This document provides a fundamental analysis of PBBANK for the financial year 2014. It analyzes various aspects of PBBANK's business such as its profitability, efficiency, asset quality, capital adequacy, growth drivers, and risks. The analysis finds that PBBANK has consistently high profitability and low costs. Its asset quality is also strong with low problem loans. However, it faces risks from margin compression and slowing loan growth. Overall, the document performs a thorough analysis of PBBANK's financial performance and position.

1. PBBANK
FUNDAMENTAL ANALYSIS
Financial Year 2014 (31 December 2014)
At the time of writing, I owned shares of PBBANK.
11 November 2015
L. C. Chong
http://lcchong.wordpress.com
https://www.facebook.com/groups/285121298359919/

2. DISCLAIMER
I am NOT an investment advisor nor a financial advisor, and no information provided
here is to be interpreted as a suggestion to buy or sell securities.
Stock analysis in this presentation may not neutral because I have incorporated my
risk appetite and principles in the analysis.
2

3. DECLARATION OF INTEREST
• At the time of writing, I owned shares of PBBANK.

4. KEEP IN TOUCH
http://lcchong.wordpress.com
https://goo.gl/jjkq4P

5. SCOPE
• Figures and ratios are based on the figures reported in Annual Report or the latest
Q4 Quarterly Report (QR)
• Unless there is a need, this analysis will not include financial figures reported in Q1,
Q2 and Q3
• I will provide QR result highlights in my blog
• Valuation is not covered in this analysis
• I will provide valuation in my blog.

6. CHANGES
• 22 Oct 2015 – First write up of PBBANK in PowerPoint format
• 3 Nov 2015 – Removed peer comparison
• 11 Nov 2015 – Applied new template

7. OTHER REFERENCES
• Peer Comparison in Bank Industry (KLSE) –
http://www.slideshare.net/lcchong76/bank-industry-klse-peer-comparison

8. BUSINESS PROFILE
• The Bank is principally engaged in all aspects of commercial banking and the
provision of related financial services
• One of the leading banking groups in Malaysia, with overseas market presence in
Cambodia, Vietnam, Laos, Hong Kong, China and Sri Lanka
• Offers a comprehensive range of financial products and services covering, amongst
others, personal banking, commercial banking, Islamic banking, investment banking,
share broking, trustee services, nominee services, sales and management of unit
trust funds, bancassurance and general insurance products

9. BUSINESS PROFILE (CONT.)
Hire Purchase Retail Operations Corporate Lending
Treasury and Capital
Market Operations
Investment Banking Fund Management Others
Domestic Operating Segments

10. BUSINESS PROFILE (CONT.)
Hong Kong
SAR
Cambodia
Other
Countries
Overseas Operating Segments

11. OWNERSHIP SUMMARY
INSTITUTIONS
44%
CORPORATIONS (PRIVATE)
32%
PUBLIC AND OTHER
22%
INDIVIDUALS/INSIDERS
1%
STATE OWNED SHARES
1%

12. TOP 5 SHAREHOLDERS
CONSOLIDATED TEH
HOLDINGS SDN BERHAD
47%
EMPLOYEES PROVIDENT
FUND OF MALAYSIA
32%
PERMODALAN NASIONAL
BERHAD
13%
SELECTED SECURITIES SDN.
BHD.
4%
STATE STREET GLOBAL
ADVISORS, INC.
4%

13. OWNERSHIP ANALYSIS
• Main shareholders of PBBANK are Consolidated Teh Holdings and institutional
funds
• PBBANK is covered by a lot of local and foreign analysts
• This provides quite a good liquidity to this shares.

14. ECONOMIC MOATS
• Cost Advantage
• PBBANK enjoys extreme high net profit margin, and could be the highest among the
banks in Malaysia
• On the other hand, the banking sector is facing Net Interest Margin (NIM) compression
• NIM compression will persist in the next few years.
• Switching Costs
• PBBANK’s wide networks, both local and also global reach
• Another important is inertia. Many people don’t switch banks, even if they feel that
they’re being nickeled and dimed by their current bank.
• The inertia is weaker nowadays. Consumers can have few bank accounts in different
bank, and change their preferred bank easily. Attractive refinancing offers provided by
other banks.

