Public Bank financial analysis

1. A brief history of Public Bank Berhad 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. 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. Public Bank is the most recognised 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 capitalisation and balance sheet. 2. Public Bank product and services Public Bank provide a wide range of banking and financial services including retail commercial banking, corporate banking, investment banking, stock broking, funds managemen wealth management t, services , Islamic banking, home mortgage financing, vehicle hire purchase financing and commercial lending to small- and medium-sized enterprises. 3. List of strengths and weaknesses of Public Bank To determine the actual performance of the company more precisely, a comparison among the factors discussed below need to be made ( ZainalAbidin, 20097). The factors measured can be a benchmark for comparison and are as follows: 3.1 Management The factors that are been taken into consideration are: a. Recruitment and selection of a workforce that are suitable and of high quality b. Retention of capable workers c. Highly skilled middle and top managers as a result of development programs organised 3.2 Marketing The factors that are been taken into consideration are: a. Identification of the customer needs and satisfying those needs b. Marketing and segmentation of the market that are suitable and strategic c. Ability to choose and manage distribution channels

(Core customer deposits comprising fixed deposit (savings deposit and current account gre by 20. Strong corporate governance. Relationship with shareholders c. Consistent product quality that meets user needs/ preferences b.5% respectively . f. Financial performance of the company b. Ability to recognise relevant consumer be a viour and produce products that attract their interests. (Public Bank Islamic on mid-market commercial enterprising). 3.2% 12. The efficiency in terms of Public Bank s cost to income ratio. Expertise in forecasting current needs and identifying ne market segments.3 Fin n i l a.  ©  ©¨ ¦§ ¦ £ ¥ ¢ ¢ ¤ £ ¡ Identifying Public Bank strengths and weaknesses Table 1 (Determining strengths)     4. Productive and motivated in sales g. ethods in identif in co p n s st e n ths and weaknesses       .4 Op tion/p odu tion a.4 % and 12. Effec ve use of promotional tec niques and market targeting e. c.d. Financial performance compared to the other competitors 3.

Table 2 (Determining weaknesses) Table 3 (Strengths and weaknesses combined) 4.1 St e n ths   .

Whilst shows how the firm hold their strong position in the industry. 5) Great staffing and perks a. 3) Product competitiveness a. One particular customer who is a credit card user of Public Bank wishes to update his contact details via fax but was rejected. The process was slow that the customer files a complaint against the bank. which a lot customer complaint to be slow and this is causing dissatisfaction among the customers. Public Bank encourage skill acquired and knowledge development (mandatory training for all level and staff).1) Low cost to income ratio a. The other competitors have copycatting their core product such as unit trust and . maximum of RM250k. 4) Strong company image a. The firm is stationing service ambassador approximately 500 customer service representative. Public Bank successfully reach 34. Public Bank are not only recognised through their financial performance but also for their achievements as a successful financial institution by winning a range of awards throughout the years. Another known weakness in Public Bank is the online service provider. Public Bank s healthy profit trend shows the firm s strengths and continues growth. There was actually a complaint about Public Bank s poor service. 2) Slow online service provider a. Public Bank s pursuit of excellence in corporate governance has enhance the shareholder value. Public Bank is also upgrading its service by promising to resolve any complaints by maximum of 10 days. This shows that Public Bank itself is a well known brand. They also offer 0% interest on staff home loan. 3) Strong corporate governance a. 2) Healthy profit trend a.2 Weaknesses 1) Poor customer service a. 4. They encourage performance based reward (bonuses up to 23 month of salary). It promotes a high premium of transparency and accountability to the shareholder.4% which is the most efficient among Malaysian banks such Maybank and CIMB.

ratio analysis can predict future bankruptcy. Public Bank is allocating its budget to increase booth services. 5) Limited self-service technology a. 5.00 40.40 46.40 31. Selected locations for ATMs other than branches. activity ratios.00 58.00 0. it is important for an industry or a company to find its own specific ratio which is relevant and applicable.1 Cost to Income Ratio (to measure efficiency) 120. However.20 2008 44. 4) Online security a.2%: 2008) as compared to Industry and its closest competitors ( Maybank and CIMB) . Financial ratios can be used to analyse trends and to compa the firm's financials to those of other firms or re Industry.50 100.00 Public Bank Maybank CIMB Industry Figure: Public Bank Cost to Income for 5 years ( Average of Industry= > 40%) Public Bank is the most efficient Malaysian bank in Malaysia.80 49. leverage ratios. Listed below is the list of important ratios to interpret Public Bank performance.00 48.insurance (Bancassurance). Public Bank is having problem with their online security as phishing cases are on the rise and not to mention targeting Public Bank s customers as well.00 80. profitability ratios and growth ratios. In some cases. Cash deposits and cheque deposits are only allocated at the branch.00 60. The lowest cost to income ratio (34. However it is under control as MyCert is trying to avoid any phishers send to Public Bank s customers.40 2009 20.4%: 2009 31.00 34.40 52. Financial ratios and performance Indicator Financial ratios are useful indicators of a firm's performance and financial situation. 5. The components for ratios are liquidity ratio.

7x 1.8x 1. Public Bank is the most efficient Bank in utilising it resources comparing to all its competitor and Industry average. 5. Times Interest Earned Ratio PB Return on Assets % Maybank Return on Assets % CIMB Return on Assets % 2005 2.00 2009 2008 2007 2006 2005 If we compare the results of Cost to Income for 5 years ( 2005 -2009).00 31.3x 1.00 30.0x 1.40 33.9x 2010 (till Q3) 2.5x 2007 1.10 32.6x 2009 2. Public Bank still maintain the percentage below 40% (Industry estimating)From here we can conclude.0x 2.3x 2.70 33.20 Public Bank 29.00 34.8x 2008 1.1x It means that PB is comparably average and equally the same on the ability to meet its annual interest cost as in comparison with competitors listed.7x 1. The higher ratio is important for Public Bank to extend the earning to be decline without resulting in financial embarrassment due to default. .0x 2.4x 2006 1.00 34.7x 1.80 33.Public Bank 35.00 31.9x 1.8x 1.2 Leverage Ratio a.3x 1.00 32. From the table Public Bank and its competitors have almost similar capability to meet its interest payment obligation and the financial risk related in which shows lower risk of default.

