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Nikkei Markets

Public Bank's third quarter net profit slips 1.5% on year

Lender aims to maintain healthy capital position, analysts expect tepid growth

Public Bank derived bulk of its profits from Malaysia, making its fortune closely-linked to the health of Southeast Asia’s third-largest economy. 

KUALA LUMPUR (Nikkei Markets) -- Public Bank, Malaysia's third-largest bank by assets, said Thursday its net profit fell 1.5% in the third quarter due to an absence of one-off disposal gain recorded in the year ago period.

Net profit for three months ended Sep. 30 totaled 1.38 billion ringgit ($330.85 million) compared with 1.40 billion ringgit in the same period last year, Public Bank said in an exchange filing. The company booked a one-off capital gain on investment of 42.9 million ringgit in the third quarter last year.

"Maintaining a healthy capital position will continue to be a strategic action for Public Bank to support business growth strategy while meeting regulatory requirement," said Chairman Teh Hong Piow. "Public Bank will reinforce balance sheet management to sustain profitability."

Shares of Public Bank recouped early losses and outperformed the broader market following the quarterly results announcement. Analysts said the results were broadly in line with market expectations although net interest margin was underwhelming.

"While earnings are not really accelerating, this is expected as the bank's not trying to grow too fast," said MIDF Amanah Investment Bank's analyst Imran Yassin Yusof. "The bank does not take on much risk relative to its peers, and so will be less exposed to any external shocks."

Net profit would have grown 1.6% if the one-off gain in 2017 was excluded. Quarterly net interest income rose 0.7% on-year to 1.88 billion ringgit, while net fee and commission income was 0.1% lower at 447.13 million ringgit.

For its first nine months, net profit rose 7% to 3.98 billion ringgit from 3.72 billion ringgit in the same period last year. Net return on equity was 14.7%. The lender is aiming for 14%-to-15% net return on equity in 2018, slightly lower than 2017's 15.8%, according to its annual report.

Public Bank's total gross loans rose by an annualized rate of 4.4%. In terms of asset quality, gross impaired loans ratio remained stable at 0.5% at the end of September. The company expects gross loan growth to pick up pace to 5% in 2018 from last year's 3.6% rate.

The lender derived bulk of its profits from Malaysia, making its fortune closely-linked to the health of Southeast Asia's third-largest economy. Public Bank's international business - Hong Kong, China, Cambodia and Vietnam - contributed less than 10% to pre-tax profit.

Shares of Public Bank rose 0.1% to 24.90 ringgit, while the benchmark FTSE Bursa Malaysia KLCI closed 0.2% lower.

--Jason Ng

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