public bank analysis

• Methodology• Company Background• Environmental Scanning• Identification of Issue• Strategic Formulation• Strategic Implementation• Strategic Evaluation• Summary and Conclusions

1.0 Introduction

2.0 Methodology

• Interview with Mr Yap Kin On– Head of Hire Purchase Centre– Kota Kinabalu, Api-Api Centre, Public Bank branch.

• Review on the Annual Report of Public Bank Berhad

• Review on Final Mini Budget of Malaysia• Review on monthly statistical information

available from Bank Negara Malaysia

5.2 External Factors

5.2.1 Opportunities and Threats

Opportunities- Government Policy

• Lower financing cost due to reduction of OPR to 2% (BNM, 2009)

• BNM support liquidity on:– SMEs– Guarantee on RM– Foreign currency deposit in commercial banks or

incorporated foreign banks (BNM, 2009)

• Easing of monetary policy and fiscal policy• Malaysia stimulus packages 2009 (Najib, 2009)• Lower cost of credit, increase the availability

of money• Encouraging borrowings, loans, investments,

and consumption demands• The banking institutions are expected to enjoy

the growing of loans demand or lending activities

Opportunities- Social Growth

• Increasing number of affluent customers in Malaysia (Public Bank Berhad, 2009)

• Growing of Deposits and Savings of the Malaysia citizens (BNM, 2008)

• Provide healthy and stable financing to the banking institutions’ balance sheet

• Gain opportunity for investing in other projects that result of attractive NPV.

Opportunities

Banking System Total Deposit 2001-2008Source: Bank Negara Malaysia Monthly Statistical Bulletin, various issues.Adopted from Public Bank Berhad, Economics and Planning Divisions, Economic Review, 2008. Malaysia: Banking and Finance Indicators.

Threats

• Lower net interest margin (MIDF, 2009)– By further reduction of OPR– Price wars among the banking institutions– Expected to reduction in of loans

• Result to reduction of income earnings• Believed to sustain immediate shortcomings

over a period as income from Islamic banking segment, Hire Purchase, and others. (Yap, 2009)

5.3 Internal Factors

5.3.1 Strengths and Weaknesses

Strengths- Financial Performances

• Yap (2009) suggested that the Public Bank Berhad is insulated from the current crisis.

• Impressive financial year 2008:– Net Profit grew by 21% (RM 2.12 billion in 2007 to

RM 2.58 billion in 2008)– Net return on equity reaching 30.4% as compare

to 26.3% in 2007– Balance sheet of Group also continued to expand

at a strong pace

Strong Balance Sheet Growth

Adopted from the Annual Report of Public Bank Berhad, 2009. Page. 26


Enhancing of Shareholders’ values




Strength- Asset Management

• Remain superiors in term of asset management

• Lowest net and gross non-performing loan• Group’s net NPL further decreased by neither

RM 212.5 million nor 17.0% to RM 1.04 million as the end of year 2008, even though there is RM19.25 billion growths in the total loan base

• Maintain the lowest NPL rates across the industry (MIDF, 2009)

Superior and Robust Asset Quality and Banking Peers Gross NPL and Net NPL.Adopted from Public Bank Berhad Annual Report, 2008. p.126.

Gross NPL Ratio by sector of Public Bank Group and Industry Average. Adopted from Public Bank Berhad Annual Report, 2008. p.126.

Credit Ratings of Public Bank BerhadAdopted from Public Bank Berhad Annual Report, 2008. p.135.

Strength- Credit Rating

• The Group continues to accord strong financial ratings

• Injection of confidence to investor and customer on their perception to the Group

• November 2008, Moody’s Investor Service reaffirmed Public Bank’s long-term deposit rating of A3, and short-term deposit rating of P-1

• Standard & Poor’s Rating Agency reaffirmed Public Bank A- long-term rating and A-2 short-term counterparty credit rating with stable outlook in May 2008

• September 2008, Rating Agency Malaysia reaffirmed Public Bank’s long-term rating of AAA, the highest accorded by Rating Agency Malaysia, and its short-term rating of P1

7.3 Performance MetricsKey

Performance Indicators

Annual Report 2005 3-Year

Plan Actual in 2008 Variances Favour/Adverse

Return on Average Equity

Ratio 28% 30% 2.4% F

Core Capital Ratio 8% 8% 0.3% F

Risk Weighted Capital Ratio 13% 14% 1.2% F

Net Non-Performing Loan Ratio 2% 1% 0.9% F

Total Loans and Advances RM 98 billion

RM 118.39 billion 21% F

Total Assets RM 150 billionRM 196.16

billion 31% F

Correction Actions

• No major changes had occurred in the firm’s external strategic management position

• Increasing in the market share about 14% • While there is also no existing of the changes

occurred in the firm’s internal strategic position• Remains a best performer in term of

profitability as what had mentioned in the previous part

• Continue to apply the current or present functional strategic course especially in term of the product development, and also market penetration

• Continue to aware of the external and internal environment

• According to David (1987) that changing is necessary to increase or raise employees’ and manager’s anxieties where also in greater scope could actually renew confidence of the current strategies or cover of weakness

8.0 Summary and Conclusion• Impressive financial performance, marker share

improvement, asset quality management• Implemented various functional and corporate

strategies• Economic Downturn, even perform better then what

had expected• All the objectives that set in year 2005 had been

achieved in year 2008• Strategic position is strong and correction action is

believed to remain the same• Difficult for discovering of major weakness or

foreseeable threats in the future

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public bank analysis