1.

0 BACKGROUND

1.1 Introduction

Public Bank Berhad is a bank based in Malaysia. The Public Bank Group's business
ended the financial year 2005 on a high note with RM111.6 billion in assets, RM68.1 billion in
loans and RM84.1 billion in deposits. In terms of balance sheet size, the Public Bank Group is
the third largest banking group in Malaysia with approximately US$ 41.76 billion in total assets
in Malaysia with the lowest non-performing loan ratios.

Presently, Public Bank has 243 local branches and 3 overseas branches namely, Hong
Kong Branch, Colombo Branch, Sri Lanka and Vientian Branch, Lao PDR. Public Bank is
currently the biggest domestic bank in Malaysia by shareholders' funds. It focuses on retail
customers and small to medium sized enterprises. The bank was founded in 1966 by Teh Hong
Piow, the then general manager of Malayan Banking. The bank was listed on the Malaysian
Stock Exchange in 1967.

1.2 History

Established in 1966 by its Founder and Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow,
Public Bank is a leading provider of financial services in Malaysia with banking operations in
Hong Kong and China, Cambodia, Vietnam, Laos and Sri Lanka. In Malaysia, Public Bank is
one of the most efficient banks as reflected by its low cost to income ratio. Public Bank is a top-
tier bank in Malaysia, well-reputed for its prudent management, superior customer service,
uncompromising service delivery standards and strong corporate governance and corporate
culture. Public Bank remains untouched by the global financial crisis which wrecked havoc in
major financial centers around the world.

Over the years, the Public Bank Group has been part of the strong catalysts to support
Malaysia’s economic development. Since its early days, Public Bank has transformed into a
strong and successful financial institution, offering a wide range of competitive and innovative
products and solutions to meet its customers’ needs. In Malaysia, Public Bank is an industry
leader in home mortgage financing, vehicle hire purchase financing and commercial lending to
small- and medium-sized enterprises. Also, in Malaysia, the Public Bank Group has the highest
market share for the private sector unit trust business. In Hong Kong, the Group is an industry
leader in personal consumer financing.

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 Public Bank is the most recognized brand in the Malaysian financial services industry for
its strong brand promise. In terms of size, it is the third largest domestic bank in Malaysia by
market capitalization and balance sheet. The Public Bank Group has over 17,160 staff, with
90% of the staff in Malaysia and the rest in its overseas operations in Hong Kong and China,
Cambodia, Vietnam, Laos and Sri Lanka.

1.3 Core Businesses

The Public Bank Group is very focused on its core businesses of providing a wide range
of banking and financial services including retail commercial banking, corporate banking,
investment banking, stock broking, funds management, wealth management services and
Islamic banking. Public Bank is a market leader with a strong and profitable franchise in
consumer banking and retail commercial lending to mid-market small- and medium-sized
enterprises in Malaysia. The Bank’s market share for loans has doubled since 2001. The Public
Bank Group has a strong franchise in deposit-taking business in Malaysia and in its overseas
operations. Similar to that of loans, Public Bank’s market share for core customer deposits had
increased significantly over the years. In terms of scale, the Public Bank Group has a large
customer base with extensive points of access in Malaysia and in the region.

1.3 Major Award

The Public Bank Group’s profile has been boosted significantly in 2009 when it was
voted as the Best Retail Bank in Asia Pacific by the Asian Banker based on several criteria such
as superior core deposit collection capabilities, value of its franchise, excellent financial
performance, sustainability of its balance sheet and risk management. Public Bank won this
award, outperforming not only national competitors but also regional peers.

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3.0 CORPORATE MISSION AND PHILOSOPHY

3.1 Mission

"To sustain the position of being the most efficient, profitable and respected premier financial
institution in Malaysia.”

