KUALA LUMPUR: Public Bank Bhd posted lower net profit of RM4.87bil in the financial year ended Dec 31,2020 due to one-off Day One net modification loss, negative effect of the reduction in the Overnight Policy Rate (OPR) and higher loan impairment allowance.
It announced on Thursday, group’s pre-tax profit for FY20 decreased by RM849.1mil or 11.9% to RM6.28bil compared with RM7.13bil a year ago. Its net profit fell by RM639.9mil or 11.6% to RM4.87bil from RM5.51bil in FY19.
Tan Sri Teh Hong Piow, founder, chairman emeritus, director and adviser of Public Bank, said: “2020 was a year full of unprecedented challenges. The onset of Covid-19 pandemic inflicted significant economic disruptions and uncertainties.
“Coupled with several OPR reductions during the year, it had placed further pressure on the banking sector. Against this backdrop, the Public Bank Group was still able to show steady performance and sustain its profitability.”
Teh said Public Bank continued to maintain its resilient fundamentals in 2020, delivering net return on equity of 11.2% whilst sustaining its low gross impaired loan ratio of 0.4% as well as efficient cost-to-income ratio of 34.6%.
In view of the sustained profit performance, Teh said the board of directors declared a dividend of 13 sen per share, which amounted to a total dividend payout of RM2.52bil, representing 51.8% payout of the group’s net profit for 2020.
“Despite facing various challenges in 2020, the group’s continued dividend payout during this difficult time reflects its appreciation of shareholders’ support, ” he said.
The dividend will be paid on March 22, based on the dividend entitlement date of March 12.
Elaborating on the FY20 results, Public Bank said the lower earnings were mainly due to the one-off Day One net modification loss related to Covid-19 relief measures amounting to RM498.4mil incurred during the second quarter, coupled with the negative effect of OPR reduction of 125 basis points during the year.
“As a result, overall net interest income of the group declined by RM254.3mil (-3.4%) despite a positive loans growth achieved, ” it said.
Public Bank said the loan impairment allowance increased by RM951.8mil due to pre-emptive allowance set aside in anticipation of the effect of Covid-19 pandemic.
It also said other operating expenses rose by RM90.3mil (-2.4%). However, these were partially offset by higher investment income by RM279.9mil (+166.9%) and higher net fee and commission income by RM188.9mil (+10.9%) on higher income from fund management and stock-broking businesses.
It said other comprehensive income (net) of the group for FY20 increased by RM246.4mil or 318.1%. This was mainly due to gain on remeasurements of defined benefit plans of RM28mil in FY20 versus a loss of RM228.9mil in FY19, as well as higher gain on revaluation of financial investments.
Public Bank said the group’s profit continued to be supported by steady loans and customer deposits growth.
The gross loans grew by RM15.2bil or 4.6% to RM345.7bil as at Dec 31,2020 from RM330.5bil at end-December 2019. The loans were mainly driven by growth in mortgage financing, hire purchase financing and lending to SMEs.
Fourth quarter financial performance
Public Bank said in 4Q, pre-tax profit fell by 19.2% to RM1,474.7mil from RM1.82bil a year ago. Net profit declined by 18.3% to RM1.148bil.
“The decrease was mainly due to higher loan impairment allowance made by RM513.3mil due to preemptive allowance set aside in anticipation of the potential effect of Covid-19 pandemic.
“These were partially offset by higher net fee and commission income by RM121.6mil on higher income from fund management and stockbroking businesses, and higher net income from Islamic banking business by RM48.8mil, ” it said.