CIMB as low as 0.45 3.57 2007 2. Total Asset Turnover.4% It measures a firm overall return on all of its assets investment.4% 1. Here we can summarize that Public Bank is consistently ensure return on its investment compared to its competitors since both competitors have ups and down in maintaining the return for an asset hold (Maybank as low as 0.0% 1.69 2008 2.78 Total Assets Turnover also known as Total Assets Utilization.43 4. It measures the firm s effectiveness in using all of its assets. Improvement is needed as both competitors able to meet more than 3% as compared to Public Bank which only maintain an average of 2%++.3% 1.2%-1.3% 1. Results show the productivity of assets in producing revenues and the firm ability to control costs in its operation (ranging 1. PB 2005 % Maybank % CIMB % 3.2% 0.50 2010 (till Q3) 2.18 3. The higher ratios is the better.7%: 2005) .4% 1.2%: 2009.5.4 Profitability Ratios a.7% 1.4%).16 3.28 2.2% 1.02 2006 2. Public Bank have the lease advantage on utilising the asset it have.1% 1.54 2009 2. Return on Asset PB 2005 2006 2007 2008 2009 2010 (till Q3) 1.21 3.3% 1. 5.66 3. Public Bank should find a way to challenge CIMB strategy since it achieves 4. Comparing to others competitors.6% 1.2% 1.3 Activity Ratio a.3% Return on Assets % Maybank Return on Assets % CIMB Return on Assets % 1.46 3.3% 1.2% 1.16% in the recent Q3 of 2010.37 3.99 4.1% 0.3% 1.16 3.35 3.

The Growth is important for us to determine the earning increment and available for shareholder. growth of EPS by Public Bank is not much different except for year 2009 but in small figure compared to competitors.7% 17. it keep maintaining the return to shareholder. What we can see.3% These ratios measure of the rate of return on the investment of the common stockholder or net worth.1% in year 2008.4% 7. Earnings per Share (Annual Percentage Growth in EPS) PB 2005 2006 2007 2008 EPS Maybank EPS CIMB EPS 14.0% 74. Return on Equity PB Return on Equity % Maybank Return on Equity % CIMB Return on Equity % 2005 17.1% 2008 27.1%) (77. High ratios will be favourable to owner shareholder and will attract more investor on Public Bank shares.0% 16.3% 11.9% 12.5 Growth Ratio (Growth over Prior Year) a.b. As above results on financial. As an example. A stable Earning per share or small changes might reflect the perc entage yearly. Public Bank will be the Company of choice.1% 21. The higher ratios the better return to the owner of the firm.4% 252.4% (19. If an investor required a stable EPS.5% 17. we can conclude that Public Bank have it strength of healthy profit trend and Good Company image financially .0% 60.2% 3.3% 2009 (4.6% 2007 23.1% 14.9% 15.6% 15.1%) 37.5% 2010 (till Q3) 25.1% Earnings per share are important since it indicate earnings available to the owner of share.7% 13.3% 2009 24.1% (31. Maybank offer a decline in Growth as high as 77.7%) 2010 (till Q3) 13.5% 14.5%) 349. 5.6% 16.9% 22.8% 14.0% 2006 19. Public Bank maintain the highest percentage of return to its shareholder. it means that it a stable EPS as compared to its competitors.6% 8. When all its competitors below 20% ROE.0% 20.7% 46. From 2005 2010.5% in year 2008 and CIMB also facing a decline of 31.

6. Performance indicator (Source www. and the latest stock market for Public Bank shows a stable growth up to November 2010. Picture Automoti e Finance Compan of the Year 2010 % Frost and Sulli an 1 $ # AWARDS. RECOGNITION & RANKINGS RECEIVED IN 2010 $ AWARDED B .2 Awards and reco nition 2009 and 2010 " No.malaysiaco.com/business/listed-company/finance/) Stock market can also be seen as a performance indicator for Public Bank as it also represents the strength and development of the firm. ! 6.

Best Foreign Exchange Provider 2011 in Malaysia in the Global Finance World's Best Foreign Exchange Providers 2011.Banking in the BrandLaureate Awards 2009 2010 Asia Pacific Brands Foundation 3 Best SME Bank in Malaysia 2010 Alpha Southeast Asia 4 The Asian Banker Best Retail Bank in Malaysia 2009 5 6 Best Domestic Bank in Malaysia 2010 The Asset . Global Finance 2 Best Brands in Financial Services .

This information can also be used to determine their current competitive advantages. Conclusion Internal analysis is important as it help the firm to see its position in the industry. Social Responsibility. discover their potential advantages and possibly see what is preventing competitive advantages from being developed in the firm. Management. Corporate Governance. . Environmental Responsibility and Investor Relations The Asset 7. The firm s strengths and weaknesses can also be identified. The most important part is to help to firm to develop strategic planning to gain competitive advantage compared to the other competitors.7 Corporate Governance Asia Recognition Award 2009 Corporate Governance Asia 8 Platinum Award for AllRound Excellence in Financial Performance.

Selangor DarulEhsan.com Zainal.maybank.thestaronline. Oxford Fajar.com www. (2010).com www.References www. and Wong.cimb.publicbank.com www.com www.capitaliq. . Strategic Management: Internal environmental analysis.

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