Public Bank Berhad PBBANK FYE22Q3

Top-notch profitability and remarkably healthy asset quality

Last Updated: 2 Dec 2022; Analysis is based on FYE21 results and FYE22Q3 interim results.

Read me first

  1. At the time of writing this page, I owned shares of PBBANK.
  2. I do my best to write this analysis as objective as possible. No point I lie to myself, and, no offence, I don’t need you to push up the stock prices.
  3. Fair value estimates and earnings projection are not included here, so you won’t perceive buy/sell recommendation.
  4. I agree to disagree, I welcome tactful discussion and I respect your view (no matter what). Market moves because of different perspectives.
  5. Click to learn how to analyse performance of a commercial bank.

Click to view filing of the FYE2021 Annual Report in Bursa Announcement, FYE21Q4 Investor Presentation, FYE22Q3 interim results and FYE22 Q3 Investor Presentation.

PBBANK F.A.C.E. Analysis

Public Bank Berhad PBBANK - Financial, key results and metrics

Highly stable funding, but limited room to increase lending

  • Funding and liquidity of PBBANK is at healthy level. Compared to peers, PBBANK’s Loans/Customer Deposits (%) 93% indicated that PBBANK may have limited room to utilise customer deposits to increase lending. Usually, 93% to 95% of Loans/Customer Deposits considered very high.
  • Among the banks, portion of customer deposits in PBBANK’s funding is one of the highest one. The ratio has been increasing steadily from FYE17: 91.1% to FYE21: 93.4%. PBBANK doesn’t rely too much of unstable funding sources, such as money market funding and debt funding.

Remarkably healthy, and best in Malaysia

  • Degree of impaired loans improved from FYE17: 0.48% to FYE21: 0.31%. Plus, its loan impairment charges over gross loans decreased from FYE17: 0.14% to FYE21: 0.08%.
    These rates are the lowest among Malaysia banks. Maintaining such a low impaired loans rate during pandemic is a strong evident of PBBANK capabilities in prudent lending.
  • Gross loans grew +3.6% YoY (FYE20: MYR345.7m; FYE21: MYR358.0m), and grew 3.3% CAGR since 2017 (FYE17: MYR304.5m; FYE21: MYR358.0m).
  • High loan loss coverage FYE21: 360.7% indicates PBBANK has extremely high reserves in relation to the impaired loans in the loan portfolio.

Adequate Tangible Common Equity over RWA, and CET 1 Capital Ratio above Basel III requirements

Slightly above earnings power, but top-notch profitability

Earnings

  • Operating profit of PBBANK grew steadily 4.05% CAGR from FY17: MYR7,318.6m to FY21: MYR8,579.2m. However, its recurring earnings power ratio maintained in the range of 2.5% to 2.8% because PBBANK ramped up its RWA 3.8% CAGR from FY17: MYR 257,351.9m to FY21: MYR 298,889.7m.

Profitability

  • PBBANK’s Cost / Income is the lowest among the banks. It’s incredible cost effectiveness attributed highest ROE among the banks.
  • On the other hand, in the past 2 years, the pandemic, market and worldwide uncertainties caused much higher total impairment charges from loans and securities. Its “Loans & Securities Impairment Charges / Pre-Impairment Operating Profit” increased from FYE17: 2.78% to FYE21: 14.07%. Still, PBBANK’s ratio is still the lowest if compared to peers. Quality of loan portfolio of PBBANK is very high.
  • Lower profitability is reflected in declining Return on Average Equity – FYE17: 15.8% ➡️ FYE21: 12.4%. Another reason contributed to lower ROE is increase of regulatory reserves. I am not worry about the declining ROE.

Segmental Information

Domestic Operating Segments

Business Segments (MYR in thousand) 2019 2020 2021
Hire Purchase 399,104 106,478 -117,050
Retail Operations 3,727,041 3,666,439 4,311,380
Corporate Lending 515,475 461,702 444,820
Treasury and Capital Market Operations 319,264 567,820 432,613
Investment Banking 39,601 116,934 80,703
Fund Management 646,788 714,788 878,086
Others 22,564 -34,413 -30,390
Head Office and Funding Center 721,996 58,728 749,327
Total 6,393,852 5,660,496 6,751,510

Overseas Operating Segments

Business Segments (MYR in thousand) 2019 2020 2021
Hong Kong SAR 296,200 259,390 320,413
Cambodia 348,809 259,943 242,474
Other Countries 93,926 105,142 59,656
Total 740,954 626,495 624,564

