4

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

FiVE-yEAR gROuP FinAnCiAl suMMARy

Year Ended 31 December oPERaTINg RESuLTS (Rmmillion) Operating profit Profit before tax expense and zakat Net profit attributable to equity holders of the Bank 5,386 5,104 3,869 5,200 4,878 3,684 4,738 4,086 3,048 4,015 3,321 2,517 3,948 3,379 2,581 2012 2011# 2010# 2009 2008

KEy BaLaNCE ShEET daTa (Rmmillion) Total assets Loans, advances and financing Total liabilities Deposits from customers Core customer deposits Paid-up capital Shareholders equity Commitments and contingencies 274,625 196,052 255,981 225,042 177,035 3,532 17,944 79,458 250,559 175,953 234,140 200,371 157,297 3,532 15,722 70,847 226,988 154,864 212,644 176,872 143,639 3,532 13,692 69,206 217,136 135,336 205,421 170,892 127,623 3,532 11,023 61,435 196,163 118,386 185,934 151,185 111,204 3,532 9,537 52,867

ShaRE INfoRmaTIoN aNd VaLuaTIoN Share Information Per share (sen) Basic/Diluted earnings Net dividend Cash dividend Share dividend Net assets Share price as at 31 December (RM) Local Foreign Market capitalisation (RM'Million) Valuations (Local Share) Net dividend yield (%) Net dividend yield (including share dividend) (%) Dividend payout ratio (%) Dividend payout ratio (including share dividend) (%) Price to earnings multiple (times) Price to book multiple (times) 3.1 3.1 45.3 45.3 14.7 3.2 3.6 3.6 48.3 48.3 12.7 3.0 3.5 3.5 52.3 52.3 14.9 3.3 3.7 5.1 56.6 79.3 15.4 3.5 4.6 7.5 53.2 84.8 11.5 3.1 110.5 50.0 512.4 16.28 16.30 57,521 105.2 48.0 448.9 13.38 13.20 47,066 87.2 45.5 391.0 13.02 13.00 45,964 73.3 41.3 1 for 68 319.4 11.30 11.26 39,868 76.9 41.0 1 for 35 284.2 8.85 8.75 31,152

PROFIT BeFORe TAx

GROSS IMPAIReD LOANS RATIO

RM 5.10b

0.7%

Five-Year Group Financial Summary

CuSTOMeR DePOSITS GROSS LOANS

12.3%
Year Ended 31 December fINaNCIaL RaTIoS (%) Profitability Ratios Net interest margin on average interest bearing assets 1 Net return on equity 2 Return on average assets Return on average risk-weighted assets Cost/income ratio Asset Quality Ratios Net loan to deposit ratio Gross impaired loans ratio 3 Loan loss coverage Capital Adequacy Ratios Tier I capital ratio Risk-weighted capital ratio Capital base (RMMillion) Tier 1 equity capital debt capital Tier 2 loan impairment reserves debt capital Others 11.4 14.6 26,298 16,544 3,893 1,038 4,870 (47) 11.2 15.6 25,416 14,334 3,916 1,073 6,138 (45) 11.3 14.2 19,992 12,040 3,896 1,002 3,102 (48) 87.1 0.7 126.0 87.8 0.9 113.8 87.6 1.1 94.2 3.1 24.5 1.9 3.0 30.5 3.3 26.8 2.0 3.2 29.8 3.4 27.1 1.8 3.1 30.7 2012 2011# 2010#

11.3%
2009 2008 3.2 26.1 1.6 2.8 32.6 3.2 30.4 1.8 3.2 31.2

79.2 1.4 120.3^

78.3 1.0 159.7

10.5 14.6 18,221 9,161 3,964 2,052 3,218 (174)

8.3 13.7 15,775 8,157 1,440 1,760 4,419 (1)

PRoduCTIVITy RaTIoS No. of employees Gross loan per employee (RM000) Deposits per employee (RM000) Profit before tax per employee (RM000) 17,625 11,222 12,768 290 17,511 10,148 11,443 279 17,369 9,013 10,183 235 17,169 8,015 9,953 193 16,160 7,467 9,356 209

maRKET ShaRE (%) Domestic market share Loans, advances & financing Deposits from customers Core customer deposits
1 2 3

