STRICTLY PRIVATE & CONFIDENTIAL
SERIAL NO.:________
(Company No. 6463-H)
(Incorporated in Malaysia)
and
PBFIN BERHAD
(Company No. 6471-U)
(Incorporated in Malaysia)
INFORMATION MEMORANDUM
ISSUANCE OF NON-CUMULATIVE PERPETUAL CAPITAL
SECURITIES OF UP TO RM5.0 BILLION IN NOMINAL VALUE
BY PUBLIC BANK BERHAD WHICH ARE STAPLED TO
SUBORDINATED NOTES ISSUED BY PBFIN BERHAD, UNDER
A NON-INNOVATIVE TIER 1 STAPLED SECURITIES
PROGRAMME
Principal Adviser/Lead Arranger
(Company No. 20027-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Joint Lead Managers
CIMB Investment Bank Berhad
(Company No. 18417-M)
(A Participating Organisation of Bursa Malaysia
Securities Berhad)
(Company No. 20027-W)
(A Participating Organisation of Bursa Malaysia
Securities Berhad)
RHB Investment Bank Berhad
(Company No. 19663-P)
(A Participating Organisation of Bursa
Malaysia Securities Berhad)
This Information Memorandum is dated 18 May 2009
RESPONSIBILITY STATEMENT
This IM has been approved by the Directors of (i) Public Bank Berhad (“Public Bank” or “PBB”
or the “Bank”) and (ii) PBFIN Berhad (“PBFIN”) (collectively PBB and PBFIN shall be referred
to as the “Issuers” and references to an Issuer mean either one (1) of them) and they
collectively and individually accept full responsibility for the accuracy of the information given
and confirm that, after having made all reasonable enquiries, and to the best of their
knowledge and belief, there are no false or misleading statements or other facts the omission
of which would make any statement in this IM false or misleading and there is no material
omission in this IM.
IMPORTANT NOTICE AND GENERAL STATEMENTS OF DISCLAIMER
This IM is issued in connection with the RM5.0 billion Non-Innovative Tier 1 Stapled
Securities (“NIT-1 Stapled Securities”) programme (the “NIT-1 Stapled Securities Programme”
or “Programme”) by the Issuers. Each issuance of the NIT-1 Stapled Securities will comprise
(i) non-cumulative perpetual capital securities (“Capital Securities”) issued by Public Bank;
and (ii) an equivalent in nominal value of subordinated notes (“Subordinated Notes”) issued
by PBFIN, a wholly-owned subsidiary of Public Bank (collectively “Stapled Securities”). The
proceeds from the Capital Securities will be used by Public Bank to acquire the rights under
the Note Assignment Agreement. The proceeds from the Subordinated Notes will be used by
PBFIN to on-lend to Public Bank pursuant to an inter-company subordinated loan on terms
and conditions which are the same as that of the Subordinated Notes and will be used to
finance the working capital, general banking and other corporate purposes of Public Bank.
At the point of issuance of the Stapled Securities, the Stapled Securities shall not be issued,
offered, sold, transferred or otherwise disposed of, directly or indirectly, nor shall any
document or other material in connection therewith, including this IM, be distributed, in
Malaysia other than to persons who fall within any of the categories of persons specified
under Schedule 6 or Section 229(1)(b), Schedule 7 or Section 230(1)(b) and Schedule 9 or
Section 257(3) of the Capital Markets and Services Act, 2007 (as amended from time to time)
(“CMSA”).
Subsequent to the issuance of the Stapled Securities, the offer for purchase of, or invitation to
purchase the Stapled Securities will be subject to the selling restrictions in that the Stapled
Securities may not be offered or sold directly or indirectly, nor may any document or other
material in connection therewith be distributed in Malaysia other than to persons who fall
within any of the categories of persons specified under Schedule 6 or Section 229(1)(b) and
Schedule 9 or Section 257(3) of the CMSA.
No application is being made to list the Stapled Securities on any stock exchange, nor is any
such application contemplated.
The Issuers have authorised (i) Public Investment Bank Berhad (“Public Investment Bank” or
“PIVB” or the “Principal Adviser/Lead Arranger” or the “Facility Agent”); (ii) CIMB Investment
Bank Berhad (“CIMB Investment Bank” or “CIMB”) and (iii) RHB Investment Bank Berhad
(“RHB Investment Bank”) (collectively PIVB, CIMB and RHB Investment Bank shall be
referred to as the “Joint Lead Managers”) to distribute this IM. This IM may not, in whole or in
part, be reproduced or used for any other purpose, or shown, given or sent to or filed with any
other person including, without limitation, any government or regulatory authority except with
the prior consent of the Issuers or the Principal Adviser/Lead Arranger or the Joint Lead
Managers as required under any Malaysian laws, regulations and guidelines.
No representation or warranty, express or implied, is given or assumed by the Principal
Adviser/Lead Arranger or the Joint Lead Managers as to the authenticity, origin, validity,
accuracy or completeness of information and data contained in this IM or that the information
or data remains unchanged in any respect after the relevant date shown in this IM. The
Principal Adviser/Lead Arranger and the Joint Lead Managers have not accepted and will not
accept any responsibility for the information and data contained in this IM or otherwise in
i
relation to the Stapled Securities and shall not be liable for any consequences of reliance on
any of the information or data in this IM, except as provided by Malaysian laws. No person is
authorised to give any information or data or to make any representation or warranty in
relation to the Programme other than as contained in this IM and, if given or made, any such
information, data, representation or warranty must not be relied upon as having been
authorised by the Issuers, Principal Adviser/Lead Arranger or the Joint Lead Managers or any
other person. The Principal Adviser/Lead Arranger and the Joint Lead Managers expressly do
not undertake to review the financial condition or affairs of the Issuers during the tenure of the
Stapled Securities or to advise any investor of the Stapled Securities of any information
coming to their attention.
The information in this IM supersedes all other information and material previously supplied (if
any) to the recipients. By taking possession of this IM, the recipients are acknowledging and
agreeing and are deemed to have acknowledged and agreed that they will not rely on any
previous information supplied (if any).
This IM has not been and will not be made to comply with the laws of any jurisdiction other
than Malaysia (the “Foreign Jurisdiction”), and has not been and will not be lodged, registered
or approved pursuant to or under any legislation (or with or by any regulatory authorities or
other relevant bodies) of any Foreign Jurisdiction and does not constitute an issue or offer of,
or an invitation to apply for, the Stapled Securities or any other securities of any kind by any
party in any Foreign Jurisdiction.
The distribution or possession of this IM in Malaysia or in any Foreign Jurisdiction may be
restricted or prohibited by law. Each recipient is required by the Issuers and the Principal
Adviser/Lead Arranger and the Joint Lead Managers to seek appropriate professional advice
regarding, and to observe, any such restriction or prohibition. None of the Issuers, the
Principal Adviser/Lead Arranger or the Joint Lead Manager accepts any responsibility or
liability to any person in relation to the distribution or possession of this IM in Malaysia or in
any Foreign Jurisdiction. This IM is not and is not intended to be a prospectus and has not
been registered or lodged under the laws of Malaysia or of any Foreign Jurisdiction as a
prospectus.
In addition, recipients of this IM should note the selling restrictions in the Summary of the
Principal Terms and Conditions as set out in Section 2.0 of this IM.
By accepting delivery of this IM, each recipient agrees to the terms upon which this IM is
provided to such recipient as set out in this IM, and further agrees and confirms that (a) it will
keep confidential all information and data in this IM, (b) it is lawful for the recipient to
subscribe for or purchase the Stapled Securities under all jurisdictions to which the recipient
is subject, (c) the recipient has complied with all applicable laws in connection with such
subscription or purchase of the Stapled Securities, (d) the Issuers, the Principal Adviser/Lead
Arranger, the Joint Lead Managers and its respective directors, officers, employees and
professional advisers are not and will not be in breach of the laws of any jurisdiction to which
the recipient is subject as a result of such subscription for or purchase of the Stapled
Securities, and they shall not have any responsibility or liability in the event that such
subscription for or purchase of the Stapled Securities is or shall become unlawful,
unenforceable, voidable or void, (e) it is aware that the Stapled Securities can only be offered,
sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant
selling restrictions and all applicable laws, (f) it has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks of subscribing
for or purchasing the Stapled Securities, and is able and is prepared to bear the economic
and financial risks of investing in or holding the Stapled Securities, (g) it is subscribing for or
accepting the Stapled Securities for its own account, and (h) it is a person to whom an issue,
offer or invitation to subscribe for or purchase the Stapled Securities would constitute an
excluded issue, excluded offer or excluded invitation as defined in the CMSA. Each recipient
is solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions
to which it is subject. For the avoidance of doubt, this IM shall not constitute an offer or
invitation to subscribe for or purchase the Stapled Securities in relation to any recipient who
does not fall within item (h) above.
ii
This IM is not, and should not be construed as, a recommendation by the Issuers, the
Principal Adviser/Lead Arranger or the Joint Lead Managers or any other party to the recipient
to subscribe for or purchase of the Stapled Securities. This IM is not a substitute for, and
should not be regarded as, an independent evaluation and analysis of the Stapled Securities
or the risks associated therewith. Each recipient should perform and is deemed to have made
its own independent investigation and analysis of the Issuers, the Stapled Securities and all
other relevant matters, and each recipient should consult its own financial, legal and other
appropriate professional advisers.
Neither the delivery of this IM nor the offering, sale or delivery of any Stapled Securities shall
in any circumstance imply that the information contained herein concerning the Issuers is
correct at any time subsequent to the date hereof or that any other information supplied in
connection with the Stapled Securities is correct as of any time subsequent to the date
indicated in the document containing the same.
This IM includes “forward looking statements”. All these statements are based on estimates
and assumptions made by the Issuers that, although believed to be reasonable, are subject to
risks and uncertainties that may cause actual events and the future results of the Issuers to
be materially different from that expected or indicated by such statements and estimates and
no assurance can be given that any of such statements or estimates will be realised. In light
of these and other uncertainties, the inclusion of a forward looking statement in this IM should
not be regarded as a representation or warranty by the Issuers or any other person that the
plans and objectives of the Issuers will be achieved.
STATEMENTS OF DISCLAIMER
A copy of this IM will be deposited with the Securities Commission (“SC”) in accordance with
the CMSA, who takes no responsibility for the contents.
The issue, offer or invitation in relation to the Stapled Securities in this IM or otherwise are
subject to the fulfillment of various conditions precedent.
The SC had approved the NIT-1 Stapled Securities Programme via its letter dated 4 May
2009 (save and except for the issuance of the Stapled Securities to the retail investors which
application is still pending the approval from the Securities Commission). The approval of the
SC shall not be taken as recommendation by the SC to invest in the Stapled Securities.
The SC shall not be liable for any non-disclosure on the part of the Issuers and assumes no
responsibility for the correctness or completeness of any statements made or opinions or
reports expressed or contained in this IM.
This IM is not an offer to sell securities and is not soliciting an offer to buy securities described
herein in any jurisdiction where the offer for sale is not permitted.
PROSPECTIVE INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS
THE MERITS AND RISKS OF THE INVESTMENT. IT IS RECOMMENDED THAT
PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER
ADVISERS BEFORE PURCHASING OR ACQUIRING OR INVESTING IN THE STAPLED
SECURITIES.
EACH ISSUANCE OF THE STAPLED SECURITIES WILL CARRY DIFFERENT RISKS
AND PROSPECTIVE INVESTORS ARE STRONGLY ENCOURAGED TO EVALUATE
EACH ISSUANCE OF THE STAPLED SECURITIES ON ITS OWN MERIT.
iii
CONFIDENTIALITY
This IM and its contents are strictly confidential and are provided strictly on the basis that the
recipient shall ensure the same remains confidential. Accordingly, this IM and its contents, or
any information, which is made available in connection with any further enquiries, must be
held in complete confidence.
This IM is provided to prospective investors solely in relation to their own evaluation of the
Stapled Securities.
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iv
TABLE OF CONTENTS
Page No.
Section
Section
1.0
Executive Summary
1.1
1.2
1.3
1.4
1.5
1.6
Background of Public Bank Berhad
Brief Description of the NIT-1 Stapled Securities Programme
and the Stapled Securities
Details of Utilisation of Proceeds
Rating of the Stapled Securities
Selling Restrictions
Selected Financial Information
2.0
Summary of the Principal Terms and Conditions
2.1
Summary of the Principal Terms and Conditions of the
Capital Securities under the Programme
Summary of the Principal Terms and Conditions of the
Subordinated Notes under the Programme
2.2
Section
1
1
5
5
5
6
9
26
3.0
Investment Considerations
3.1
3.2
3.3
3.4
Risks Relating to the Public Bank Group
Risks Relating to the Industry
Risks Relating to the Stapled Securities
Potential Conflict of Interest Situation
4.0
Background Information of the Public Bank Group
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
Introduction
History
Share Capital and Substantial Shareholders
Background information of PBFIN Berhad
The Business of the Public Bank Group
Principal Subsidiaries
Stature of Public Bank
Profile of Directors
Senior Management
Public Bank Group’s Strategy
46
47
48
50
51
61
65
66
72
73
Section
5.0
Capitalisation and Indebtedness
74
Section
6.0
Funding and Capital Adequacy
75
Section
7.0
Asset Quality
82
Section
8.0
Risk Management
93
Section
9.0
Supervision and Regulation
98
Section
10.0
Overview of the Malaysian Economy
103
Section
11.0
Other Information
11.1
11.2
11.3
Material Litigation
Material Contracts Outside the Ordinary Course of Business
Material Contingent Liabilities and Material Capital
Commitment
Section
40
41
42
44
106
106
106
Appendix
I
Audited Financial Statements of Public Bank Berhad for the Year
ended 31 December 2008 provided in a form of a compact disc
Appendix
II
Audited Financial Statements of PBFIN Berhad for the Year ended
31 December 2008
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
SECTION 1.0
1.1
EXECUTIVE SUMMARY
Background of Public Bank Berhad
Public Bank was incorporated as Public Bank Limited in Malaysia on 30 December 1965 and
had on 15 April 1966 changed its name to Public Bank Berhad. Public Bank commenced
operations on 6 August 1966 and has been listed on the Main Board of Bursa Malaysia
Securities Berhad (“Bursa Securities”) since 6 April 1967. Public Bank was the third (3rd)
largest listed company in Malaysia by market capitalisation as at 31 December 2008. The
registered office of Public Bank is at 27th Floor, Menara Public Bank, 146, Jalan Ampang,
50450 Kuala Lumpur.
Public Bank is principally engaged in banking and finance company businesses and the
provision of related financial services. Public Bank together with its subsidiaries and associated
companies (“Public Bank Group” or “PBB Group” or the “Group”) are involved in banking,
Islamic banking, investment banking, financing, credit card business, stock broking, provision
of finance to purchasers of licensed public vehicles, sale of trust units and management of unit
trust funds, bancassurance and general insurance and other related financial services such as
trustee and nominee services.
