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❗
- At the time of writing this page, I owned shares of PBBANK.
- 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.
- Fair value estimates and earnings projection are not included here, so you won’t perceive buy/sell recommendation.
- I agree to disagree, I welcome tactful discussion and I respect your view (no matter what). Market moves because of different perspectives.
- 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
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
- Increasing Tangible Common Equity over RWA (FY17: 14.0%➡️FY21: 15.5%) and CET 1 Capital Ratio (FY17: 12.2%➡️FY21: 14.5%) indicates PBBANK has sufficient capital to cover asset risks.
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.
- Among the banks, PBBANK recurring earnings power ratio and net interest margin is slightly above the average.
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 |
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Interim Results of PBBANK 30 Sep 2022 (FYE22 Q3)
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):
- Unit trust income -13.6% YoY
- Stockbroking income -49.4% YoY
- Foreign exchange income +11.0% YoY
- 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
Thong Guan Industries Berhad TGUAN FYE22Q3
Public Bank Berhad PBBANK FYE22Q3
Power Root Berhad PWROOT FYE23Q2
Collection of Guides
[pt_view id=”bcd3b2cq2d”]