16.7 15.2 16.7

16.4 14.9 16.1

16.3 14.8 16.3

15.9 16.3 15.4

14.8 15.5 14.7

^ #

Excluding negotiable instruments of deposit and money market deposits which are on-lent to interbank. Based on equity attributable to equity holders of the Bank, adjusted for dividend declared subsequent to year end. FYE 2009 to 2012 are based on a more stringent criteria on classification of impaired loans under MFRS/FRS 139. FYE 2008 is based on 3 months classification under BNM/GP3. Restated due to the adoption of FRS 139. Restated as a result of retrospective application of MFRS 139. For FYE 2010, only relevant balance sheet items have been restated to position as at 1 January 2011.

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

suMMARy OF FiVE-yEAR gROuP gROwTh

Resilient Performance Amid Challenging Environment
Enhancing Shareholder Value
Commendable Prot Track Record
RMMillion 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2,436 2,581 2,517 3,048 3,684* 3,869

2008

2009

2010

2011

2012

Year

Net profit attributable to equity holders Once-off ING goodwill income

* Restated due to retrospective application of MFRS 139 which resulted in a change in accounting policy on collective assessment allowance for loans

Attractive Shareholder Return

Percentage (%) 40

30

30.4 26.1 28.4 27.1 26.8 24.5

20

10

2008

2009

2010

2011

2012

Year

Net return on equity Net return on equity (excluding once-off ING goodwill income)

Summary of Five-Year Group Growth

Healthy Dividend Payout

Sen 100 84.8 80 79.3 80 70 60 53.2 25.3 56.6 52.3 60 48.3 45.3 50 40 30 20 20 10 0 41.0 41.3 45.5 48.0 50.0
Percentage (%)

100 90

16.6

40

2008

2009

2010

2011

2012

0 Year

Ordinary net dividend per share-sen Share dividend per share-sen Dividend payout ratio (excluding share dividend) Dividend payout ratio (including share dividend)

Improving Share Price

RM
18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0

16.28 13.38 13.20

16.30

13.02 11.30 11.26 8.85 8.75

13.00

Year Share price Public Bank (Local) Share price Public Bank (Foreign)

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

Summary of Five-Year Group Growth

Healthy Balance Sheet Growth

Healthy Growth in Loans and Customer Deposits with Stable Loan/Deposit Ratio
RMMillion 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0 Percentage (%)

87.6* 78.3 79.2 170,892 151,185 137,610 120,669 176,872 156,544

87.8* 200,371 177,694

225,042 87.1 197,783

100 90 80 70 60 50 40 30 20 10 0

2008

2009
Customer deposits Net loan/deposit ratio

2010

2011

2012

Year

Gross loans, advances and financing

Steady Asset Growth

RMMillion 300,000 250,559* 250,000 200,000 150,000 100,000 50,000 0 196,163 217,136 226,988* 274,625

2008

2009
Total assets

2010

2011

2012

Year

Summary of Five-Year Group Growth

Percentage (%) 1.6

1.4
1.2

1.0
0.8

1.0

1.1 0.9 0.9 0.8 0.7

0.4

2008

2009

2010

2011

2012

Year

Gross impaired loans ratio old GP3*

Gross impaired loans ratio MFRS 139**

* Old GP3 loans in arrears for 3 months or more ** MFRS 139 loans in arrears for 3 months or more and significant loans below 3 months which show indications of impairment

high Loan Loss Reserves

Percentage (%) 200

159.7
150

120.3^
100

113.8* 94.2*

126.0

50

2008

2009
Loan loss coverage

2010

2011

2012

Year

10

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

sEgMEnTAl AnAlysis
2011
Domestic 16.9% 46.1% 6.6% 12.0% 1.5% 6.8% 2.3% Overseas 5.8% 1.7% 0.3% Hong Kong SAR Cambodia Other countries Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

Operating Revenue

2012
Domestic 16.0% 48.0% 6.9% 11.8% Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

2011

2012

1.3% 6.2% 2.6% Overseas 5.3% 1.6% 0.3%

Hong Kong SAR Cambodia Other countries

2011
Domestic 13.2% 57.0% 6.3% 6.6% 1.0% 6.6% 3.2% Overseas 3.6% 1.9% 0.6% Hong Kong SAR Cambodia Other countries Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