3.2 Corporate Philosophy

For its Customers

• By providing the most courteous and efficient service in every aspect of its business
• By being innovative in the development of new banking products and services

For its Employees

• By promoting the well-being of its staff through attractive remuneration and fringe
benefits
• By promoting good staff morale through proper staff training and development, and
provision of opportunities for career advancement

For its Shareholders

• By forging ahead and consolidating its position as a stable and progressive financial
institution
• By generating profits and a fair return on their investment

For the Community it serves

• By assuming its role as a socially responsible corporate citizen in a tangible manner

• By adhering closely to national policies and objectives thereby contributing towards the
progress of the nation

INTRODUCTION TO VISA AND MASTER

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VISA

The story of VISA is inseparable from one of the most significant payment innovations of the
twentieth century the payment card. By developed this tool of unprecedented flexibility and
popularizing its use around the world. VISA shape the way that people everywhere live.
The VISA card has helped bring possibilities and independence to millennium VISA era began
in 1958, when the Bank of America first issued its blue, white and gold BankAmericard to
customers in Califonia. Its bedrock concept of personal empowerment traces back much earlier.
A.P. Giannini, founder of the Bank of America at the beginning of the century, believed that
flexible personal credit could help ordinary men and women take control of together. The
BankAmericard, a financial instrument established to drive positive social change, continued this
legenacy of compassionate, customer-focused banking.
With BanlAmericard international popularity in the 1960s and 1970s new corporate entity, jointly
owned and a operated by license member institutions, was created to support them. The name
“Visa” was introduced in 1976 and applied to the new organization. Soon Visa credit cards were
spreading around the world.

Under the leadership of Dee Hock, Visa laid the groundwork for the success of its member
financial institutions for decades to come. Hock oversaw the creation of the first-ever electronic
system for handling credit transactions-an investment in transaction processing infrastructure
which would lead to rapid growth and expansion. Throughout the 1980s and 1990s, Visa
continued to make important strides forward, introducing the first premium credit card, creating
the first global ATM network, developing new smart and prepaid cards and gaining market share
around the world.

Today, Visa proudly lives up to its heritage by focusing on empowering customers. Visa 21,000
member institutions have issued more than one billion cards and to its values remain firmly
anchored in service, commitment and innovation. Visa is pioneering the creation of c-
commerce, or universal commerce-the ability to conduct commerce anywhere, and way. In the
real world and online, Visa is leading the global market with exciting new put on larger and
grader and celebrations in an attempt to out-do each other.
Jointly owned by more than 21,000 financial institutional around the global reach, Visa remains
very much a local organization, giving its regional offices a high degree of operating and
marketing autonomy, Because Visa’s regional organizations are closest to their local markets,
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they know best how to help member institutions serve their customers. Empowering member
financial institutions-it’s the principle that underlines Visa’s success.

Visa products and services-including credit, debit and prepaid, corporate, purchasing and
business products-are offered directly by member financial institutional to their customers. Visa
international focuses on providing members with a strong competitive platform, including an
advanced transactional processing infrastructure and global branding and marketing. But
around a highly responsive and flexible regional structure, Visa International also leads new
initivates in product development, global research and strategic alliances.

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MASTER
MasterCard International is a global payments company with one of the most recognized and
respected brands in the world. We manager a full range of payment programs and service,
including MasterCard® credit, MasterCards® debit cards, Maestro® online debit cards, Cirrus®
ATM cash access, and related programs.

With approximately 22,500 MasterCard, Cirrus and Maestro members worldwide, MasterCard
serves consumers and businesses, both large and small, in 210 countries and territories.
MasterCard is leader in quality and innovation, offering a wide range of payment solutions in the
virtual and traditional worlds. MasterCard’s award-wining Priceless® advertising campaign is
now seen in 98 countries and 46 languages, giving the MasterCard brand a truly global reach
and scope. MasterCard is accepted at millions of locations around the global.

MasterCard began in the 1940s when several U.S. banks started giving their customers
specially-issued paper that could be used like cash in local stores. In 1951, The Franklin
National Bank in New York formalized the practice by introducing the first real credit card.
Over the next decade, several franchises evolved where a single bank in each major city would
accept cards as payment with certain merchant’s theyd chosen to work with. ON August 16,196,
one of the groups formed the interbank card Association (ICA), which later become MasterCArd
International.