For background information of PBFIN and profile of directors of PBFIN, please refer to Section
4.4 – “Background Information of PBFIN Berhad”.
1.2
Brief Description of the NIT-1 Stapled Securities Programme and the Stapled
Securities
The Programme will involve the issuance by PBB of up to RM5.0 billion nominal value of
Capital Securities that are stapled to the Subordinated Notes to be issued by PBFIN. The
Programme shall be available for utilisation for a period of seven (7) years from the first (1st)
issuance of the Stapled Securities. The first (1st) issuance of the Stapled Securities under the
Programme will be made within two (2) years from the date of the SC’s approval of the
Programme.
The Capital Securities are structured in accordance with the guidelines for issuance of noninnovative Tier 1 capital under the Risk-Weighted Capital Adequacy Framework (General
Requirements and Capital Components) issued by Bank Negara Malaysia (“BNM”) on 20
September 2007 (“RWCA Framework”).
Each issuance of the Stapled Securities under the Programme will involve the following:
a) Issuance of perpetual Capital Securities by PBB to investors.
This is the instrument that will qualify as non-innovative Tier 1 capital of PBB under the
RWCA Framework. The qualification derives from the features of the Capital Securities
including, inter alia, their perpetual nature, non-cumulative and discretionary distributions,
and no pressure for early redemption (for example, no step-up in coupon rates). Proceeds
from the Capital Securities will be used by PBB to acquire the note assignment right
described in (d) below.
b) Issuance of Subordinated Notes by PBFIN to investors.
This, together with (c) below, is the primary arrangement that will qualify the interest
payments made under the Stapled Securities as tax-deductible for PBB prior to any
Assignment Event. The Subordinated Notes are stapled to the Capital Securities in order
to pass interest payments from the inter-company subordinated loan to investors prior to
any Assignment Event. Upon the occurrence of an Assignment Event, the Subordinated
Notes shall be assigned to PBB and the Capital Securities will, in turn start making
1
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
distribution payments. In this manner investors shall continue to receive the same returns
(subject to any distribution payment restrictions described in Section 2.1 – “Summary of
the Principal Terms and Conditions of the Capital Securities under the Programme”) even
after the Subordinated Notes are assigned to PBB.
c) Granting of a subordinated inter-company loan by PBFIN to PBB.
This, together with (b) above, is the primary arrangement that will qualify the interest
payments made under the Stapled Securities as tax-deductible for PBB prior to any
Assignment Event. The interest payments on the inter-company subordinated loan will
enable PBFIN to meet its interest payment obligations under the Subordinated Notes.
Proceeds from the inter-company loan will be used to finance the working capital, general
banking and other corporate purposes of PBB.
d) Acquisition of a note assignment right over the Subordinated Notes by PBB from investors.
This entitles PBB to acquire the Subordinated Notes upon the occurrence of any
Assignment Event. Payment by PBB for the note assignment right is made upfront, using
proceeds from the Capital Securities. In this manner investors of the Stapled Securities are
required to make only one (1) payment being an amount equivalent to the face value of
one (1) issue of securities, either for the Capital Securities or the Subordinated Notes, but
not both.
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2
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Diagram 1:
Transaction flow in respect of the Stapled Securities to be issued under the
Programme
PBB
3
Rights under
the Note
Assignment
Agreement
3
2
RM
RM
1
Capital
Securities
INVESTORS
6
Subordinated
Loan
8
Periodic
interest
payments
5
7
Periodic
interest
payments
4
Subordinated
Notes
RM
PBFIN
The transaction flow sequence of the Stapled Securities is as follows :(1) & (2)
Investors will subscribe for the Capital Securities by paying PBB the consideration
equal to the nominal value of the Capital Securities.
(3)
PBB will then enter into a Note Assignment Agreement with such investors
pursuant to which PBB pays (using the proceeds from the Capital Securities) such
investors upfront, an amount equal to the nominal amount of the Capital Securities
subscribed by such investors, for the right to require the assignment of the
Subordinated Notes to PBB, as the Assignment Right Holder, upon the occurrence
of an Assignment Event. As such, upon the occurrence of an Assignment Event,
the Subordinated Notes will be automatically transferred to PBB.
Note: The amount payable by the investors for the Capital Securities will be netted
off against the amount payable for the note assignment right by PBB to the
investors.
(4) & (5)
The Subordinated Notes are issued simultaneously with the Capital Securities and
are stapled to the Capital Securities. Such investors shall subscribe for the
Subordinated Notes from PBFIN at par, by paying PBFIN the consideration equal
to the nominal value of the Subordinated Notes.
(6)
Following the subscription by such investors of the Subordinated Notes issued by
PBFIN, the proceeds from the issue of the Subordinated Notes will be on-lent by
PBFIN to PBB through the Subordinated Loan based on terms and conditions
which are the same as that of the Subordinated Notes, to finance the working
capital, general banking and other corporate purposes of PBB. The Capital
Securities shall have the same Distribution rate and Distribution Date as the
interest rate and the interest payment date of the Subordinated Notes to which
they are stapled.
3
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(7)
PBB will make periodic interest payments under the Subordinated Loan to PBFIN.
(8)
PBFIN will, in turn make periodic interest payments under the Subordinated Notes
to investors until the occurrence of an Assignment Event.
At the point of issuance of the Stapled Securities, each Capital Security will be stapled to a
Subordinated Note. Each Capital Security and Subordinated Note together will constitute a
Stapled Security which cannot be transferred or traded separately until the occurrence of an
Assignment Event. Pursuant to the occurrence of an Assignment Event and upon the
assignment of the Subordinated Notes to PBB, the Assignment Right Holder, the
corresponding Capital Security ceases to be stapled to the Subordinated Note that had been
assigned to PBB, and PBB may at its option redeem the Subordinated Notes.
So long as the Capital Securities are stapled to the Subordinated Notes, PBFIN will make
periodic interest payments to investors until the occurrence of an Assignment Event. Pursuant
to the occurrence of an Assignment Event and upon the assignment of the Subordinated Notes
by investors to PBB, PBB will then begin to make periodic distribution payments on the Capital
Securities to investors.
In respect of the Capital Securities, in the event that PBB has not paid dividends to its
shareholders in the twelve (12) month period immediately preceding any Distribution payment
date, PBB has the option to cancel the Distribution payments and such cancelled Distributions
will not be paid and will not be accumulated. If PBB is in breach of BNM’s minimum capital
adequacy requirements on a Distribution payment date or the payment of the Distribution
would result in a breach of BNM’s minimum capital adequacy requirements, the Distribution
shall be cancelled. PBB is required to make Distribution payments on the Capital Securities if
PBB pays dividends on its ordinary share capital.
In respect of the Subordinated Notes, PBFIN has the option to defer payment of interest. If
PBB is in breach of BNM’s minimum capital adequacy ratio requirements as applicable to PBB
or the payment of interest by PBB on the Subordinated Loan would result in a breach by PBB
of BNM’s minimum capital adequacy ratio requirements, interests will be deferred on a
cumulative basis.
Any non-payment and cancellation of the Distribution under the Capital Securities pursuant to
the Payment Limitation Condition and any deferral of interest payments under the
Subordinated Notes will not be deemed as a default but will trigger the Dividend and Capital
Stopper, and an Assignment Event respectively.
The Dividend and Capital Stopper shall remain in force until PBB has fully paid Distributions for
a period of one (1) year or has set aside such amounts in a designated trust account for the
payment to investors of the Capital Securities or paid the deferred Subordinated Notes interest
in full. If interest accruing on the Subordinated Notes from the last interest payment date before
an Assignment Event up to (and excluding) the Assignment Event date is not paid to investors,
the Dividend and Capital Stopper will apply until such amounts are fully paid to investors.
The tenor of the Capital Securities is perpetual, subject to cancellation by PBB or the Facility
Agent in accordance with the terms and conditions of the Capital Securities. PBB may, at its
option and subject to the Redemption Conditions, Redeem the Capital Securities no earlier
than the fifth (5th) anniversary of the relevant issue date of the Stapled Securities, and any
relevant Distribution payment date thereafter.
The tenor for each issue of the Subordinated Notes is up to fifty (50) years and PBB may, at its
option redeem the Subordinated Notes following an Assignment Event.
The Capital Securities and the Subordinated Notes have both been assigned long term ratings
of AA2 by RAM Rating.
For further details, please refer to Section 2.0 – “Summary of the Principal Terms and
Conditions”.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
1.3
Details of Utilisation of Proceeds
Proceeds from the Capital Securities will be used by Public Bank to acquire the rights under
the Note Assignment Agreement. The proceeds from the Subordinated Notes will be used by
PBFIN to on-lend to Public Bank pursuant to an inter-company subordinated loan on terms and
conditions which are the same as that of the Subordinated Notes and will be used to finance
the working capital, general banking and other corporate purposes of PBB.
1.4
Rating of the Stapled Securities
RAM Rating Services Berhad (“RAM Rating”) has assigned long-term ratings of AA2 to both
the Capital Securities and the Subordinated Notes to be issued under the NIT-1 Stapled
Securities Programme.
1.5
Selling Restrictions
At the point of issuance of the Stapled Securities, the Stapled Securities shall not be offered,
sold or transferred, directly or indirectly, nor shall any document or other material in connection
therewith including this IM be distributed in Malaysia other than to persons who fall within any
of the categories of persons specified under Schedule 6 or Section 229(1)(b), Schedule 7 or
Section 230(1)(b) and Schedule 9 or Section 257(3) of the CMSA.
Subsequent to the issuance of the Stapled Securities, the Stapled Securities may not be
offered, sold or transferred, directly or indirectly, nor may any document or other material in
connection therewith be distributed in Malaysia other than to persons who fall within any of the
categories of persons specified under Schedule 6 or Section 229(1)(b) and Schedule 9 or
Section 257(3) of the CMSA.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
1.6
Selected Financial Information
The following tables present summary audited consolidated financial information of the Group
for the years ended 31 December 2007 and 2008 (save for the financial ratios which have not
been audited) and summary unaudited consolidated interim financial information of the Group
for the three (3) month periods ended 31 March 2008 and 2009. The financial information set
out below should be read in conjunction with the consolidated financial statements of the
Group for the year ended 31 December 2008 set out in Appendix I and the footnotes below.