Prot Before Tax

2012
Domestic 13.1% 58.5% 6.3% 6.6% Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

2011

2012

0.9% 7.3% 0.9% Overseas 3.6% 2.2% 0.6%

Hong Kong SAR Cambodia Other countries

2011
Domestic 12.8% 49.3% 7.5% 22.0% 1.6% 0.1% 0.1% Overseas 5.3% 1.1% 0.2% Hong Kong SAR Cambodia Other countries Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

Total Assets

2012
Domestic 12.7% 51.0% 7.3% Hire purchase Retail operations Corporate lending Treasury and capital market operations Investment banking Fund management Others

2011

2012

21.5% 1.3% 0.1% 0.1% Overseas 4.7% 1.1% 0.2%

Hong Kong SAR Cambodia Other countries

11

AnAlysis OF ThE FinAnCiAl sTATEMEnTs

analysis of the Income Statement
Net Income
The Public Bank Groups net income grew 4.6% to RM7.75 billion in 2012 from RM7.41 billion in 2011. Variance 2012 RM000 Net interest income Net income from Islamic Banking Business Other operating income Net income 5,254,645 843,766 1,648,298 7,746,709 2011 RM000 4,974,931 868,342 1,565,297 7,408,570 RM000 279,714 (24,576) 83,001 338,139 % 5.6 (2.8) 5.3 4.6 Contribution % 67.8 10.9 21.3 100.0

Net Interest Income and Margins

RMMillion 6,000 5,000 4,000 3,000 2.7% 2,000 1,000 0 2.7% 2.5% 4,974.9 5,254.6 5.0 4.0 3.1% 3.0 2.0 1.0 0 Year Percentage % 6.0

Net Interest Income

Net interest income rose 5.6% or RM279.7 million in 2012, representing 67.8% of the Public Bank Groups total net income. Net interest margin on interest-bearing assets (excluding funds from wholesale deposits) fell 20 basis points to 3.1% in 2012 mainly due to narrowing loan and deposit spread as a result of keen market competition. Despite the compression of net interest margin, the Groups net income increased by 4.6% or RM338.1 million to RM7,746.7 million in 2012 primarily due to healthy growth in loans and customer deposits.

4,597.4 3.4%

3.3%

Net Income from Islamic Banking Business

In 2012, the Public Bank Groups net income from Islamic banking business accounted for 10.9% of the Groups total net income. The decrease in net income by RM24.6 million was mainly due a transfer to Profit equalisation Reserve (PeR) of investment account holders in 2012 as compared to a transfer from PeR in 2011.

2010

2011
Net interest income

2012

Net int margin (exclude funds from MMD and NIDs issued) Net int margin

12

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

Analysis of the Financial Statements

other operating Income

The Public Bank Groups other operating income accounted for 21.3% of the Groups total net income. Other operating income grew by 5.3% to RM1,648.3 million in 2012 from RM1,565.3 million in 2011 mainly due to higher comission income and fee income from the Groups fund management business.

2012 RM000 Net fee and commission income of which: Net commission, service charges and fees Net brokerage and commissions Income from fund management activities Net gains and losses on financial instruments Other income of which: Profits from foreign exchange business Total other operating income 225,445 1,648,298 394,684 75,509 557,126 170,244 312,741 1,165,313

2011 RM000 1,118,909 360,794 100,946 525,317 166,154 280,234 217,563 1,565,297

Variance RM000 46,404 33,890 (25,437) 31,809 4,090 32,507 7,882 83,001 % 4.1 9.4 (25.2) 6.1 2.5 11.6 3.6 5.3

Other Operating Income Contribution 2012

10% 19%

34%

71%

24%

5% 8%

The Public Bank Groups net fee and commission income grew by RM46.4 million or 4.1% in 2012 to RM1,165.3 million, led by strong performance of the Groups fund management business which reported an increase in income of RM31.8 million or 6.1% to RM557.1 million. This was supported by the growth in net asset value of unit trust funds under management by 22.0% to RM54.58 billion as compared to RM44.75 billion in 2011. Net commission, service charges and fees increased to RM394.7 million in 2012, representing a 9.4% growth from 2011. Net brokerage and commissions from stock-broking activities contributed RM75.5 million to the Groups total other operating income in 2012. Net gains and losses on financial instruments rose by RM4.1 million or 2.5% to RM170.2 million in 2012. Other income increased by RM32.5 million or 11.6% to RM312.7 million in 2012 as a result of gain on revaluation of investment properties in Hong Kong and higher volume of the Groups foreign exchange business.

