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Malaysia: Public Bank eyes increase in non-interest income

KUALA LUMPUR: Amidst a dip in net interest margins in the banking sector, Public Bank Bhd (PBB) says it will focus on beefing up its non-interest income.

“The industry outlook will remain challenging, moving forward. We will look very hard into increasing our fee-based income, which is one of our strategies going forward,” managing director and chief executive officer Tan Sri Tay Ah Lek said at its AGM yesterday.

Tay said the industry’s “margin squeeze” will continue with the intense competition experienced today.

“The banking industry is experiencing challenging times. We can expect the margins to continue to be squeezed and this will affect the return on equity (ROE), moving forward. But our ROE is the still the highest among our peers at 16.5%. Our peers’ average is around 10%,” he said.

Tay said despite that, the bank is not resting on its laurels and would like to increase its revenue streams.

“We would like to get additional revenue. When the market is good, we just go through traditional channels. But in times like this we are struggling and are scraping the bottom of the barrel. We are finding it harder and harder and have to go to every corner of the market in order to make an extra ringgit,” he said.

On its cost-to-income (CTI) ratio, Tay said that there was a slight increase on this front at 32.3%.

“But we are the lowest and are still at the lowest compared to the others in the industry. The rest are in their 40s, either in the mid or high 40s. The increase in the CTI is mainly coming from the cost of compliance (due to regulations),” Tay said.

“We have to comply with more controls in place and this cost would definitely increase, and this is the same for everyone in the industry.

“So, there will be slight pressure on this front but it should be able to sustain around this level,” he added.

He said management is confident about its asset quality and would be able to sustain due to the credit prudence and culture that exists in PBB.

“It is due to the prudence of the management that has been built over the years that has been inculcated by our chairman Tan Sri Teh Hong Piow,” he said.

Meanwhile, Tay said demand for Internet banking has been on an increase and the bank continues to improve efficiency and enhance security from time to time.

On the outlook for the respective lending segments, Tay said the property market continues to be soft but there are opportunities in financing the affordable housing segment.

“This is what we would like to target, while the high-end is on a very selective basis,” he said.

He noted that in the automotive segment, car sales had dropped but he said there still are opportunities in this segment.

“There will still be buyers for new cars, except that some buyers may decide to postpone changing their cars.

“It is definitely challenging times for the industry, but having said that, there will still be growth; but growth will be at a more moderate pace,” said Tay.

Source: http://www.thestar.com.my/business/business-news/2017/03/28/public-bank-eyes-increase-in-noninterest-income/#HuCvjFWX0UDHLmIf.99