Income Statements
Operating revenue
Audited for the year ended 31
December
2007
2008
(RM million)
(RM million)
Unaudited for the three (3)
month period ended 31 March
2008
2009
(RM million)
(RM million)
9,557.6
10,500.3
2,636.0
2,431.5
7,451.8
(4,208.2)
8,289.7
(4,562.4)
2,007.6
(1,112.9)
1,911.9
(953.1)
3,243.6
3,727.3
894.7
958.8
478.2
558.4
123.6
144.8
3,721.8
4,285.7
1,018.3
1,103.6
1,389.5
1,453.5
557.5
294.3
5,111.3
(1,693.7)
5,739.2
(1,791.1)
1,575.8
(450.7)
1,397.9
(497.1)
3,417.6
3,948.1
1,125.1
900.8
(407.2)
(12.2)
(548.6)
(32.8)
(144.4)
(13.4)
(156.4)
(1.8)
2,998.2
3,366.7
967.3
742.6
Share of profit after tax of
equity accounted
associated companies
5.4
12.5
3.3
2.3
Profit before tax expense
and zakat
Tax expense and zakat
3,003.6
(801.8)
3,379.2
(756.5)
970.6
(239.1)
744.9
(149.1)
Profit for the year/period
2,201.8
2,622.7
731.5
595.8
Attributable to:Equity holders of the Bank
Minority interests
2,123.9
77.9
2,581.3
41.4
717.4
14.1
589.3
6.5
Profit for the year/period
2,201.8
2,622.7
731.5
595.8
Earnings per RM1.00
share:- basic (sen)
- diluted (sen)
63.3
62.9
76.9
76.9
21.4
21.4
17.4
17.4
Dividends per RM1.00
share:Cash dividends
- gross (sen)
- net (sen)
Share dividends
75.0
55.3
-
55.0
41.0
1 for 35
-
-
Interest income
Interest expense
Net interest income
Net income from Islamic
banking operations
Other operating income
Net income
Other operating expenses
Operating profit
Allowance for losses on
loans and financing
Impairment loss
6
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Audited as at 31 December
Balance Sheets
2007
(RM million)
2008
(RM million)
Unaudited
as at
31 March
2009
(RM million)
35,548.8
36,597.0
33,334.3
2,683.8
12,723.5
8,061.9
4,081.3
3,872.4
99,328.0
112.2
1,812.2
2,373.9
321.8
46.3
54.4
259.6
864.8
2,010.3
174,155.2
1,941.4
5,141.8
11,349.8
5,626.4
8,286.7
118,386.3
590.2
1,548.7
2,636.7
488.9
127.8
66.0
291.9
1,011.5
2,072.0
196,163.1
469.6
11,940.0
10,238.4
6,757.7
5,976.1
123,413.0
586.5
1,289.4
1,083.0
485.0
136.9
69.6
306.7
1,002.5
2,137.9
199,226.6
138,764.6
162,279.6
168,133.4
ASSETS
Cash and short-term funds
Deposits and placements with banks and other
financial institutions
Securities purchased under resale agreements
Securities held-for-trading
Securities available-for-sale
Securities held-to-maturity
Loans, advances and financing
Derivative financial assets
Other assets
Statutory deposits with Central Banks
Deferred tax assets
Investment in associated companies
Investment properties
Prepaid land lease payments
Property and equipment
Intangible assets
TOTAL ASSETS
LIABILITIES
Deposits from customers
Deposits and placements of banks and other
financial institutions
Obligations on securities sold under repurchase
agreements
Bills and acceptances payable
Recourse obligations on loans sold to Cagamas
Derivative financial liabilities
Other liabilities
Borrowings
Subordinated notes
Hybrid capital securities
Provision for tax expense and zakat
Deferred tax liabilities
TOTAL LIABILITIES
10,438.1
5,589.9
6,868.4
2.3
3,452.3
3,956.4
153.2
2,347.7
349.7
2,468.6
1,855.8
365.9
22.2
164,176.8
3,062.4
4,537.3
495.1
2,422.8
860.2
4,178.2
2,124.5
382.5
1.9
185,934.4
2,456.7
1,229.9
362.4
2,139.3
906.6
4,301.2
2,123.8
359.0
2.0
188,882.7
EQUITY
Share capital
Reserves
Treasury shares
Equity attributable to equity holders of the Bank
Minority interests
TOTAL EQUITY
3,527.9
7,088.2
(1,273.9)
9,342.2
636.2
9,978.4
3,531.9
7,278.9
(1,274.1)
9,536.7
692.0
10,228.7
3,531.9
6,658.3
(581.6)
9,608.6
735.3
10,343.9
174,155.2
196,163.1
199,226.6
40,807.5
52,866.9
56,605.2
TOTAL LIABILITIES AND EQUITY
OFF-BALANCE SHEET EXPOSURES
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
7
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Audited as at 31 December
2007
(RM million)
2008
(RM million)
Unaudited
as at
31 March
2009
(RM million)
(%)
(%)
(%)
1.4
30.4
3.2
0.9
159.7
73.0
31.2
8.3
13.7
1.2
25.5
3.1
0.8
163.8
73.4
35.6
7.6
13.3
The following financial ratios are unaudited:Financial Ratios(1)
Return on assets
Return on equity
Net interest margin
Net NPL ratio
Allowance for bad and doubtful debts/NPL
Loans and advances/total deposits
Cost to income
Core capital ratio
Risk-weighted capital ratio
1.3
26.3
3.2
1.2
119.5
71.6
33.1
9.1
13.6
(Source: Extracted from the audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
Notes:
(1)
Financial Ratios Definitions:“Return on assets” means net profit for the year/period attributable to equity holders of the Bank as a
percentage of the average of beginning and year-end total assets.
“Return on equity” means net profit for the year/period attributable to equity holders of the Bank as a
percentage of the average of beginning and year-end shareholders’ funds, net of proposed dividends.
“Net interest margin” means net interest income, including net financing income from Islamic Banking
operations, as a percentage of the average of beginning and year-end interest-earning assets (excluding
negotiable instruments of deposit and money market deposits which are on-lent to the Interbank market).
“Net NPL ratio” means non-performing loans less specific allowance as a percentage of gross loans,
advances and financing (including Islamic house financing sold to Cagamas Berhad) less specific
allowance.
“Allowance for bad and doubtful debts/NPL” means total specific allowance and general allowance for bad
and doubtful debts as a percentage of non-performing loans.
“Loans and advances/total deposits” means net loans, advances and financing as a percentage of deposits
from customers.
“Cost to Income” means operating expenses as a percentage of net income.
“Core capital ratio” means the ratio of Tier 1 capital to risk-weighted assets.
“Risk-weighted capital ratio” means the ratio of the total capital base to risk-weighted assets.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
8
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
SECTION 2.0
2.1
SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS
SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE CAPITAL
SECURITIES UNDER THE PROGRAMME
Principal Terms and Conditions
(a)
Names of the parties involved in the proposed transaction (where applicable)
(i)
Principal Advisers /
Lead Arrangers
:
Public Investment Bank Berhad (Company No.
20027-W) (“PIVB”)
(ii)
Arranger(s)
:
Not applicable.
(iii)
Valuers
:
Not applicable.
(iv)
Solicitors
:
Messrs. Adnan Sundra & Low
(v)
Financial Adviser
:
Not applicable.
(vi)
Technical Adviser
:
Not applicable.
(vii) Guarantor
:
Not applicable.
(viii) Trustee
:
AmanahRaya Trustees Berhad (Company No.
766894-T)
(ix)
Facility Agent
:
PIVB
(x)
Primary Subscriber(s)
and amount
subscribed (where
applicable)
:
The Primary Subscriber(s) (if any) shall be
determined prior to each issuance of the Stapled
Securities (as defined under item (b) below) in the
event that the Stapled Securities are issued via a
bought deal basis (where applicable). Not
applicable for issuance via book building and direct
placement.
(xi)
Underwriter(s) and
amount underwritten
:
PBB may consider appointing underwriters for each
issuance of the Stapled Securities.
The Securities Commission (“SC”) will be advised
accordingly in the event PBB is able to secure any
underwriting commitment.
(xii) Central Depository
:
Bank Negara Malaysia (“BNM”)
(xiii) Paying Agent
:
BNM
(xiv) Reporting Accountant
:
Not applicable.
(xv) Others
:
Joint Lead Managers
(i)
PIVB;
(ii)
CIMB Investment Bank Berhad (Company No.
18417-M) (“CIMB”); and
(iii)
RHB Investment Bank Berhad (Company No.
19663-P) (“RHB Investment Bank”).
9
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
PBB, at its discretion, may consider appointing
additional joint lead manager(s) to assist in the
issuance (by way of book-building and/or direct
placement) of the Stapled Securities under the
Programme (as defined under item (b) below). The
Securities Commission (“SC”) will be advised
accordingly in the event PBB appoints additional
joint lead manager(s).
Market Makers (for retail tranche only)
(i)
CIMB; and
(ii)
RHB Investment Bank.
The role of the Market Maker is :
(i)
to provide a two-way price quotation for the
Stapled Securities; and
(ii)
to buy and sell the Stapled Securities based on
the price quoted.
Prior to the issuance of the Stapled Securities to
retail investors, PBB and the Market Makers shall
enter into agreements with regard to the market
making arrangements.
PBB, at its discretion, may consider appointing
additional market maker(s). The SC will be advised
accordingly in the event PBB appoints additional
market maker(s).
Tax Advisor
KPMG Tax Services Sdn Bhd (Company No.
96860-M), appointed to provide an opinion to PBB
on the tax implications of the Programme.
Rating Agency
RAM Rating Services Berhad (Company No.
763588-T) (“RAM Rating”)
(b)
Facility Description
:
A non-innovative Tier 1 stapled securities
programme (“Programme”) established by PBB
comprising of the issuance of non-cumulative
perpetual capital securities (“Capital Securities”) by
PBB that are stapled to the subordinated notes
(“Subordinated Notes”) to be issued by PBFIN
Berhad (“PBFIN”), a wholly-owned subsidiary of
PBB.
(The Capital Securities and the Subordinated Notes
shall collectively hereinafter be referred to as the
“Stapled Securities”).
The Capital Securities will qualify as non-innovative
Tier 1 capital of PBB for purposes of BNM’s capital
adequacy regulations.
For the avoidance of doubt, at the point of issuance
until the occurrence of an Assignment Event (as
defined under item (x)(ix) below), the Capital
Securities to be issued shall be stapled to the
Subordinated Notes.
10
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Pursuant to the occurrence of an Assignment Event
and upon the assignment of the Subordinated Notes
to the Assignment Right Holder (as defined under
item (x)(vii) below) under the Note Assignment (as
defined under item (x)(v) below), the corresponding
Capital Security ceases to be stapled to the
Subordinated Note that is assigned. For the
avoidance of doubt, the Subordinated Note does not
cease to be stapled to the corresponding Capital
Security which forms part of the Stapled Security in
any other circumstances. Once un-stapled, the
Subordinated Notes may not be assigned to any
person other than the Assignment Right Holder.
(c)
Issue Size (RM)
:
Up to RM5.0 billion in nominal value.
For the avoidance of doubt, at any point in time up
to RM5.0 billion in nominal value of Capital
Securities stapled to the equivalent amount in
nominal value of Subordinated Notes may be
issued.
(d)
Issue Price (RM)
:
The Capital Securities shall be issued at par.
(e)
Tenor of the facility / issue
:
Tenor of Programme
Perpetual, subject to cancellation by the Issuer or
the Facility Agent in accordance with the terms and
conditions of the Capital Securities.
Availability Period for Utilisation
The Programme shall be available for utilisation for
a period of seven (7) years from the first issuance of
the Stapled Securities. The first issuance of the
Stapled Securities under the Programme will be
made within two (2) years of the SC’s approval of
the Programme.
Tenor of Issue
Perpetual.
(f)
Interest / Coupon (%)
:
Distribution Rate
Prior to the occurrence of an Assignment Event, the
Capital Securities will not accrue cash distribution
(“Distribution”).
Following the occurrence of an Assignment Event,
Distribution will accrue on the Capital Securities at a
fixed rate, to be determined prior to each issuance
of the Capital Securities, from (and including) the
interest payment date under the Subordinated
Notes immediately prior to the Assignment Date (as
defined below).
“Assignment Date” means the date of the
occurrence of the relevant Assignment Event as
specified in the notice to be provided by PBB to the
holders of the Stapled Securities.
11
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(g)
Interest / Coupon Payment
Frequency
:
Subject to the Limitation on Payment of Distribution
(as defined under item (x)(i) below), following the
occurrence of an Assignment Event, Distributions
will be payable quarterly or semi-annually in arrears
(each a “Distribution Date”), to be determined prior
to each issuance of the Capital Securities,
commencing on the first Distribution Date falling
immediately after the Assignment Date.
For the avoidance of doubt, the first Distribution will
include an amount calculated from (and including)
the interest payment date under the relevant
Subordinated Notes falling immediately prior to the
Assignment Date. The Capital Securities which are
stapled to the Subordinated Notes shall have the
same corresponding Distribution Date and interest
payment date respectively.
(h)
Interest / Coupon Payment
Basis
:
Actual number of days elapsed on a 365-day basis.
(i)
Yield to Maturity (%)
:
Each issuance of Capital Securities will be priced on
the basis of yield to its first Optional Redemption
Date (as defined under item (x)(iv) below).
The applicable yield for the Capital Securities will be
determined prior to each issuance of the Capital
Securities.
(j)
Security / Collateral (if any)
:
None.
(k)
Details of utilisation of
proceeds
:
Proceeds from the issuance of the Capital
Securities will be used to acquire the rights under
the Note Assignment Agreement (as defined under
item (x)(xii) below).
Following the subscription by investors of the
Subordinated Notes issued by PBFIN, the proceeds
of the issue of the Subordinated Notes will be onlent by PBFIN to PBB through the Subordinated
Loan (as defined under item (k) of the Principal
Terms and Conditions of the Subordinated Notes
under the Programme) based on terms and
conditions similar to the Subordinated Notes, to
finance the working capital, general banking and
other corporate purposes of PBB.
(l)
Sinking Fund (if any)
(m)
Rating
- Credit Rating Assigned
:
Not applicable.
: The long term rating for the Capital Securities is
AA2 assigned by RAM Rating.
- Name of Rating Agency
(n)
Form and Denomination
: The Capital Securities shall be issued in bearer form
in denominations of not less than RM1,000 each or
such other denomination in accordance with the
rules and regulations issued by BNM. The Capital
Securities will be represented at all times by global
certificates to be deposited with BNM and will be
12
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
traded under the Real Time Electronic Transfer of
Funds and Securities (“RENTAS”) System operated
and maintained by BNM.
The Capital Securities shall be issued in accordance
with the Rules on the Fully Automated System for
Issuing/Tendering (“FAST”) issued by BNM (“FAST
Rules”).
(o)
Mode of Issue
:
The Capital Securities may be issued via private
placement on a best efforts basis, or on a bought
deal basis, or book building on a best efforts basis,
with an information memorandum or a prospectus,
as may be applicable, for the intended subscribers.
(p)
Selling Restriction
:
Capital Securities
Investors
intended
for
Sophisticated
Selling Restriction at Issuance :
The Capital Securities may not be offered, sold or
transferred, directly or indirectly, nor may any
document or other material in connection therewith
be distributed in Malaysia other than to persons
falling within Schedule 6 or Section 229(1)(b),
Schedule 7 or Section 230(1)(b) and Schedule 9 or
Section 257(3) of the Capital Markets and Services
Act, 2007 (“CMSA”).
Selling Restriction after Issuance :
The Capital Securities may not be offered, sold or
transferred, directly or indirectly, nor may any
document or other material in connection therewith
be distributed in Malaysia other than to persons
falling within Schedule 6 or Section 229(1)(b) and
Schedule 9 or Section 257(3) of the CMSA.