Net fee and commission income Net gains and losses on nancial instruments Other income Income from fund management activities Net commission, service charges and fees Net brokerage and commissions Other fee and commission income

13

Analysis of the Financial Statements

other operating Expenses

Other operating expenses of the Public Bank Group increased by 6.9% to RM2,360.9 million in 2012 as a result of higher personnel and establishment costs. Personnel cost accounted for 68.3% of total operating expenses of the Group. Total Other Operating Expenses
RMMillion 2,500

Other Operating Expenses Contribution 2012

6.4% 6.1% 68.3% 19.2%

Personnel cost
143.6 138.5 2,000 155.3 453.9 419.1 1,500 152.0

Establishment cost Marketing expenses Administration and general expenses

1,000 1,495.8

1,611.4

Personnel cost rose by 7.7% to RM1,611.4 million in 2012 primarily due to annual salary expense and higher headcounts to support business expansion. The Public Bank Groups staff force expanded to 17,625 as at the end of 2012 from 17,511 a year ago. establishment cost accounted for 19.2% of total other operating expenses of the Group. In 2012, establishment cost increased by 8.3% from RM419.1 million in 2011 to RM453.9 million in 2012 due to the opening of new branches and investment in infrastructure to support expansion in business volume.

500

2011

2012
Personnel cost Establishment cost Marketing expenses

Year

Administration and general expenses

The Groups marketing expenses decreased by 2.1% to RM152.0 million in 2012 whilst administration and general expenses increased by 3.7% to RM143.6 million in 2012, accounting for 6.4% and 6.1% respectively of the Groups total other operating expenses.

14

PUBLIC BANK BERHAD Annual Report 2012

Resilient Always

Analysis of the Financial Statements

Allowance for Impairment on Loans, Advances and Financing

RMMillion 350

allowance for Impairment on Loans, advances and financing

The domestic allowance for impairment on loans, advances and financing fell by RM12.5 million to RM147.2 million in 2012 mainly due to the improvement in collective assessment allowance offset by lower recoveries. The overseas allowance for impairment on loan, advances and financing dropped by RM35.0 million or 20.9% to RM132.0 million in 2012 due to improved credit conditions in the Groups Hong Kong and Cambodian operations.

300

250 200

167.0 132.0

Impairment Loss
150

100

159.7*

147.2

Impairment loss on foreclosed properties and financial investments available-for-sale amounted to RM6.6 million in 2012 as compared to impairment loss written back of RM1.6 million in 2011.

50 0 Year

Tax Expenses and Zakat

2011 2012
Domestic Overseas

In 2012, the Public Bank Groups tax expense increased by RM38.7 million or 3.4% to RM1,192.2 million consistent with the higher reported pre-tax profits. The Groups effective tax rate was 23.4% in 2012, lower than Malaysias statutory tax rate of 25.0% mainly due to certain income not subject to tax and the effects of lower tax rates in jurisdictions outside Malaysia.

Restated due to retrospective application of MFRS 139 which resulted in a change in accounting policy on collective assessment allowance for loans

15

Analysis of the Financial Statements

analysis of the Statement of financial Position

2012 RMMillion Assets Cash and balances with banks Reverse repurchase agreements Financial assets held-for-trading Financial investments available-for-sale Financial investments held-to-maturity Loans, advances and financing Statutory deposits with Central Banks Other assets Total Assets Liabilities Deposits from customers Deposits from banks Debt securities issued and other borrowed funds Other liabilities Total Liabilities Total Equity Total Liabilities and Equity
#

2011# RMMillion

Variance RMMillion

18,636 8,159 16,617 17,201 6,257 196,052 5,787 5,916 274,625

18,634 9,287 10,657 16,719 7,629 175,953 5,598 6,082 250,559

2 (1,128) 5,960 482 (1,372) 20,099 189 (166) 24,066

0.0 (12.1) 55.9 2.9 (18.0) 11.4 3.4 (2.7) 9.6

225,042 12,849 9,947 8,143 255,981 18,644 274,625

200,371 15,807 11,318 6,643 234,139 16,420 250,559

24,671 (2,958) (1,371) 1,500 21,842 2,224 24,066

12.3 (18.7) (12.1) 22.6 9.3 13.5 9.6

Restated as a result of retrospective application of MFRS 139.