DIFFERENT TYPES OF CARDS

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CREDIT CARDS
If you carry a balance, credit cards can be like expensive loans made by banks, gasoline
companies and department stores. The credit card issuer gives you a card. You use the card to
pay for items and services up to certain total amount-your credit “limit” The store merchant or
services provider collects what you owe from the card issuer, whom you replay. You’re allowed
to pay off what you owe little by little each month, as long as you pay a minimum amount each
time. You’re charged interest on the balance you owe ( as high as 26% each year) at the end of
each period, unless you pay the full balance each time your bull arrives.

Credit cards yield profits to their issuers for several reasons. The most important is the high rate
of interest-interest on credit cards alone accounts for the bulk of the profit earned by banks that
issue credit card, and most companies charge late fees, over-the-time fees and other
miscellaneous charges. Finally, the companies profit by charging merchants and service
providers a fee each time a customer uses the company’s credit in the merchant’s
establishment.

CHARGE CARDS
Charge cards, also called travel and entertainment cards, are a little different from credit cards.
Charge cards, such as American Express and Diners Club, have no credit limit. You can usually
charge as much as want, but you are required to pay off your entire balance when your bill
arrives, with one exception. It you charge air fare, cruise fees or hotels fees for a hotel room
booked through a travel agent on an American Express card, you pay off your balance over 36
months. You’ll be charged between 19% and 21% interest and will have to make minimum
monthly payments of $20, or 1/36 of your balance, whichever is greater.

Charge card companies make their profits by charging very high annual fees- up to $100- and
by charging merchants relatively high fees each time a customer pays using the company’s
charge card.

If you don’t pay your charge card bill in full, you’ll get a one-month grace period, when no
interest is charged. After that, you’ll be charged interest that averages about 18%. It you don’t
pay after about months, three months, your account will be closed and your bill sent to the
collections departments.
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CASH ADVANCES
Many people use their credit or charge cards to obtain cash advances, Cash advances are
generally more expensive than standard credit card charges. Most banks charge a transaction
fee up to 4% for taking a cash advance. They also charged interest from the date the cash
advance is posted, even if you pay it back in full when your bill comes. Finally, the interest rate
is often higher or cash advances than it is on ordinary credit card charges.

ATM CARDS
ATM cards are issued by banks essentially to give bank customers flexibility in their banking
hours. In most areas, with an ATM card you can withdraw money, make deposit, transfer,
money between accounts, find out your balance, get a cash advance and even make payments
at all hours of the day or night.

DEBIT CARDS
Debit cards combine the functions of ATM cards and checks. Debit card area issued by banks
but are used at stores, not at the banks themselves. When you pay with a debit card, the
money is automatically deducted from your checking account. Many banks issue a combined
ATM/Debit card that looks just like a credit card and can be used in places where credit cards
are accepted. But don’t be mistaken- they are not credit cards. The money you spend comes
out of your checking account immediately.

Many people prefer debit cards over checks for two reasons:
• You do not have to carry checkbook and present identification, but are still able to make
purchases directly from your checking account.

• You pay your bills immediately, unlike when you use a credit card and get the bill later.

But there are disadvantages to using debit cards. Many people prefer having 20-25 days to pay
their credit card bills. Also, consumers using debit cards don’t have the right to withhold
payment in the event of a dispute with the merchant over the goods or services paid for. In
addition, many banks and merchants charge transaction fees for using debit card. Finally, if
debit card number is stolen on the internet, the may drain your bank account before the bank is

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able to complete its investigation. For this reason, it’s better to use credit, rather than debit,
cards for online purchase.

STORE VALUE CARD

Electronically processed card that stores monetary value
Value can be stores on a chip or magnetic strip on the card.
Typically used by public utilities where a large number of small value transactions can replace
cash e.g., MTNL Card, BEST Card.

SMART CARD
Has an implanted computer chip incorporated in the card plastic which gives it the power to
perform many different functions like having a PC in your wallet!
Multiple applications on the same card e.g. credit, debit, electronic cash, driving licenses,
secure identification hence you need to carry less cards in your wallet.
Chip can record data or value or both and can store up to 80 times more information than a
magnetic chip.
Terminal on which the card is used has a chip reader in addition to the magnetic stripe reader.