Capital Securities intended for Retail Investors
No selling restrictions.
However, retail investors will not be able to trade
their holdings of the Stapled Securities except with
the Market Maker. The Market Maker will be able to
trade its holdings of the Stapled Securities with any
investor.
(q)
Listing Status
:
The Capital Securities will not be listed on Bursa
Malaysia Securities Berhad or any other stock
exchange.
(r)
Minimum Level of
Subscription (RM or %)
:
For issuance via book building, the minimum level of
subscription for each issue of the Capital Securities
shall be 5% of the nominal value of each issue.
For issuance via bought deal or private placement,
the minimum level of subscription for each issue of
Capital Securities shall be 100% of the nominal
value of each issue.
In the event that any issue, offer or invitation is
undersubscribed and does not meet the minimum
level of subscription, the same shall be aborted and
13
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
where applicable, any consideration received for the
purpose of subscription shall be immediately
returned to the respective subscribers/investors.
(s)
Other regulatory approvals
required in relation to the
issue, offer or invitation and
whether or not obtained
(please specify)
:
1.
Approval from BNM for the following :(a)
the establishment of the Programme; and
(b)
the classification of the Capital Securities
issued from time to time under the
Programme over the availability period of
seven (7) years from the date of first
issuance of the Capital Securities as
non-innovative Tier 1 capital for the
computation of the Risk Weighted Capital
Adequacy Ratio (“RWCR”) of PBB and
the PBB Group pursuant to the Risk
Weighted Capital Adequacy Framework
(General Requirements and Capital
Components) issued by BNM on 20
September, 2007 (RWCA Framework).
Application to BNM has been made vide a
letter dated 3 March 2009 and the approval
was obtained vide BNM’s letter dated 16 March
2009.
2.
Approval from the SC for the following :(a)
the establishment of the Programme and
the issuance of the Capital Securities by
PBB and the issuance of the
Subordinated Notes by PBFIN under the
Programme;
(b)
the waiver from having to comply with
paragraph 6.01 – Other Regulatory
Approvals of the PDS Guidelines to allow
this submission for approval of the
Stapled Securities prior to obtaining
approval from BNM;
(c)
the waiver from having to comply with
certain provisions under the SC’s
Guidelines on the Minimum Contents
Requirements for Trust Deeds in respect
of the Stapled Securities; and
(d)
the waiver from having to comply with
paragraph 1.03 of Part III of the SC’s
Prospectus Guidelines.
Application to the SC for (b), (c) and (d) above
has been made vide a letter dated 27 February
2009 and the approval was obtained vide the
SC’s letter dated 16 March 2009.
(t)
Conditions Precedent
:
Conditions precedent shall include but not limited to
the following:(i)
Certified true copies of the Issuer’s
Memorandum and Articles of Association,
board resolution, Form 8 (Certificate of
Incorporation), Form 13 (Certificate of
14
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Incorporation on Change of Name of
Company), Form 24 (Return of Allotment of
Shares), Form 44 (Notice of Situation of
Registered Office) and Form 49 (Return Giving
Particulars in Register of Directors, Managers
and Secretaries and Changes of Particulars)
have been furnished to the Facility Agent and
the Trustee;
(ii)
Each of the transaction documents (as advised
by the Solicitors) shall have been duly
executed and stamped where applicable;
(iii) Written approval from BNM for the following:(a)
the establishment of the Programme; and
(b)
the classification of the Capital Securities
issued from time to time under the
Programme over the availability period of
seven (7) years from the date of first
issuance of the Capital Securities as
non-innovative Tier 1 capital for the
computation of the RWCR of PBB and
the PBB Group;
(iv) Written approval from the SC for the
establishment of the Programme and the
issuance of the Capital Securities by PBB and
the issuance of the Subordinated Notes by
PBFIN;
(v) A legal opinion from the Solicitors addressed to
the Principal Adviser/Lead Arranger advising
with respect to, inter-alia, the validity, legality
and enforceability of the Stapled Securities and
the transaction documents, and a written
confirmation from the Solicitors to the Principal
Adviser/Lead Arranger that all conditions
precedent have been fulfilled;
(vi) Evidence that the Capital Securities under the
Programme have been assigned a minimum
long-term rating of AA2 by RAM Rating; and
(vii) Such other conditions precedent as may be
advised by the Solicitors for the Principal
Adviser/Lead Arranger (if any).
(u)
Representations and
Warranties
:
Representations and warranties shall include but not
limited to the following :(i)
The Issuer is a company duly incorporated and
validly existing under the laws of Malaysia;
(ii)
The Issuer has the power to enter into, exercise
its rights and perform its obligations under the
transaction documents;
(iii) The Issuer’s entry into, exercise of its rights
under and performance of the transaction
documents do not and will not violate any
existing law or agreement to which it is a party;
(iv) The Issuer has all licences, franchises, permits,
15
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
authorisations, approvals, orders and other
concessions of and from all governmental and
regulatory officials and bodies that are necessary
to own or lease its properties and conduct its
business, other than where the failure to obtain
such
licences,
franchises,
permits,
authorisations, approvals, orders and other
concessions would not have a material adverse
effect on the ability of the Issuer to comply with
its obligations under the transaction documents;
(v)
The transaction documents create valid and
binding obligations which are enforceable on and
against the Issuer;
(vi) All necessary actions, authorisations and
consents required under the transaction
documents have been taken, fulfilled and
obtained and remain in full force and effect;
(vii) that no Enforcement Event (as defined in item
(x)(xiii) below) has occurred;
(viii) The audited accounts of the Issuer are prepared
in accordance with generally accepted
accounting principles and standards and give a
true and fair view of the financial condition of the
Issuer;
(ix) No litigation or arbitration is current or, to the
Issuer’s knowledge, is threatened, which if
adversely determined would have a material
adverse effect on the ability of the Issuer to
comply with its obligations under the transaction
documents;
(x)
The financial statements and other information
supplied in respect of the financial statements
are true and accurate in all material aspects and
not misleading;
(xi) There is no contravention of Section 62 of the
Banking and Financial Institutions Act, 1989;
(xii) No step has been taken by the Issuer, its
creditors or any of its shareholders or any other
person on its behalf, nor have any legal
proceedings or applications been started, under
Section 176 of the Companies Act, 1965;
(xiii) There has been no change in the business or
condition (financial or otherwise) of the Issuer or
its subsidiaries since the date of its last audited
financial statements which might have a material
adverse effect on the ability of the Issuer to
comply with its obligations under the transaction
documents; and
(xiv) Such other representations and warranties as
may be advised by the Solicitors for the Principal
Adviser/Lead Arranger (if any).
16
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(v)
Events of Default
:
There are no events of default under the Capital
Securities. Please refer to item (x)(xiii) below for
Enforcement Events.
(w)
Principal terms and
conditions for warrants
(where applicable)
:
Not applicable.
(x)
Other principal terms and conditions for the issue
(x)(i)
Limitation on
Payment of
Distribution
:
If the Payment Limitation Condition (as defined
below) is met,
(i)
on the fifteenth (15th) business day prior to any
Distribution payment date; and
(ii)
continues to be met from such prior fifteenth
(15th) business day to (and including) such
Distribution payment date;
PBB may, at its option, cancel the Distribution which
would otherwise have been payable on such
Distribution payment date. Any such cancellation
will not constitute or be deemed a default by PBB
for any purpose whatsoever.
Subject to the provisions (i) and (ii) below, PBB’s
obligations to make payment of such Unpaid
Distribution Amount (as defined below) shall cease
to exist and such payments shall no longer be due
and payable.
“Payment Limitation Condition” means that during
the twelve (12) months period immediately
preceding any Distribution payment date, PBB did
not declare and/or pay any dividend to its
shareholders or make any interest payment or
distribution on any securities or instruments ranking
junior to the Capital Securities.
“Unpaid Distribution Amount” means any
Distribution which is cancelled by PBB pursuant to
this Limitation on Payment of Distribution.
Notwithstanding the above, if
(i) the Capital Securities no longer qualify as noninnovative Tier 1 capital of PBB for the purposes
of BNM’s minimum capital adequacy ratio
requirements under any applicable regulation,
and such disqualification has been confirmed by
BNM; and
(ii) PBB is not in breach of BNM’s minimum capital
adequacy ratio requirements applicable to PBB;
any Unpaid Distribution Amounts shall become
cumulative and compounding at the Distribution rate
from the date PBB cancels the Distribution until
such payments are paid. In such circumstances,
any Unpaid Distribution Amounts, together with
accrued amounts relating to the compounding of
such Unpaid Distribution Amounts, will become due
17
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
and payable upon the Redemption (as defined
under item (x)(iii) below) of the Capital Securities.
For the avoidance of doubt, no Distributions will be
paid if (i) PBB is, on a Distribution payment date, in
breach of BNM’s minimum capital adequacy ratio
requirements applicable to PBB, or (ii) PBB would,
as a result of a payment of Distribution, be in breach
thereof immediately after the Distribution payment
date. Such loss of right of the Capital Security
holders to receive the Distribution will not constitute
or be deemed a default by PBB for any purpose
whatsoever.
(x)(ii)
Dividend and
Capital Stopper
:
Following an Assignment Event, in the event that
PBB has not
(a) made a full payment of any Distribution on a
Distribution Date; or
(b) fully paid to the Capital Security holders an
amount equal to the accrued and unpaid
interest payments (if any) on the Subordinated
Notes previously stapled to such Capital
Securities and any other amounts outstanding
(if any) on such Subordinated Notes from the
last interest payment date of such
Subordinated Notes before the Assignment
Date up to (and excluding) the Assignment
Date;
then
(i)
PBB shall not pay any dividends to its
shareholders or make any interest payment or
distribution on any security or instrument
ranking pari passu with or junior to the
Subordinated
Loan/Capital
Securities
(“Dividend Stopper”); and
(ii)
PBB shall not redeem, purchase, reduce or
otherwise acquire any of its ordinary shares,
preference shares, securities or instruments
ranking pari passu with or junior to the
Subordinated Loan/Capital Securities, or any
securities of any of its subsidiary undertakings
benefiting from a guarantee from PBB, ranking,
as to the payment of sums under such
guarantee, pari passu with or junior to the
Subordinated Loan/Capital Securities (“Capital
Stopper”).
The Dividend Stopper or Capital Stopper shall
continue to apply, as the case may be, until any of
(i), (ii) or (iii) below is met:
(i)
PBB has paid in full the Distribution due for two
(2) semi-annual or, in the case of quarterly
payments four (4), consecutive Distribution
payment dates after the application of the
Dividend Stopper and the Capital Stopper; or
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(ii)
PBB has irrevocably set aside in a separately
designated trust account of PBB for the
payment to the Capital Security holders, an
amount sufficient to provide for the full
Distribution due for two (2) semi-annual or, in
the case of quarterly payments, four (4),
consecutive Distribution payment dates after
the application of the Dividend Stopper and the
Capital Stopper and if upon determination of
the amount of each of such Distribution there is
a shortfall in the amounts set aside with
reference to the amounts so determined, an
amount at least equal to such shortfall shall be
paid or irrevocably set aside in the same
manner; or
(iii) an Optional Distribution (as defined below) has,
at the option of PBB and subject to the written
approval of BNM, been paid to all Capital
Security holders equal to, without duplication of
amounts previously paid to the Capital Security
holders, amounts outstanding (if any) on the
Subordinated Notes or the Capital Securities
which were scheduled to be paid in the twelve
(12) months before the date of payment of the
Optional Distribution.
“Optional Distribution” means an amount equal to
the sum of:
(a) any due and unpaid interest amount in respect
of the Subordinated Notes; and
(b) any due and unpaid Distribution in respect of
the Capital Securities;
each scheduled to have been paid during the twelve
(12) months period immediately preceding the date
on which PBB shall pay the Optional Distribution.
(x)(iii)
Optional
Redemption
:
PBB may, at its option and subject to the
Redemption Conditions (as defined below) being
satisfied, Redeem (as defined below) the Capital
Securities (in whole but not in part) on any Optional
Redemption Date (as defined under item (x)(iv)
below).
“Redemption Conditions” means:
(1) PBB is solvent at the time of any Redemption
(as defined below) of the Capital Securities and
immediately thereafter;
(2) PBB is not in breach of BNM’s minimum capital
adequacy ratio requirements applicable to
PBB; and
(3) PBB has obtained the written approval of BNM
prior to the Redemption of the Capital
Securities.
“Redeem” means:
(1) redeem
19
the
Capital
Securities
for
the
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Redemption Amount (as defined under item
(x)(vii) below); or
(2) procure an entity to acquire the Capital
Securities for the Redemption Amount.
“Redemption” has the corresponding meaning to
“Redeem”.
(x)(iv)
Optional
Redemption Date
:
For each issue of Capital Securities, a date falling
no earlier than the fifth (5th) anniversary of the
relevant first issue date of the Capital Securities,
and any Distribution Date thereafter.