Gross loans, advances and financing by economic purpose

Economic Purpose (MYR in thousand) 2019 2020 2021
Purchase of securities 3,806,514 4,359,446 4,215,419
Purchase of transport vehicles 56,213,822 54,982,651 51,770,061
Purchase of landed properties - Residential 147,679,774 135,970,426 125,850,883
Purchase of landed properties - Non-residential 81,731,913 82,919,775 81,941,217
Purchase of fixed assets 456,272 443,942 433,035
Personal use 13,217,789 13,742,077 13,648,878
Credit card 2,182,299 1,996,528 2,161,229
Purchase of consumer durables 704 798 801
Constructions 7,662,697 7,396,048 7,401,779
Mergers and acquisitions 9,730
Working capital 40,836,823 38,874,027 38,576,599
Others 4,238,145 4,965,509 4,458,810
Total 358,026,752 345,651,227 330,468,441

Impaired loans, advances and financing by economic purpose

Economic Purpose (MYR in thousand) 2019 2020 2021
Purchase of securities 33,996 0 724
Purchase of transport vehicles 151,752 175,309 241,765
Purchase of landed properties - Residential 336,453 440,544 629,565
Purchase of landed properties - Non-residential 178,167 207,258 227,326
Purchase of fixed assets 10,655 12,779 8,523
Personal use 87,462 106,756 153,351
Credit card 8,048 13,812 17,983
Purchase of consumer durables 1 1 1
Constructions 14,835 15,077 57,119
Mergers and acquisitions
Working capital 275,638 274,330 256,412
Others 4,916 5,352 12,150
Total 1,101,923 1,251,218 1,604,919

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Interim Results of PBBANK 30 Sep 2022 (FYE22 Q3)

Qtr Report FY22Q3 Income Statement PBBANK

PBBANK recorded FYE22Q3: MYR 2,387.4m, +7.7% QoQ from FYE22Q2: MYR 2,217.6 from interest income and higher return +14.8% QoQ from investment, unit trust, stockbroking, and foreign exchange business.

However, due to the volatile market, lower income from investment, unit trust, stockbroking, and foreign exchange business caused -11.0% YoY in their non-interest income (FYE21-9M: MYR 2,038.2 ➡️ FYE22-9M: MYR 1,813.0):

  1. Unit trust income -13.6% YoY
  2. Stockbroking income -49.4% YoY
  3. Foreign exchange income +11.0% YoY
  4. Fee & commission income +5.3% YoY

There is no red / yellow flag observed in impairment losses. Their gross impaired loans ratio is FY22Q3: 0.21% (FYE20: 0.34% and FYE21: 0.24%), a very healthy position.

Corporate Development

  • 13 Sep 2022 – Public Bank plans sustainability roadmap, says to raise profitability by focusing on areas of strength. (The Edge Markets)
  • 31 Aug 2022 – Public Bank aims for 5% loan growth this year. (The Star)

Stock Analysis

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Thong Guan Industries Berhad TGUAN FYE22Q3

Solid growth with margin compression and high capex expected for expansion. Revenue growth - +20.6% YoY, FYE2021-9M: MYR 886.3M ➡️ FYE2022-9M: MYR 1,068.8M. Quarterly gross margin decline to 14.03%.

Public Bank Berhad PBBANK FYE22Q3

Top-notch profitability and remarkably healthy asset quality. Recorded FYE22Q3: MYR 2,387.4m, +7.7% QoQ from FYE22Q2: MYR 2,217.6 from interest income and higher return +14.8% QoQ from non-interest income.
Power Root Berhad PWROOT

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Malayan Banking Berhad MAYBANK FYE22Q3

Above par earnings, but mediocre profitability and relatively high-risk loan portfolio. Improved profitability due to higher earnings (+17% YoY) and lower allowances (-25% YoY). MAYBANK is expected to end 2022 fiscal year strong.

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Strong rebound despite supply chain issues and inflation. Revenue growth +365.8% YoY, FYE2021-Q1: MYR 81.4M ➡️ FYE2022-Q1: MYR 379.1M; MYR 1,319.1M in FYE2022, +28.1% YoY. ROIC of PADINI recovered from FYE2020: 7%, FYE2021: 5.7% ➡️ FYE2022: 12.5%.

Collection of Guides

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