15. ECONOMIC MOATS (CONT.)
• Network Effect
• Strong brand and leadership position in the domestic market
• Expected to continue with ETP investment momentum
• Intangible Assets
• The abundant of experience and strong workforce
• Widely known and well recognized by its unique brand name and its head logo
• Efficient Scale
• Have characteristics of rational oligopolies
• Can decide to lower its prices, change its output, expand into a new market, offer new
services, or advertise. This will have powerful and consequential effects on the
profitability of its competitors

16. PROFITABILITY
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
PRE-PROVISION OPERATING INCOME AND ROE
From FY10 to FY14, pre-provision operating income of
PBBANK constantly increased 5.8% yearly

17. PROFITABILITY (CONT.)
1.354%
1.481%
1.402%
1.338%
1.315%
22.3%
23.3%
21.2%
19.9%
16.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1.200%
1.250%
1.300%
1.350%
1.400%
1.450%
1.500%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
ReturnonEquity
NetIncome%TangibleAssets
Net Income % Tangible Assets Return on Equity

18. PROFITABILITY (CONT.)
• Using Moody’s rating system as benchmark, PBBANK’s profitability is rated as M+
(Medium+) for FY14
• To help you gauge the rating, for FY11, PBBANK’s profitability is rated as S- (Strong-)
• ROE decreased from 23.3% (FY11) to 16.1% (FY14) due to increase of tangible assets
(such as loans and investment portfolio)
• We can clearly see this in the “Net Income % Tangible Assets” chart.

19. PROFITABILITY (CONT.)
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2010 2011 2012 2013 2014
DOMESTIC BUSINESS
Hire Purchase Retail Operations Corporate Lending
Treasury and Capital Market Operations Investment Banking Fund Management
Others Head Office

20. PROFITABILITY (CONT.)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2010 2011 2012 2013 2014
OVERSEAS BUSINESS
Hong Kong SAR Cambodia Other Countries

21. PROFITABILITY (CONT.)
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Revenue Stream
Interest Income Commissions and fees Investment Income Other Income

22. EFFICIENCY
30.7%
29.8%
31.2%
30.7%
30.0%
29.0%
29.5%
30.0%
30.5%
31.0%
31.5%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Cost to Income
In the past 5 financial years, PBBANK maintained its cost-to-income in the range of 29%-31%. Efficiency
of PBBANK can be graded as A.

23. ASSET RISK
1.1%
0.9%
0.7% 0.7%
0.6%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Problem loans % gross loans
By Moody’s standard, PBBANK’s asset risk can be rated as
VS+ (Very Strong+). This also indicates that PBBANK is
very strict in loan approval.

24. CAPITAL ADEQUACY
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Chart Title
Tier 1 Ratio Tangible Common Equity % RWA
• PBBANK increased regulatory capital, from 11.1%
(FY13) to 12.8% (FY14). This is way above Bank Negara
requirement.
• “Tangible Common Equity % RWA” increased from
9.6% (FY13) to 12.2% (FY14). Again, by Moody’s
standard, this is rated as M+ (Medium+).

25. FUNDING STRUCTURE & LIQUID
RESOURCES
13.2%
11.0%
8.6%
9.0%
10.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Market funds % Tangible Banking Assets
As of FY14, “market funds/tangible banking assets” of
PBBANK is 10.0%, which is rated as S (Strong).

26. FUNDING STRUCTURE & LIQUID
RESOURCES (CONT.)
13.8%
19.9% 19.7%
18.9%
22.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Liquid Banking Assets % Tangible Banking Assets
Since FY11, PBBANK has been working on improving
liquid banking assets – 13.8% (FY11) to 22.7% (FY14). We
can rate this as M (Medium).

27. FUNDING STRUCTURE & LIQUID
RESOURCES (CONT.)
87.6%
87.8%
87.1%
87.5%
88.0%
86.6%
86.8%
87.0%
87.2%
87.4%
87.6%
87.8%
88.0%
88.2%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Loan-to-deposit ratio
The following chart shows loan-to-deposit for PBBANK,
and the range is between 87% to 88%. We will compare
this with other banks later.

28. MARKET RISK APPETITE
6.7%
9.2%
8.4%
9.6%
9.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
Market Risk Appetite
Market Risk Appetite of PBBANK is less than 10% where
this can be rated as A.

29. GROWTH DRIVERS
• 25 Jul 2014 – To focus more on commercial property loans and loans to civil
servants with higher yields
• 25 Jul 2014 – After the completion of its acquisition of another 50% equity in VAD
Public Bank (VPB) presently held by Joint Stock Commercial Bank for Investment and
Development of Vietnam (BIDV), VPB will be converted into a 100% owned foreign
bank.