(x)(v)
Tax Redemption
:
If there is more than an insubstantial risk that:
(i)
PBB has or will become obliged to pay
Additional Amounts (as defined under item
(x)(xvi) below) or any taxes other than the
Additional Amounts (if any) in relation to the
Capital Securities; or
(ii)
PBB has or will become obliged to pay
Additional Amounts pursuant to the terms and
conditions of the Subordinated Loan and/or any
taxes other than the Additional Amount (if any),
in relation to the Subordinated Loan; or
(iii) The issuer of the Subordinated Notes has or
will become obliged to pay Additional Amounts
pursuant to the terms and conditions of the
Subordinated Notes and/or any taxes other
than the Additional Amounts (if any), in relation
to the Subordinated Notes; or
(iv) The issuer of the Subordinated Notes is not
able to fully deduct interest payments made
under the Subordinated Notes from interest
income received under the Subordinated Loan;
or
(v) PBB would no longer obtain tax deductions for
the purposes of Malaysian corporation tax for
any interest payment in respect of the
Subordinated Loan;
as a result of a change in, or amendment to, the
laws or regulations of Malaysia or any political
subdivision or any authority thereof or therein
having power to tax, or change in the application or
official interpretation of such laws or regulations,
which change or amendment becomes effective on
or after the date of first issue of each issue of the
Capital Securities and PBB cannot, by taking
reasonable measures available to it, avoid such
obligations, then PBB may, at its option, Redeem
the Capital Securities (in whole, but not in part) at
the Redemption Amount (as defined in item (x)(vii)
below), subject to the Redemption Conditions being
satisfied.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(x)(vi)
Regulatory
Redemption
:
If the Capital Securities no longer qualify as noninnovative Tier 1 capital of PBB for the purposes of
BNM’s capital adequacy ratio requirements under
any regulations applicable to PBB, then PBB may,
at its option, Redeem the Capital Securities (in
whole, but not in part) at the Redemption Amount,
subject to the Redemption Conditions being
satisfied.
(x)(vii)
Redemption
Amount
:
In the case of an Optional Redemption, a Tax
Redemption or a Regulatory Redemption, an
amount equal to 100% of the face value together
with accrued but unpaid Distributions (if any)
relating to the then current Distribution period (if
any) up to (and excluding) the date on which the
Capital Securities are Redeemed.
(x)(viii)
Note Assignment
:
In respect of each issue of the Capital Securities, if
an Assignment Event occurs:
(i)
all amounts which become due and payable in
respect of each issue of the Subordinated
Notes after the occurrence of an Assignment
Event (“Assignment Event Date”) (including
any previously deferred interest amounts and
whether or not relating to the interest periods
prior to the Assignment Event Date) will be
payable to the Assignment Right Holder (as
defined under item (x)(x) below);
(ii)
all rights, title and interests of the relevant
Subordinated Note holders under the
Subordinated Notes are automatically assigned
and transferred to the Assignment Right Holder
on the Assignment Event Date; and
(iii) The Assignment Right Holder may at its option
Redeem the Subordinated Notes accordingly.
Each Subordinated Note holder irrevocably appoints
the Assignment Right Holder to be the agent of the
Subordinated Note holder to do all such acts and
things (including signing all documents or transfers)
as may in the opinion of the Assignment Right
Holder be necessary or desirable to be done in
order to record or perfect the transfer of the
Subordinated Notes from the Subordinated Note
holder to the Assignment Right Holder under the
Note Assignment. Such acts and things shall
include the execution and delivery of irrevocable
standing instructions by each Subordinated Note
holder to its Authorised Depository Institution (“ADI”)
to effect the transfer of the Subordinated Notes to
the Assignment Right Holder and the delivery by the
Subordinated Note holder of a copy of such
instruction to the Assignment Right Holder and the
Subordinated Notes Issuer.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(x)(ix)
Assignment
Events
:
An assignment event means the occurrence of any
of the following events:
(i)
the Assignment Right Holder in its absolute
discretion elects that an Assignment Event
occurs; or
(ii)
BNM in its absolute discretion determines that
a Note Assignment should occur; or
(iii) the redemption of the Capital Securities by
PBB pursuant to a Tax Redemption or a
Regulatory Redemption or a Optional
Redemption; or
(iv) the deferral of any interest on the Subordinated
Notes in accordance with the Interest Deferral
Right (as defined under item (x)(i) of the
Principal Terms and Conditions of the
Subordinated Notes under the Programme)
and the Mandatory Interest Deferral (as defined
under item (x)(ii) of the Principal Terms and
Conditions of the Subordinated Notes under
the Programme); or
(v)
PBB is in breach of BNM’s minimum capital
adequacy ratio requirements applicable to
PBB; or
(vi) commencement of a Winding-Up Proceeding
(as defined in item (x)(xiii) below) in respect of
PBFIN or PBB; or
(vii) appointment of an administrator in connection
with a restructuring or similar arrangements of
PBB or all or substantially all of its properties;
or
(viii) an Enforcement Event under the terms of the
Subordinated Notes; or
(ix) the occurrence of an Optional Redemption
Date; or
(x)
PBFIN ceases to be a, directly or indirectly,
wholly-owned subsidiary of PBB.
(x)(x)
Assignment Right
Holder
:
PBB
(x)(xi)
Stapling
:
Transfer Restriction
Each Capital Security will be stapled to a
Subordinated Note. Each Subordinated Note and
Capital Security together will constitute a Stapled
Security. Until an Assignment Event occurs and the
Subordinated Notes have been transferred to the
Assignment Right Holder, the Subordinated Notes
cannot be transferred without the Capital Securities
also being transferred to the same transferee.
Unstapling
Pursuant to the occurrence of an Assignment Event
and upon the assignment of the Subordinated Notes
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
to the Assignment Right Holder under the Note
Assignment, the corresponding Capital Security
ceases to be stapled to the Subordinated Note that
is assigned. For the avoidance of doubt, the
Subordinated Note does not cease to be stapled to
the corresponding Capital Security which forms part
of the Stapled Security in any other circumstances.
Once un-stapled, the Subordinated Notes may not
be assigned to any person other than the
Assignment Right Holder.
(x)(xii)
Note Assignment
Agreement
:
Investors will subscribe for the Capital Securities by
paying PBB the consideration equal to the nominal
value of the Capital Securities.
PBB will then enter into a note assignment
agreement (“Note Assignment Agreement”) with
such investors pursuant to which:
(i)
PBB pays such investors upfront (of an amount
equal to the nominal value for the Capital
Securities purchased by such investors) for the
right to require the assignment of the
Subordinated Notes to PBB (as Assignment
Right Holder) upon an Assignment Event,
whereby upon an Assignment Event, the
Subordinated Notes will be automatically
transferred to PBB.
(ii)
Such investors shall apply the proceeds from
the issue of the Capital Securities received
from the Assignment Right Holder pursuant to
the Note Assignment Agreement upfront to
subscribe
for
the
equal
amount
of
Subordinated Notes from PBFIN, at par.
(iii) Such investors shall execute and deliver
irrevocable standing instructions to their
respective ADIs to effect the transfer of the
Subordinated Notes to the Assignment Right
Holder and deliver a copy of such instruction to
the Assignment Right Holder and PBFIN, being
the issuer of the Subordinated Notes.
(x)(xiii)
Enforcement
Events
Upon the occurrence of any of the following events
(each an “Enforcement Event”) in respect of a
tranche of the Capital Securities :
(a) a default made in the payment of any nominal
value of the relevant Capital Securities on the
due date for payment thereof; or
(b) a default made in the payment of Distribution
amounts (including any additional amounts) on
the relevant Capital Securities on the due date
for payment thereof, which default continues
for fourteen (14) days consecutively (other than
the non-payment of Distribution as provided for
under the Limitation On Payment Of
Distribution)
the Capital Security holders of such tranche may, at
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
their discretion and without further notice, institute
Winding-Up Proceedings (as defined below) against
PBB in Malaysia (but not elsewhere) provided that,
such holders shall have no right to declare the
principal of the relevant Capital Securities to be due
and payable in the case of non-payment of
Distribution on, or other amounts owing under, such
Capital Securities or a default in the performance of
any other covenant of PBB.
If a Winding-Up Proceeding commences in respect
of PBB, or an effective resolution of the
shareholders of PBB is passed for a Winding-Up
Proceeding in respect of PBB, the Capital Security
holders may, at such holders’ option, declare the
principal of and any Distribution amounts on the
Capital Securities to be due and payable
immediately, by a notice in writing to PBB. Upon
such a declaration, such nominal value and any
Distribution amounts shall become immediately due
and payable.
“Winding-Up Proceeding” means the occurrence
of any of the following:
(a) a court or agency or supervisory authority in
Malaysia having jurisdiction in respect thereof
shall have instituted a proceeding or entered a
decree or order for the appointment of a
receiver or liquidator in any insolvency,
rehabilitation, readjustment of debt, marshalling
of
assets
and
liabilities,
or
similar
arrangements involving PBB or all or
substantially all of its properties, or for the
winding-up of or liquidation of its affairs and
such proceedings, decree or order shall not
have been vacated or shall have remained in
force, undischarged or unstayed for a period of
sixty (60) days; or
(b) PBB files a petition to take advantage of any
insolvency statute.
(x)(xiv)
Ranking
The Capital Securities are direct and unsecured
obligations of PBB.
The principal, Distribution amounts and any other
amounts payable on the Capital Securities will be
subordinated in right of payment upon the
occurrence of any Winding-Up Proceedings to the
prior payment in full of all deposit liabilities and all
other liabilities of PBB (including liabilities of offices
and branches of PBB wherever located and any
debt
securities
(whether
subordinated
or
unsubordinated) of PBB that rank senior to the
Capital Securities) except, in each case, to those
liabilities which by their terms rank equal with
(including the existing RM1.2 billion Innovative Tier
1 Capital Securities and the USD200 million
Innovative Tier 1 Capital Securities) or junior to the
Capital Securities.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Claims in respect of the Capital Securities will rank
pari passu and without preference among
themselves and with the most junior class of
preference shares (if any) of PBB, but in priority to
the rights and claims of holders of the ordinary
equity shares of PBB.
(x)(xv)
Guarantee
:
The Capital Securities will not be secured or
covered by a guarantee of PBB, or any related
entity of PBB, or any other arrangement that legally
or economically enhances the seniority of the claims
of the Capital Security holders.
(x)(xvi)
Withholding
Taxes
:
All payments in respect of the Capital Securities by
or on behalf of PBB shall be made without
withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or
government charges of whatever nature imposed,
levied, collected, withheld or assessed by or within
any relevant jurisdiction, unless the withholding or
deduction of the taxes is required by law.
In the event such taxes are imposed, PBB will not
have to pay additional amounts (“Additional
Amounts”) as may be necessary in order that the
net amounts received by the Capital Security
holders after the withholding or deduction shall
equal the respective amounts which would have
been receivable in respect of the Capital Securities
in the absence of the withholding or deduction.
(x)(xvii) Voting Rights
:
The Capital Security holders will not be entitled to
receive notice of or to attend or to vote at a meeting
of the ordinary shareholders of PBB or to participate
in the management of PBB.
(x)(xviii) Amendments to
the Conditions
:
Amendments to the terms and conditions of the
Capital Securities shall only be made with the prior
written approval of BNM, the SC and the Capital
Security holders.
(x)(xiv)
:
The Capital Securities will be governed by, and shall
be constructed in accordance, with Malaysian law.
Governing Laws
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
2.2
SUMMARY OF THE PRINCIPAL TERMS AND
SUBORDINATED NOTES UNDER THE PROGRAMME
CONDITIONS
OF
THE
Principal Terms and Conditions
(a)
Names of the parties involved in the proposed transaction (where applicable)
(i)
Principal Advisers /
Lead Arrangers
:
Public Investment Bank Berhad (Company No.
20027-W) (“PIVB”)
(ii)
Arranger(s)
:
Not applicable.
(iii)
Valuers
:
Not applicable.
(iv)
Solicitors
:
Messrs. Adnan Sundra & Low
(v)
Financial Adviser
:
Not applicable.
(vi)
Technical Adviser
:
Not applicable.
(vii) Guarantor
:
Not applicable.
(viii) Trustee
:
AmanahRaya Trustees Berhad (Company No.
766894-T)
(ix)
Facility Agent
:
PIVB
(x)
Primary Subscriber(s)
and amount
subscribed (where
applicable)
:
The Primary Subscriber(s) (if any) shall be
determined prior to each issuance of the Stapled
Securities (as defined under item (b) below) in the
event that the Stapled Securities are issued via a
bought deal basis (where applicable). Not
applicable for issuance via book building and direct
placement.
(xi)
Underwriter(s) and
amount underwritten
:
PBB may consider appointing underwriters for each
issuance of the Stapled Securities.
The Securities Commission (“SC”) will be advised
accordingly in the event PBB is able to secure any
underwriting commitment.
:
Bank Negara Malaysia (“BNM”)
(xiii) Paying Agent
:
BNM
(xiv) Reporting
Accountant
:
Not applicable.
(xv)
:
Joint Lead Managers
(xii)
Central Depository
Others
(i) PIVB;
(ii) CIMB Investment Bank Berhad (Company No.
18417-M) (“CIMB”); and
(iii) RHB Investment Bank Berhad (Company No.
19663-P) (“RHB Investment Bank”).
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
PBB, at its discretion, may consider appointing
additional joint lead manager(s) to assist in the
issuance (by way of book-building and/or direct
placement) of the Stapled Securities (as defined
under item (b) below) under the Programme (as
defined under item (b) below). The SC will be
advised accordingly in the event PBB appoints
additional joint lead manager(s).
Market Makers (for retail tranche only)
(i)
CIMB; and
(ii)
RHB Investment Bank.
The role of the Market Maker is :
(i)
to provide a two-way price quotation for the
Stapled Securities (as defined under item (b)
below); and
(ii)
to buy and sell the Stapled Securities based on
the price quoted.
Prior to the issuance of the Stapled Securities to
retail investors, PBB and the Market Makers shall
enter into agreements with regard to the market
making arrangements.
PBB, at its discretion, may consider appointing
additional market maker(s). The SC will be advised
accordingly in the event PBB appoints additional
market maker(s).
Tax Advisor
KPMG Tax Services Sdn Bhd (Company No.
96860-M), appointed to provide an opinion to PBB
on the tax implications of the Programme.
Rating Agency
RAM Rating Services Berhad (Company No.
