‘Prudent lending culture will hold us steady’

KUALA LUMPUR: Public Bank Bhd, which continues to stand head and shoulders above its peers in terms of return on equity (ROE), cost-to-income ratio (CIR) and gross impaired loan ratio, is not concerned about asset quality despite economic and market uncertainties due to its prudent lending culture.

Public Bank boasts the highest ROE of 16.5% and lowest CIR and gross impaired loan ratio of 32.3% and 0.5% respectively in 2016.

In comparison, Malayan Banking Bhd achieved an ROE of 10.6% last year, a CIR of 47.3% and net impaired loans ratio of 1.51% last year. CIMB Group Holdings Bhd’s ROE stood at 8.3%, while CIR hit 53.9%, and gross impairment ratio came in at 3.3%. RHB Bank Bhd’s ROE was 8.5%, against a CIR of 50.0% and gross impaired loans ratio of 2.43%.

Despite a tougher operating environment in 2016, Public Bank’s loans and deposits increased 7.5% and 2.9% respectively, higher than the industry’s loans and deposit growth of 5.3% and 1.5% respectively.

“Our prudent credit culture has been inculcated by Tan Sri Teh Hong Piow since he founded the bank. This has been (maintained) over the last 50 years,” Public Bank managing director and CEO Tan Sri Tay Ah Lek said at its AGM yesterday.

Public Bank’s gross impaired loan ratio stood at 0.5% in 2016, the lowest among domestic commercial banking groups and well below the banking industry’s gross impaired loan ratio of 1.6%.

“Our target is we should always work within this level (0.5%). Even in extreme conditions, we should not exceed 1%. Our loans are resilient and there is a slight pressure but I think it is a matter of being more efficient in the collection process. The prudence of accepting credit all these years is intact and this is how we achieve a resilient base of loans and borrowers,” said Tay.

The group’s lending activities to the retail banking segment remained its strategic focus, driven by the extension of credit mainly for the purchase of residential properties and passenger vehicles as well as commercial lending to SMEs. Collectively, this formed 85% of the group’s total loans and financing as at the end of 2016.

The group will further penetrate new market segments to enhance its revenue stream, with improved cross-selling and focus on growing its fee-based income. It will also continue to drive productivity to improve its cost efficiency.

Minority Shareholder Watchdog Group, which brought up the question of succession planning considering the average age of 71.5 years of its board members, was told that identifying suitable candidates within the group of Public Bank, Public Investment Bank Bhd and Public Islamic Bank Bhd is an ongoing process.

“Over the last six months, we’ve appointed three directors to these entities. We’ll still be continuing with identifying (new leaders) and new directors are subject to approval by Bank Negara Malaysia,” Tay said.