CO-BRANDED CARD
Banks enter each into partnership with a non-bank to market credit cards.
Both parties are into the alliance for financial gain as the non bank partner is a profit-making
company with a good customer base.
The bank gains an additional customer base while the non-bank partner can offer credit cards to
its members.
A customized card for a specific retailer or service provider, such as shoppers Stop that wishes
to solicits customers. The issuer looks after the card operations while the co-branded partner
shared marketing costs and responsibility
E.g. Citibank-Jet-Airways Card, HSBC-PNB card.

AFFINITY CARDS
To grow a portfolio, the bank enters into partnership with a non-bank to issue a card which may
have a third party name on the face of the card
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If the non-bank partner is a non-profit organization, the card is known as an affinity card.
As credit card issued by a member in conjunction with an organization or collective group (e.g. a
professional organization or special interest group) which is identified on the card. The issuer
often pays the organization a royalty per card or per transaction charged.

4.0 TYPES OF CREDIT CARD

PB Visa Classic / PB MasterCard Standard

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Summary
The service tax will be collected on the date the card is issued, on the completion of each year
or on the date of renewal of the card. This means that the abovementioned service tax shall be
levied on new credit card issued effective from 1 January 2010. For existing credit cards issued
before 1 January 2010, the service tax shall be levied upon anniversary of card issuance.
Meanwhile, the annual fees is RM 75.00 for principal and RM 45.00 for supplementary. At the
same time, there is no joining fee be charge when applying this card. Below are the finance
charges that need to be paid when using this card:
Repayment Behavior Interest Rate
a) With prompt minimum repayment for 13.5% p.a of the total outstanding balance
12 months within 12 consecutive from the 13th month.
months.
b) With prompt minimum repayment for 16% p.a of the total outstanding balance from
10 months and more within the last 12 the 13th month.
consecutive months.
c) Credit cardholder who does not meet 17.5% p.a of the total outstanding balance.
the above criteria.

PB Visa Gold / PB Gold MasterCard

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Summary

With effect from 1 January 2010, there will be service tax imposed on credit card as follows:

i. RM50 per annum on the Principal Card; and

ii. RM25 per annum on each Supplementary Card

The service tax will be collected on the date the card is issued, on the completion of each year
or on the date of renewal of the card. This means that the abovementioned service tax shall be
levied on new credit card issued effective from 1 January 2010. For existing credit cards issued
before 1 January 2010, the service tax shall be levied upon anniversary of card issuance. The
annual fees is RM 150.00 for principal and RM 100.00 for supplementary. For failure or late
payment fees, a further charge of a minimum of RM5 or 1% of total outstanding balance as at
statement date, whichever is higher, capped to a maximum of RM50, shall be debited to the
Card Account and the minimum monthly payment is 5% of the outstanding or a minimum of RM
50. Below is the payment charge for repayment behavior:
Repayment Behavior Interest Rate
a) With prompt minimum repayment for 13.5% p.a of the total outstanding balance
12 months within 12 consecutive from the 13th month.
months.
b) With prompt minimum repayment for 16% p.a of the total outstanding balance from
10 months and more within the last 12 the 13th month.
consecutive months.
c) Credit cardholder who does not meet 17.5% p.a of the total outstanding balance.
the above criteria.

Period No. of days Balance Aggregate

Balance
1/3/2010 1 1247.63 1247.63
2/3 – 4/3/2010 3 2033.23 6099.69
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 5/3 – 7/3/2010 3 2091.43 6274.29
8/3/2010 1 2148.43 2148.43
9/3 – 11/3/2010 3 1148.43 3445.29
12/3/2010 1 1341.33 1341.33
13/3 – 14/3/2010 2 1361.36 2722.72
15/3 – 24/3/2010 10 1475.36 14753.60
25/3 – 26/3/2010 2 1660.21 3320.42
27/3 – 28/3/2010 2 1678.31 3356.62
29/3 – 31/3/2010 3 1697.83 5093.49
31 49803.51

Average Daily Balance = 49803.51 / 31

= RM 1606.57

Interest Charge = (16% / 12) x 1606.57

= RM 21.42

Total Outstanding Balance = 1697.83 + 2142

= RM 1719.25

Minimum Payment = 5% x 1719.25

= RM 85.96

Total Outstanding Balance = 1719.25 + 85.96

after Min Payment
= RM 1805.21

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