763588-T) (“RAM Rating”)
(b)
Facility Description
:
A non-innovative Tier 1 stapled securities
programme (“Programme”) established by PBB
comprising the issuance of non-cumulative
perpetual capital securities (“Capital Securities”) by
PBB that are stapled to the subordinated notes
(“Subordinated Notes”) to be issued by PBFIN.
(The Capital Securities and the Subordinated Notes
shall collectively hereinafter be referred to as the
“Stapled Securities”).
The Capital Securities will qualify as non-innovative
Tier 1 capital of PBB for purposes of BNM’s capital
adequacy regulations.
For the avoidance of doubt, at the point of issuance
until the occurrence of an Assignment Event (as
defined under item (x)(vi) below), the Capital
Securities to be issued shall be stapled to the
Subordinated Notes.
Pursuant to the occurrence of an Assignment Event
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
and upon the assignment of the Subordinated Notes
to the Assignment Right Holder (as defined under
item (x)(vii) below) under the Note Assignment (as
defined under item (x)(v) below), the corresponding
Capital Security ceases to be stapled to the
Subordinated Note that is assigned. For the
avoidance of doubt, the Subordinated Note does not
cease to be stapled to the corresponding Capital
Security which forms part of the Stapled Security in
any other circumstances. Once un-stapled, the
Subordinated Notes may not be assigned to any
person other than the Assignment Right Holder.
(c)
Issue Size (RM)
:
Up to RM5.0 billion in nominal value.
For avoidance of doubt, at any point in time up to
RM5.0 billion in nominal value of Capital Securities
stapled to the equivalent amount in nominal value of
Subordinated Notes may be issued.
(d)
Issue Price (RM)
:
The Subordinated Notes shall be issued at par.
(e)
Tenor of the facility / issue
:
Tenor of Programme
Perpetual, subject to cancellation by the Issuer or
the Facility Agent in accordance with the terms and
conditions of the Subordinated Notes.
Availability Period for Utilisation
The Programme shall be available for utilisation for
a period of seven (7) years from the first issuance of
the Stapled Securities. The first issuance of the
Stapled Securities under the Programme will be
made within two (2) years of SC approval of the
Programme.
Tenor of Issue
Up to fifty (50) years from the issuance of each
Subordinated Notes.
(f)
Interest / Coupon (%)
:
To be determined prior to each issuance of
Subordinated Notes.
(g)
Interest / Coupon Payment
Frequency
:
Subject to the Interest Deferral Right (as defined
under item (x)(i) below) and the Mandatory Interest
Deferral (as defined under item (x)(ii), interest shall
be payable quarterly or semi-annually in arrears, to
be determined prior to each issuance of
Subordinated Notes.
For the avoidance of doubt, the Capital Securities
which are stapled to the Subordinated Notes shall
have the same corresponding Distribution Date (as
defined under item (g) of the Principal Terms and
Conditions of Capital Securities under the
Programme)
and
interest
payment
date
respectively.
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(h)
Interest / Coupon Payment
Basis
:
Actual number of days elapsed on a 365-day basis.
(i)
Yield to Maturity (%)
:
Each issuance of Subordinated Notes will be priced
on the basis of yield to the first Optional Redemption
Date (as defined under item (x)(iv) of the Principal
Terms and Conditions of the Capital Securities) of
the Capital Securities.
The applicable yield for the Subordinated Notes will
be determined prior to each issuance of the
Subordinated Notes.
(j)
Security / Collateral (if any)
:
None.
(k)
Details of utilisation of
proceeds
:
The proceeds from each issuance of the
Subordinated Notes shall be on-lent to PBB
pursuant to an inter-company subordinated loan
(“Subordinated Loan”) based on terms and
conditions similar to those for the Subordinated
Notes, to finance the working capital, general
banking and other corporate purposes of PBB.
(l)
Sinking Fund (if any)
:
Not applicable.
(m)
Rating
: The long term rating for the Subordinated Notes is
AA2 assigned by RAM Rating.
- Credit Rating Assigned
- Name of Rating Agency
(n)
: The Subordinated Notes shall be issued in bearer
form in denominations of not less than RM1,000
each or such other denomination in accordance with
the rules and regulations issued by BNM. The
Subordinated Notes will be represented at all times
by global certificates to be deposited with BNM and
will be traded under the Real Time Electronic
Transfer of Funds and Securities (“RENTAS”)
System operated and maintained by BNM.
Form and Denomination
The Subordinated Notes shall be issued in
accordance with the Rules on the Fully Automated
System for Issuing/Tendering (“FAST”) issued by
BNM (“FAST Rules”).
(o)
Mode of Issue
:
The Subordinated Notes which are stapled to the
Capital Securities, may be issued via private
placement on a best efforts basis, or on a bought
deal basis, or book building on a best efforts basis,
with an information memorandum or a prospectus,
as may be applicable, for the intended subscribers.
(p)
Selling Restriction
:
Subordinated Notes intended for Sophisticated
Investors
Selling Restriction at Issuance :
The Subordinated Notes may not be offered, sold or
transferred, directly or indirectly, nor may any
document or other material in connection therewith
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
be distributed in Malaysia other than to persons
falling within Schedule 6 or Section 229(1)(b),
Schedule 7 or Section 230(1)(b) and Schedule 9 or
Section 257(3) of the Capital Markets and Services
Act, 2007 (“CMSA”).
Selling Restriction after Issuance :
The Subordinated Notes may not be offered, sold or
transferred, directly or indirectly, nor may any
document or other material in connection therewith
be distributed in Malaysia other than to persons
falling within Schedule 6 or Section 229(1)(b) and
Schedule 9 or Section 257(3) of the CMSA.
Subordinated Notes intended for Retail Investors
No selling restrictions.
However, retail investors will not be able to trade
their holdings of the Stapled Securities except with
the Market Maker. The Market Maker will be able to
trade its holdings of the Stapled Securities with any
investor.
For the avoidance of doubt, the Subordinated Notes
may not be offered, sold or transferred, directly or
indirectly on its own. The Subordinated Notes shall
be offered, sold or transferred, directly or indirectly
as part of the Stapled Securities being stapled to
the Capital Securities.
(q)
Listing Status
:
The Subordinated Notes will not be listed on Bursa
Malaysia Securities Berhad or on any other stock
exchange.
(r)
Minimum Level of
Subscription (RM or %)
:
For issuance via book building, the minimum level of
subscription for each issue of the Subordinated
Notes which are stapled to the Capital Securities
shall be 5% of the nominal value of each issue.
For issuance via bought deal or private placement,
the minimum level of subscription for each issue of
Subordinated Notes which are stapled to the Capital
Securities shall be 100% of the nominal value of
each issue.
In the event that any issue, offer or invitation is
undersubscribed and does not meet the minimum
level of subscription, the same shall be aborted and
where applicable, any consideration received for the
purpose of subscription shall be immediately
returned to the respective subscribers/investors.
(s)
Other regulatory approvals
required in relation to the
issue, offer or invitation
and whether or not
obtained (please specify)
:
1.
Approval from BNM to PBB for the following :(a)
the establishment of the Programme; and
(b)
the classification of the Capital Securities
issued from time to time under the
Programme over the availability period of
seven (7) years from the date of first
issuance of the Capital Securities as
non-innovative Tier 1 capital for the
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Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
computation of the Risk Weighted Capital
Adequacy Ratio (“RWCR”) of PBB and
the PBB Group pursuant to the Risk
Weighted Capital Adequacy Framework
(General Requirements and Capital
Components) issued by BNM on 20
September, 2007 (RWCA Framework).
Application to BNM by PBB has been made
vide a letter dated 3 March 2009 and the
approval was obtained vide BNM’s letter dated
16 March 2009.
2.
Approval from the SC for the following :(a)
the establishment of the Programme and
the issuance of the Capital Securities by
PBB and the issuance of the
Subordinated Notes by PBFIN under the
Programme;
(b)
the waiver from having to comply with
paragraph 6.01 – Other Regulatory
Approvals of the PDS Guidelines to allow
this submission for approval of the
Stapled Securities prior to obtaining
approval from BNM;
(c)
the waiver from having to comply with
certain provisions under the SC’s
Guidelines on the Minimum Contents
Requirements for Trust Deeds in respect
of the Stapled Securities; and
(d)
the waiver from having to comply with
paragraph 1.03 of Part III of the SC’s
Prospectus Guidelines.
Application to the SC for (b), (c) and (d) above
has been made vide a letter dated 27 February
2009 and the approval was obtained vide the
SC’s letter dated 16 March 2009.
(t)
Conditions Precedent
:
Conditions precedent shall include but not limited to
the following:(i)
Certified true copies of the Issuer’s
Memorandum and Articles of Association,
board resolution, Form 8 (Certificate of
Incorporation), Form 13 (Certificate of
Incorporation on Change of Name of
Company), Form 24 (Return of Allotment of
Shares), Form 44 (Notice of Situation of
Registered Office) and Form 49 (Return Giving
Particulars in Register of Directors, Managers
and Secretaries and Changes of Particulars)
have been furnished to the Facility Agent and
the Trustee;
(ii)
Each of the transaction documents (as advised
by the Solicitors) shall have been duly
executed and stamped where applicable;
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(iii) Written approval from BNM to PBB for the
following:(a)
the establishment of the Programme;
and
(b)
the classification of the Capital Securities
Notes issued from time to time under the
Programme over the availability period of
seven (7) years from the date of first
issuance of the Capital Securities as
non-innovative Tier 1 capital for the
computation of the RWCR of PBB and
the PBB Group;
(iv)
Written approval from the SC for the
establishment of the Programme and the
issuance of the Capital Securities by PBB and
the issuance of the Subordinated Notes by
PBFIN;
(v)
A legal opinion from the Solicitors addressed
to the Principal Adviser/Lead Arranger
advising with respect to, inter-alia, the validity,
legality and enforceability of the Stapled
Securities and the transaction documents, and
a written confirmation from the Solicitors to the
Principal Adviser/Lead Arranger that all
conditions precedent have been fulfilled;
(vi)
Evidence that the Subordinated Notes under
the Programme have been assigned a
minimum long-term rating of AA2 by RAM
Rating; and
(vii) Such other conditions precedent as may be
advised by the Solicitors for the Principal
Adviser/Lead Arranger (if any).
(u)
Representations and
Warranties
:
Representations and warranties shall include but not
limited to the following: (i)
The Issuer is a company duly incorporated and
validly existing under the laws of Malaysia;
(ii)
The Issuer has the power to enter into, exercise
its rights and perform its obligations under the
transaction documents;
(iii)
The Issuer’s entry into, exercise of its rights
under and performance of the transaction
documents do not and will not violate any
existing law or agreement to which it is a party;
(iv)
The Issuer has all licences, franchises, permits,
authorisations, approvals, orders and other
concessions of and from all governmental and
regulatory officials and bodies that are
necessary to own or lease its properties and
conduct its business, other than where the
failure to obtain such licences, franchises,
permits, authorisations, approvals, orders and
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other concessions would not have a material
adverse effect on the ability of the Issuer to
comply with its obligations under the transaction
documents;
(v)
The transaction documents create valid and
binding obligations which are enforceable on
and against the Issuer;
(vi)
All necessary actions, authorisations and
consents required under the transaction
documents have been taken, fulfilled and
obtained and remain in full force and effect;
(vii) that no Enforcement Event (as defined in item
(x)(xi) below) has occurred;
(viii) The audited accounts of the Issuer are prepared
in accordance with generally accepted
accounting principles and standards and give a
true and fair view of the financial condition of the
Issuer;
(ix)
No litigation or arbitration is current or, to the
Issuer’s knowledge, is threatened, which if
adversely determined would have a material
adverse effect on the ability of the Issuer to
comply with its obligations under the transaction
documents;
(x)
The financial statements and other information
supplied in respect of the financial statements
are true and accurate in all material aspects and
not misleading;
(xi)
No step has been taken by the Issuer, its
creditors or its shareholder or any other person
on its behalf, nor have any legal proceedings or
applications been started, under Section 176 of
the Companies Act, 1965;
(xii) There has been no change in the business or
condition (financial or otherwise) of the Issuer
since the date of its last audited financial
statements which might have a material
adverse effect on the ability of the Issuer to
comply with its obligations under the transaction
documents; and
(xiii) Such other representations and warranties as
may be advised by the Solicitors for the
Principal Adviser/Lead Arranger (if any).
(v)
Events of Default
:
There are no events of default under the
Subordinated Notes. Please refer to item (x)(xi)
below for Enforcement Events.
(w)
Principal terms and
conditions for warrants
(where applicable)
:
Not applicable.
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(x)
Other principal terms and conditions for the issue
x(i)
Interest Deferral
Right
:
PBFIN may, at its option, defer the payment of
interest on any interest payment date (other than
the maturity date of the relevant Subordinated
Notes). Any such deferral will not constitute or be
deemed a default by PBFIN for any purpose
whatsoever.
x(ii)
Mandatory Interest
Deferral
:
If the following events exist:
(a) on the fifteenth (15th) business day prior to an
interest payment date of the Subordinated
Loan; and
(b) continues to be met on (and including) such
interest payment date of the Subordinated
Loan or payment of interest on such interest
payment date of the Subordinated Loan would
result in the following event existing, PBFIN will
correspondingly defer the payment of all
interest
payable
under
the
relevant
Subordinated Notes on such interest payment
date:
(i) PBB is in breach of BNM’s minimum capital
adequacy ratio requirements as applicable
to PBB; or
(ii) If PBB would, immediately after an interest
payment date of the Subordinated Loan, be
in breach of BNM’s minimum capital
adequacy ratio requirements applicable to
PBB as a result of the payment of interest
on that interest payment date of the
Subordinated Loan.
