March 31 totalled 1.25 billion ringgit ($284.03 million) edging higher from 1.23 billion ringgit in the same period last year, Public Bank said in an exchange filing. Quarterly net interest income rose 8.3% year-on-year to 1.82 billion ringgit, while net fee income was 6.7% higher at 407.15 million ringgit.

"The group remains committed to pursue its strategy of organic growth in its retail banking," Public Bank said. "The group will also capitalize on opportunities in its overseas operations to further enhance its business."

Public Bank is seeking to raise non-interest income such as fees and commissions this year as loan growth decelerates amid intensifying competition. The company is targeting a lower return-on-equity of between 14% and 15% in 2017 compared to 2016's 16.5% amid higher capital requirements.

Return-on-equity of lenders have been under pressure in Malaysia where more than two dozen local and foreign banks jostle for business in a market of about 30 million people. That has pressured margins as the industry compete aggressively, offering higher returns on deposits and lower interest on loans.

"The group will continue to reinforce its efforts to drive non-interest revenue as a key strategy to generate higher income in sustaining return on equity," said Public Bank Chairman Teh Hong Piow. Net return on equity stood at 14.9% in the latest quarter.

Still, analysts said Public Bank's latest results came largely in line with market expectation with key operating indicators remaining robust despite headwinds in the third-largest Southeast Asian economy.

"Their loan growth is ahead of the industry, asset quality is holding up well, and fee income was up," said UOB Kay Hian's analyst Keith Wee. However, operating cost is climbing and "this is something they need to work on," Wee added.

Public Bank's cost-to-income ratio has risen to 34.3% in the first quarter of 2017 from 32.3% in 2016. Gross loans grew 7.0% year-on-year in the first quarter, while total deposits increased 3.1% from a year earlier.

In terms of asset quality, gross impaired loans ratio stood at 0.5% while loan loss coverage ratio was 104.0% at the end of March.

"Various headwinds facing the economy will continue to place downside pressure to banks' operation," said Public Bank's Teh. "The group will continue to take proactive efforts to ensure it remains on the trajectory towards meeting its 2017 growth targets."

Shares of Public Bank were unchanged at 19.92 ringgit apiece on Thursday while the benchmark FTSE Bursa Malaysia KLCI ended 0.2% higher.

--Jason Ng

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.
Asia300

Public Bank Bhd.

Malaysia

Market(Ticker): KLS(1295)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 18,439.74M
Shares: 3,882.13M

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