30. GROWTH DRIVERS (CONT.)
• 25 Jul 2014 – While PBBANK is expected to continue to have tight credit control,
hence solid quality, the concerns of heightening credit cost remains due to higher
living cost that would potentially impact borrowers’ affordability
• 25 Jul 2014 – To maintain low CIR due to excellent cost control and operating
efficiency, ie. CIR of ~30% for the next 2 years
• 6 Jul 2015 – Public Bank strengthens collaboration with Japan’s Resona Holdings.

31. ISSUES/RISKS/CHALLENGES
• ROE on declining trend and is set to decline further after the completion of right
issue exercise. Analysts are expecting ROEs of 18.6% and 16.7% for FY14 and FY15
respectively
• 6 Feb 2015 – The impact on the rebalancing of loan portfolio towards the margin
compression will still be significant in FY15 but the impact will gradually taper off
over the next 3 years with smaller impact in the latter years.

32. ISSUES/RISKS/CHALLENGES (CONT.)
• 6 Feb 2015 – Management highlighted that the slowdown in residential property
loans was part of the Group’s strategy to be conservative and to avoid financing
properties for speculation purposes and focus on the mass market for financing of
affordable houses. Elsewhere, HP financing gained momentum slightly to a growth
of 7.5%yoy. The Group remained as leader in domestic passenger vehicle financing
with an improved market share of 28.1%
• 31 Jul 2015 – Slower loan momentum for Hong Kong and China and the other
countries

33. ISSUES/RISKS/CHALLENGES (CONT.)
• Tighter lending rules and slower loan growth – weaker-than-expected NIMs
• Slower than expected ETP projects rollouts
• Keener competitions and hence further margin squeeze
• Sharp turn in NPLs hence higher credit charge
• Potential asset quality pressure arising from changing macroeconomic environment
• Competitive landscape to put further pressure on loan pricing & funding costs
• Deterioration in asset quality
• Adverse foreign exchange movements.

34. SWOT ANALYSIS
• Strength
• One of the top 3 banking group in Malaysia by asset size
• Public Bank Group serves the financial needs of over eight million customers from all
walks of life in Malaysia and in other countries in which the Group operates
• Unbroken profit track record of the Group
• Leader in residential mortgages, passenger vehicle financing and commercial property
financing in Malaysia
• Lowest cost-to-income ratio in the industry
• Lowest impaired loan ratio

35. SWOT ANALYSIS (CONT.)
• Weakness
• Only a regional player and limited global presence
• Need more branches as the reach is scarce compared to leading banks
• May have to raise more cash to meet Basel III requirements
• Continued intense competition may suppress net interest margins

36. SWOT ANALYSIS (CONT.)
• Opportunities
• Overseas Operations and collaborations
• Business diversifications like Insurance and Mutual funds
• New business specific products for Small and medium scale enterprises
• Room to grow more fee based income
• Public Mutual to continue its strong performance

37. SWOT ANALYSIS (CONT.)
• Threats
• Increasing competition in home mortgages will inevitably result in some compression of
the net interest margin
• Sovereign Debt crisis in the Euro Zone
• Higher capital requirements under Basel III
• Fierce competition in the domestic banking market
• More stringent rules to lending introduced by BNM

38. SHAREHOLDER RETURN
Time Frame Date Bought at Original
Value
Dividend
Received
Unrealized
Gain/Loss
Current
Return
CAGR %
3-Y 22 Oct
2012
14.836 14,836 1,600 3,804 20,240 10.9%
5-Y 22 Oct
2010
12.727 12,727 2,619 5,913 21,259 10.8%
10-Y 21 Oct
2005
6.806 6,806 5,807.83 12,648.52 25,262.35 14%
Assumptions:
1. Commission paid is ignored in this simulation
2. The current price is 18.64 (as of the time of writing)
3. Unit purchased is 1,000.

39. SHAREHOLDER RETURN (CONT.)
67%
46% 46% 45% 44%
0%
10%
20%
30%
40%
50%
60%
70%
0.0000
0.1000
0.2000
0.3000
0.4000
0.5000
0.6000
0.7000
2010-12-31 2011-12-31 2012-12-31 2013-12-31 2014-12-31
CAGR -1.4%
To maintain capital adequacy, in general, banks unlikely
to maintain high dividend payout.

40. GOING FORWARD
• Moving forward, I believe that PBBANK result will be stable or a bit slow down. This
is because loan applications will continue to be slow marginally and NIM
compression will be higher in the future
• PBBANK is expected to maintain its leading market position in the domestic retail
segment, supported by continuing demand in home mortgages, vehicle financing
and small and medium enterprises ("SME") lending