Any such deferral will not constitute or be deemed a
default by PBFIN for any purpose whatsoever.
x(iii)
Payment of
Deferred Interest
:
Deferred interest amounts will be payable on the
next interest payment date, subject to the Interest
Deferral Right and the Mandatory Interest Deferral
at that time.
All deferred interest amounts will be due and
payable no later than the maturity date of the
relevant Subordinated Notes. No interest will accrue
on any deferred interest amount.
x(iv)
Dividend and
Capital Stopper
:
In the event that any amount of interest has been
deferred on an interest payment date, an
Assignment Event will be triggered and until such
deferred interest amount has been paid in full, PBB
may not:
(1) Pay any dividend to ordinary shareholders of
PBB or make any interest payment or
distribution on any securities or instruments
ranking pari passu with or junior to the
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Subordinated Loan/Capital Securities; and
(2) Redeem, purchase, reduce or otherwise
acquire any of its ordinary shares, preference
shares or other securities or instruments
ranking pari passu with or junior to the
Subordinated Loan/Capital Securities, or any of
its subsidiary undertakings benefiting from a
guarantee from PBB, ranking, as to the right of
repayment of principal, or the case of any such
guarantee, as to the right of payment of sums
under such guarantee, pari passu with or junior
to the Subordinated Loan/Capital Securities.
x(v)
Note Assignment
:
In respect of each issue of the Subordinated Notes,
if an Assignment Event occurs:
(1) all amounts which become due and payable in
respect of each issue of Subordinated Notes
after the occurrence of an Assignment Event
(“Assignment Event Date”) (including any
previously deferred interest amounts and
whether or not relating to the interest periods
prior to the Assignment Event Date) will be
payable to the Assignment Right Holder;
(2) all rights, title and interests of the relevant
Subordinated Note holders are automatically
assigned and transferred to the Assignment
Right Holder on the Assignment Event Date;
and
(3) the Assignment Right Holder may at its option
redeem the Subordinated Notes accordingly.
Each Subordinated Note holder irrevocably
appoints the Assignment Right Holder to be the
agent of the Subordinated Note holder to do all
such acts and things (including signing all
documents or transfers) as may in the opinion of the
Assignment Right Holder be necessary or desirable
to be done in order to record or perfect the transfer
of the Subordinated Notes from the Subordinated
Note holder to the Assignment Right Holder under
the Note Assignment. Such acts and things shall
include the execution and delivery of irrevocable
standing instructions by each Subordinated Note
holder to its Authorised Depository Institution
(“ADI”) to effect the transfer of the Subordinated
Notes to the Assignment Right Holder and the
delivery by the Subordinated Note holder of a copy
of such instruction to the Assignment Right Holder
and the Issuer.
x(vi)
Assignment
Events
:
An assignment event means the occurrence of any
of the following events:
(i)
the Assignment Right Holder in its absolute
discretion elects that an Assignment Event
occurs; or
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(ii)
BNM in its absolute discretion determines that
a Note Assignment should occur; or
(iii) the redemption of the Capital Securities by
PBB pursuant to a Tax Redemption (as defined
under item (x)(v) in the Principal Terms and
Conditions of the Capital Securities under the
Programme) or a Regulatory Redemption (as
defined under item (x)(vi) in the Principal
Terms and Conditions of the Capital Securities
under the Programme) or a Optional
Redemption (as defined under item (x)(iii) in
the Principal Terms and Conditions of the
Capital Securities under the Programme); or
(iv) the deferral of any interest on the Subordinated
Notes in accordance with the Interest Deferral
Right and the Mandatory Interest Deferral; or
(v) PBB is in breach of BNM’s minimum capital
adequacy ratio requirements applicable to
PBB; or
(vi) commencement of a Winding-Up Proceeding
(as defined in item (x)(xi) below) in respect of
PBFIN or PBB; or
(vii) appointment of an administrator in connection
with a restructuring or similar arrangements of
PBB or all or substantially all of its properties;
or
(viii) an Enforcement Event under the terms of the
Subordinated Notes; or
(ix) the occurrence of an Optional Redemption
Date (as defined under item (x)(iv) in the
Principal Terms and Conditions of the Capital
Securities under the Programme); or
(x) PBFIN ceases to be, directly or indirectly, a
wholly-owned subsidiary of PBB.
x(vii)
Assignment Right
Holder
:
PBB.
x(viii)
Issuer Redemption
:
Following the occurrence of an Assignment Event,
PBFIN may give a redemption notice to the
Assignment Right Holder causing redemption of all
Subordinated Notes at the Redemption Amount (as
defined below), on any interest payment date.
Similarly, following the occurrence of an Assignment
Event, PBB may at its option redeem the
Subordinated Loan from PBFIN.
“Redemption Amount” means 100% of the face
value of the Subordinated Notes together with
accrued but unpaid interest (if any) under the
Subordinated Notes.
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x(ix)
Stapling
:
Transfer Restriction
Each Capital Security will be stapled to a
Subordinated Note. Each Subordinated Note and
Capital Security together will constitute a Stapled
Security. Until an Assignment Event occurs and the
Subordinated Notes have been transferred to the
Assignment Right Holder, the Subordinated Notes
cannot be transferred without the Capital Securities
also being transferred to the same transferee.
Unstapling
Pursuant to the occurrence of an Assignment Event
and upon the assignment of the Subordinated Notes
to the Assignment Right Holder under the Note
Assignment, the corresponding Capital Security
ceases to be stapled to the Subordinated Note that
is assigned. For the avoidance of doubt, the
Subordinated Note does not cease to be stapled to
the corresponding Capital Security which forms part
of the Stapled Security in any other circumstances.
Once un-stapled, the Subordinated Notes may not
be assigned to any person other than the
Assignment Right Holder.
x(x)
Note Assignment
Agreement
:
Investors will subscribe for the Stapled Securities by
paying PBB the consideration equal to the principal
amount of the Capital Securities.
PBB will then enter into a note assignment
agreement (“Note Assignment Agreement”) with
such investors pursuant to which:
(i)
PBB pays such investor upfront (in an amount
equal to the principal amount for the Capital
Securities purchased by such investors) for the
right to require the assignment of the
Subordinated Notes to PBB (as Assignment
Right Holder) upon an Assignment Event,
whereby upon an Assignment Event, the
Subordinated Notes will be automatically
transferred to PBB.
(ii)
Such investors apply this upfront amount to
subscribe for the relevant amount of
Subordinated Notes from PBFIN, at par.
(iii) Such investors shall execute and deliver
irrevocable standing instructions to their
respective ADIs to effect the transfer of the
Subordinated Notes to the Assignment Right
Holder and deliver a copy of such instruction to
the Assignment Right Holder and the Issuer.
x(xi)
Enforcement
Events
Upon occurrence of any of the following events
(each an “Enforcement Event”) in respect of a
tranche of the Subordinated Notes:
(a) a default made in the payment of any nominal
value of the relevant Subordinated Notes on
the due date for payment thereof; or
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(b) a default made in the payment of interest on
the relevant Subordinated Notes on the due
date for payment thereof, which default
continues for fourteen (14) days consecutively
(other than the non-payment of interest as
provided under the Interest Deferral Right or
the Mandatory Interest Deferral);
the Subordinated Note holders of such tranche may,
at their discretion and without further notice, institute
Winding-Up Proceedings (as defined below) against
PBFIN in Malaysia (but not elsewhere) provided
that, such holders shall have no right to accelerate
payment of such Subordinated Notes in the case of
such default in payment of interest on, or other
amounts owing under, such Subordinated Notes or
a default in the performance of any other covenant
of PBFIN.
If a Winding-Up Proceeding commences in respect
of PBFIN, or an effective resolution of the
shareholders of PBFIN is passed for a Winding-Up
Proceeding in respect of PBFIN, the Subordinated
Note holders may, at such holders’ option, declare
the principal of and any interest amounts on the
Subordinated Notes to be due and payable
immediately, by a notice in writing to PBFIN. Upon
such a declaration, such nominal value and any
interest amounts shall become immediately due and
payable.
“Winding-Up Proceeding” means the occurrence
of any of the following:
(a) a court or agency or supervisory authority in
Malaysia having jurisdiction in respect thereof
shall have instituted a proceeding or entered a
decree or order for the appointment of a
receiver or liquidator in any insolvency,
rehabilitation,
readjustment
of
debt,
marshalling of assets and liabilities, or similar
arrangements involving PBFIN or all or
substantially all of its properties, or for the
winding-up of or liquidation of its affairs and
such proceedings, decree or order shall not
have been vacated or shall have remained in
force, undischarged or unstayed for a period of
sixty (60) days; or
(b) PBFIN files a petition to take advantage of any
insolvency statute.
x(xii)
Ranking
:
The Subordinated Notes constitute direct and
unsecured obligations of PBFIN.
The principal, interest and any other amounts
payable on the Subordinated Notes will be
subordinated in right of payment upon the
occurrence of any Winding-Up Proceeding, to the
prior payment in full of all liabilities of PBFIN
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(including liabilities of all offices and branches of
PBFIN wherever located and any debt securities
(whether subordinated or unsubordinated) of PBFIN
that rank senior to the Subordinated Notes) except,
in each case, to those liabilities which by their terms
rank equal with or junior to the Subordinated Notes.
Claims in respect of the Subordinated Notes will
rank pari passu and without preference among
themselves and with the most junior class of
preference shares (if any) of PBFIN, but in priority to
the rights and claims of holders of the ordinary
equity shares of PBFIN.
x(xiii)
Guarantee
The Subordinated Notes will not be secured or
covered by a guarantee of PBFIN or any related
entity of PBFIN, including PBB, or any other
arrangement that legally or economically enhances
the seniority of the claims of the Subordinated Note
holders.
x(xiv)
Withholding
taxes
All payments in respect of the Subordinated Notes
by or on behalf of PBFIN shall be made without
withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or
government charges of whatever nature imposed or
levied by or on behalf of the relevant jurisdiction,
unless the withholding or deduction of the taxes is
required by law.
In the event such taxes are imposed, PBFIN will not
have to pay additional amounts (“Additional
Amounts”) as may be necessary in order that the
net amounts received by the Subordinated Note
holders after the withholding or deduction shall
equal the respective amounts which would have
been receivable in respect of the Subordinated
Notes in the absence of the withholding or
deduction.
x(xv)
Voting Rights
The Subordinated Note holders will not be entitled
to receive notice of or attend or vote at a meeting of
the ordinary shareholder of PBFIN or to participate
in the management of PBFIN.
x(xvi)
Amendments to
the Conditions
Amendments to the terms and conditions of the
Subordinated Notes shall only be made with the
prior written approval of BNM, the SC and the
Subordinated Note holders.
x(xvii)
Governing Laws
The laws of Malaysia.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
SECTION 3.0
3.1
INVESTMENT CONSIDERATIONS
Risks Relating to the Public Bank Group
Non-Performing Loans, Allowances and Write-Offs
BNM regulations require that banks classify non-performing loans (“NPLs”) into three (3)
categories according to the number of months such loans are in arrears: sub-standard,
doubtful and bad. Generally, for sub-standard loans in arrears of six (6) months or more, and in
the case of the Bank, for loans in arrears of three (3) months or more, a specific allowance of
20.0 per cent. of the reservable amount, calculated as the outstanding loan amount net of
unearned interest and the value of any collateral (the “Reservable Amount”), is required to be
set aside by the Bank; for doubtful loans, a specific allowance of 50.0 per cent. of the
Reservable Amount must be set aside; and for bad loans, a specific allowance of 100.0 per
cent. of the Reservable Amount is required. In addition, the Bank adopts a policy of assigning
only 50.0 per cent. value, and no value to collateral in the form of property assets for NPLs in
arrears of more than five (5) years and more than seven (7) years respectively, in arriving at
the Reservable Amount of such NPLs. Once a loan is classified as non-performing, interest
accrued and recognised as income prior to the date the loan is classified as non-performing is
reversed out of income and set-off against the accrued interest receivable account in the
balance sheet. Thereafter, interest on the NPL is recognised as income on a cash basis.
There is no assurance that the number and value of NPLs of the Group will not increase in the
future.
There is no assurance that the level of allowances for NPLs made by the Group will prove to
be adequate, that the Group will not have to make additional allowances for possible loan
losses in the future, or that the Group would be able to realise adequate proceeds from
collateral disposals to cover the amount of NPLs net of specific allowances.
Liquidity and Short-Term Funding Sources
The funding requirements of Malaysian banks are primarily met by short-term funding sources,
namely deposits from customers and from other financial institutions. Although the Group
considers, based on past experience, that a substantial portion of its core customers’ deposits,
comprising demand, savings and fixed deposits, will continue to be deposited with the Group,
therefore providing a stable source of funding for the Group, no assurance can be given that
this will continue in the future. If a substantial number of depositors, or a small number of large
depositors, fail to roll over deposited funds upon maturity, the Group’s liquidity position could
be adversely affected and the Group may be required to seek alternative sources of shortterm, or long-term funding, which may be more expensive than deposits, to finance its
operations. There can be no guarantee that the Group will be able to obtain such funds (see
Section 6.0 – “Funding and Capital Adequacy” and Section 8.0 – “Risk Management” below).
Interest Rate Risk
The Group’s exposure to interest rate risk arises from its loan portfolio, holdings of securities
and its interbank placements.
When interest rates decline, the Group’s net interest margin generally decreases due to
immediate repricing of its base lending rate (“BLR”) based loans compared with slower
adjustments in the interest rates paid on its customers’ deposits. On the other hand, part of the
Group’s loan portfolio comprises fixed rate loans (including hire purchase loans) which are
financed through the acceptance of deposits with maturities of typically up to one (1) year that
generally move in tandem with short-term interest rates. The actual effect on net interest
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
income due to changes in interest rates will depend on the degree and timing of changes in
interest rates, the behaviour and contractual repricing dates of the Group’s assets and
liabilities and the ability of the Group to respond to changes in BNM’s overnight policy rates.