Total assets
The Public Bank Groups total assets stood at RM274.63 billion as at 31 December 2012, an increase of RM24.07 billion or 9.6% over the previous financial year. The increase was the result of another year of strong loan growth of 11.3% despite the intense competition. As at the end of December 2012, net loans, advances and financing accounted for 71.4% of the Groups total assets as compared to 70.2% in the previous year. The proportion of interest-bearing assets has remained high at 93.2% at the end of 2012.

Cash and Balances With Banks

excess liquidity in the Group was mainly held in short-term money market placements. There was no significant change in cash and balances with banks as compared to 2011.

Reverse Repurchase agreements

The Groups holdings of reverse repurchase agreements, as an alternative avenue for the placement of liquid funds, decreased by RM1.13 billion.

16

PuBLIC BANK BeRHAD Annual Report 2012

Resilient Always

Analysis of the Financial Statements

financial Investments
The Groups financial investments comprise primarily of government-related securities and money market instruments, which are mainly held for yield and liquidity purposes. Holdings of trading book positions, classified under financial assets held-for-trading has increased by RM5.96 billion mainly due to an increase in holdings of government-related securities and money market instruments. As at the end of 2012, financial assets held-for-trading comprised 41.5% of the Groups financial investments. The Groups banking book positions are held under its financial investments available-for-sale and financial investments held-to-maturity portfolios. Financial investments available-for-sale increased marginally by RM0.48 billion due to higher holdings of government-related securities, whereas financial investments held-to-maturity decreased by RM1.37 billion as a result of decreased holdings of money market instruments. As at 31 December 2012, 42.9% and 15.6% of the Groups financial investments were held in financial investments available-for-sale and financial investments held-to-maturity respectively.

deposits from Customers

The Groups deposits from customers grew by RM24.67 billion or 12.3% to RM225.04 billion on the back of a surge in core customer deposits as well as wholesale deposits. Domestic core customer deposits registered a stronger growth rate, resulting in a higher market share of 16.7% as at the end of 2012. The Groups loan to deposit ratio remained healthy at 87.1%.

deposits from Banks

Deposits from banks which consist mainly of interbank borrowings, decreased by RM2.96 billion due to the Groups funding and gapping activities.

debt Securities Issued and other Borrowed funds

The Groups debt securities comprise Subordinated Notes, Innovative Tier 1 Capital Securities and Non-innovative Tier 1 Stapled Securities. These funds allow the Group to diversify its funding base, whilst strengthening its capital position and improving its return on equity. During the year, the Group fully redeemed its uSD400.0 million Subordinated Notes. There were no issuance of replacement Tier 2 capital instruments as the Group has sufficient Tier 2 capital to sustain its immediate capital requirements.

Loans, advances and financing

The Groups loan book grew by RM20.10 billion or 11.4% to RM196.05 billion as at end of 2012. During the same period, domestic loan growth was even stronger at 12.5%, as the Public Bank Group continued to focus on its core strengths in the financing of residential properties, purchase of passenger vehicles and small- and medium-sized enterprises, which grew by 17.1%, 8.5% and 22.2% respectively. The Groups loan growth has continued to outpace that of the Malaysian banking industry. As a result, the market share increased to 16.7% as at the end of 2012. Despite adopting a strong organic growth strategy, the asset quality of the loan base has not been compromised, with the impaired loan ratio receding to 0.7% as at end of 2012.

other liabilities
Other liabilities increased by RM1.50 billion, mainly due to the increase in bills and acceptances payable and recourse obligations on loans and financing sold to Cagamas by RM0.95 billion and RM0.49 billion respectively.

Total Liabilities and Equity

The Public Bank Groups total liabilities grew by RM21.84 billion in 2012 due to strong growth in customer deposits of RM24.67 billion, partially offset by a drop in deposits from banks by RM2.96 billion. The Groups equity has also grown to RM18.64 billion, to correspond with the expansion in the asset base. This was mainly due to strong net profits of RM3.87 billion registered during the year.