3.2
Risks Relating to the Industry
Regulatory Environment
Public Bank is regulated by BNM. The Group is also subject to the relevant banking, securities
and other laws of Malaysia. BNM has extensive powers to regulate the banking industry under
the Banking and Financial Institutions Act, 1989 (“BAFIA”). This includes the power to limit the
interest rates charged by banks on certain types of loans, establish caps on lending to certain
sectors of the economy and establish priority sector lending guidelines in furtherance of certain
social and economic objectives. BNM also has broad investigative and enforcement powers
(see Section 9.0 – “Supervision and Regulation” below). Accordingly, potential investors
should be aware that BNM could, in the future, set interest rates at levels or restrict credit in a
way which may be adverse to the operations, financial condition or asset quality of banks and
financial institutions, including the Group, and may otherwise significantly restrict the activities
of the Group and banks and financial institutions generally.
Competition
The banking industry is transforming through BNM’s deregulation process as part of the
Financial Master Plan (“FSMP”). The FMSP is a ten (10) year blue print of BNM’s proposed
and projected development of the Malaysian financial services and insurance sectors launched
in 2001 and the overall objectives of the FSMP are, inter-alia, as follows :•
to develop a core set of strong domestic banking institutions and a more market-based
consumer protection framework, and to increase the efficiency and competitiveness of
the domestic banking sector;
•
to further strengthen the domestic banking sector and to remove the restrictions on
incumbent foreign banks in the Malaysian market; and
•
to liberalise the domestic banking sector and increase foreign banks’ participation in
Malaysia’s banking sector and encourage domestic banks to expand into foreign
markets.
Since 2000, the Malaysian domestic banking industry has consolidated into nine (9) domestic
banking groups which have contributed to the development of strong domestic banking groups,
providing a wider range of competitive, innovative and customised financial products and
services. With effect from 1 January 2006, incumbent foreign banks have also been allowed by
BNM to open up to four (4) new branches a year, subject to certain conditions determined by
BNM. As at the date of this IM, BNM has issued licences to seventeen (17) Islamic banks, of
which six (6) are foreign banks or wholly-owned subsidiaries of foreign controlled domestic
banks.
As a result of the above, Malaysian banks may, in the future, face increased competition
amongst the domestic banking groups and from foreign financial institutions, in addition to
existing competition from foreign financial institutions already in Malaysia.
The increased competition may have an adverse effect on the Group’s business, financial
condition, and results of its operations in the future due to, inter-alia, reduction in the rate of
growth of the Group’s loan portfolio and reduced net interest margins and spreads, as well as
a decline in the volume of the Group’s related businesses. While the Group believes that it has
formulated strategies to compete effectively in the market place, there can be no assurance
that it will be able to execute its strategies or that it will be able to effectively compete against
its existing and future competitors.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Deposits in Malaysia are only temporarily insured up to their full amount
BNM introduced a deposits insurance system to protect depositors against the loss of their
insured deposits placed with member institutions in the unlikely event a member institution is
unable to meet its obligations to depositors. The deposits insurance system was launched in
Malaysia on 1 September, 2005 and is administered by the Perbadanan Insurans Deposit
Malaysia (“PIDM”) established under the Malaysia Deposit Insurance Corporation Act, 2005.
Under the deposit insurance system, eligible deposits are insured up to a prescribed limit of
RM60,000 (inclusive of principal and interest) per depositor and per member institution. There
is also separate coverage of up to RM60,000 per depositor and per member institution for
Islamic deposits, accounts held under joint ownership, trust accounts and accounts in the
name of sole proprietorships and partnerships. All licensed commercial banks (including
subsidiaries of foreign banks operating in Malaysia), finance companies and Islamic banks are
member institutions of the deposit insurance system.
On 16 October 2008, the Ministry of Finance and BNM jointly announced the implementation
of a Government deposit guarantee as a pre-emptive and precautionary measure to maintain
the stability of the Malaysian financial system. The guarantee, implemented by PIDM, is only a
temporary measure and is effective from 16 October 2008 and will remain in force until 31
December 2010. It gives “full protection” to depositors holding all ringgit and foreign currency
deposits with commercial, Islamic, investment and international Islamic banks, as well as
deposit-taking development financial institutions regulated by BNM. However, not all deposits
and instruments are guaranteed by the deposit guarantee scheme. These include conventional
structured products that are not principal guaranteed, deposits payable outside Malaysia, interbank money market placements, negotiable instruments of deposit held by banks and
repurchase agreements.
In the event of a sudden and systemic withdrawal of deposits from the Malaysian financial
system which could lead to or exacerbate liquidity problems, all financial institutions, including
Public Bank, may suffer an adverse effect on their operations, results of their operations and
their financial conditions. The Government deposit guarantee was put in place to mitigate such
a risk. However, upon the expiry of the “full protection” by the Government deposit guarantee
after 31 December 2010, depositors will no longer be able to rely on the Government deposit
guarantee to fully protect their deposits, which may give rise to an increased risk of a sudden
and systemic withdrawal of deposits.
3.3
Risks Relating to the Stapled Securities
Subordinated Obligations
The Stapled Securities will be subordinated obligations of the Issuers. If the Issuers default on
the payment of principal or interest or Distributions on the Stapled Securities, the only action
the holders of the Stapled Securities (“Holders”) may take against the Issuers is to institute a
proceeding in Malaysia for the winding-up of the Issuers. In the case of default on the payment
of principal or interest on the Stapled Securities, such Holders will have no right to accelerate
payment of the Stapled Securities other than by Winding-Up Proceeding (as defined below).
Winding-Up Proceeding means either:
(a)
a court or agency or supervisory authority in Malaysia having jurisdiction in respect
thereof shall have instituted a proceeding or entered a decree or order for the
appointment of a receiver or liquidator in any insolvency, rehabilitation, readjustment of
debt, marshalling of assets and liabilities, or similar arrangements involving the Issuers
or all or substantially all of its properties, or for the winding-up of or liquidation of its
affairs and such proceedings, decree or order shall not have been vacated or shall
have remained in force, undischarged or unstayed for a period of sixty (60) days; or
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(b)
the Issuers shall have filed a petition to take advantage of any insolvency statute.
(see Section 2.1 – “Summary of the Principal Terms and Conditions of the Capital Securities
under the Programme”, item (x)(xiii): Enforcement Events and Section 2.2 – “Summary of the
Principal Terms and Conditions of the Subordinated Notes under the Programme”, item (x)(xi):
Enforcement Events)
Upon the occurrence of any Winding-up Proceeding, payments on the Stapled Securities will
be subordinated in right of payment to the prior payment in full of all deposits and other
liabilities of the Issuers, except those liabilities which rank equally (including the existing RM1.2
billion Innovative Tier 1 Capital Securities and the USD200.0 million Innovative Tier 1 Capital
Securities issued by Public Bank) with or junior to the Stapled Securities. In a Winding-up
Proceeding, the Holders may recover less than the holders of deposit liabilities or the holders
of other unsubordinated and subordinated liabilities of the Issuers, which rank senior to the
Stapled Securities. As there is no precedent for the winding-up of a major financial institution in
Malaysia, there is uncertainty as to the manner in which such proceeding would occur and the
results thereof.
No limitation on issuing other Tier-1 capital securities or senior indebtedness
There are no restrictions on the amount or number of other Tier-1 capital securities that Public
Bank may issue which rank pari passu with the Capital Securities or on the amount of
indebtedness that Public Bank may incur which rank senior to the Capital Securities. The
creation and issue of further Tier-1 capital securities ranking pari passu with the Capital
Securities or the incurrence of indebtedness ranking senior to the Capital Securities shall not
require the consent of the holders of the Stapled Securities. The issue of such Tier-1 capital
securities and/or incurrence of such indebtedness may reduce the amount recoverable by the
holders of the Stapled Securities in the event of dissolution or winding-up of Public Bank.
Distribution payment on the Capital Securities may be cancelled and Interest payment
on the Subordinated Notes may be deferred and even cancelled under a number of
situations
Capital Securities
Upon Occurrence of an Assignment Event (See Section 2.1 – “Summary of the Principal
Terms and Conditions of the Capital Securities under the Programme”, item (x)(ix):
Assignment Events), the Capital Securities will start to accrue cash distribution at the
Distribution Rate. Public Bank would have certain rights to cancel the distribution payable on a
Distribution payment date subject to the clause on Limitation on Payment of Distribution. (See
Section 2.1 – “Summary of the Principal Terms and Conditions of the Capital Securities under
the Programme”, item (x)(i): Limitation on Payment of Distribution). All Unpaid Distribution
Amount shall be cancelled, except in situations when the Capital Securities no longer qualify
as non-innovative Tier 1 capital for regulatory purposes and Public Bank is not in breach of
regulatory minimum capital adequacy requirements, in which case Unpaid Distribution
Amounts will become cumulative and compounding at the Distribution Rate upon the
redemption of the Capital Securities.
Subordinated Notes
Interest may be deferred on any interest payment date other than on the maturity date. PBFIN
will defer the payment of all interest payable under the Subordinated Notes if Mandatory
Interest Deferral takes place. (See Section 2.2 – “Summary of the Principal Terms and
Conditions of the Subordinated Notes under the Programme”, item (x)(ii): Mandatory Interest
Deferral). It should also be noted that the deferral of interest payments under the Subordinated
Notes will trigger an Assignment Event (as defined Section 2.2 – “Summary of Principal Terms
and Conditions of the Subordinated Notes under the Programme”, item (x)(vi): Assignment
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Events) of which the Subordinated Notes will be automatically transferred to Public Bank and
consequently investors shall no longer have any claims on the Subordinated Notes, including
any interest payments (including deferred interest payments). However, following the
occurrence of an Assignment Event, Distribution will accrue on the Capital Securities from (and
including) the interest payment date under the Subordinated Notes immediately prior to the
Assignment Date (as set out in Section 2.1 – “Summary of the Principal Terms and Conditions
of the Capital Securities under the Programme”, item (f): Interest/Coupon (%))
In either case above, there is no default interest payable under the Capital Securities or the
Subordinated Notes.
Limited Liquidity of the Stapled Securities
Presently, there is no issuance of Stapled Securities in the market. The Stapled Securities will
not be listed on Bursa Malaysia Securities Berhad (“Bursa Securities”) or any other exchange.
There can be no assurance regarding the future development of a market for the Stapled
Securities, the ability of Holders to sell their Stapled Securities or the price at which such
Holders may be able to sell their Stapled Securities.
A downgrade in ratings may affect the market price of the Stapled Securities
The Capital Securities and the Subordinated Notes have both been assigned long term ratings
of AA2 by RAM Rating. A rating is not a recommendation to buy, sell or hold the Stapled
Securities and may be subject to revision, suspension or withdrawal at any time by RAM. A
downgrade in RAM’s rating of the Capital Securities or the Subordinated Notes may adversely
on the liquidity and trading price of the Stapled Securities.
Redemption of the Capital Securities under certain circumstances
The Capital Securities may be redeemed at the option of Public Bank (in whole, but not in part)
at the Redemption Amount, subject to the Redemption Conditions being satisfied on any
Optional Redemption Date (as set out in Section 2.1 – “Summary of the Principal Terms and
Conditions of the Capital Securities under the Programme”, item (x)(iii): Optional
Redemption”). The Capital Securities may also be redeemed at the option of Public Bank (in
whole, but not in part) at the Redemption Amount, subject to the Redemption Conditions being
satisfied for tax or regulatory reasons (as set out in Section 2.1 – “Summary of the Principal
Terms and Conditions of the Capital Securities under the Programme”, item (x)(v): Tax
Redemption and item (x)(vi): Regulatory Redemption).
However, Public Bank is under no obligation to redeem the Capital Securities, which are
perpetual in tenure and have no fixed maturity date.
3.4
Potential Conflict of Interest Situation
PIVB has been appointed as the Principal Adviser/Lead Arranger, the Facility Agent and the
Joint Lead Manager for the Programme. Save as disclosed below, after making enquiries as
were reasonable in the circumstances, PIVB is not aware of any circumstances that would give
rise to a conflict of interest in their capacity as the Principal Adviser/Lead Arranger, the Facility
Agent and the Joint Lead Manager in relation to the Programme.
In view of PIVB being a wholly-owned subsidiary of PBB and PIVB being a sister company of
PBFIN, there is a potential conflict of interest arising from PIVB’s roles, as the Principal
Adviser/Lead Arranger, the Facility Agent and the Joint Lead Manager for the Programme, in
terms of PIVB’s obligations to the prospective investors of the Stapled Securities under the
Programme and PIVB and PBFIN’s relationship as subsidiaries of PBB.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Appropriate Mitigating Factors:PIVB, in relation to its roles as the Principal Adviser/Lead Arranger, the Facility Agent and the
Joint Lead Manager for the Programme, has considered the factors involved and believes that
objectivity and independence in carrying out its roles have been and will be maintained at all
times for the following reasons:(i)
PIVB is a licensed investment bank and its appointment as the Principal Adviser/Lead
Arranger, the Facility Agent and the Joint Lead Manager for the Programme is in its
ordinary course of business;
(ii)
the role of PIVB will be governed by relevant agreements and documentation which
shall clearly set out the rights, duties and responsibilities of PIVB in its capacity as the
Principal Adviser/Lead Arranger, the Facility Agent and the Joint Lead Manager for the
Programme;
(iii)
the conduct of PIVB is regulated strictly by the BAFIA and by its own internal controls
and procedures;
(iv)
the role of PIVB as the Principal Adviser/Lead Arranger for the Programme is guided
by the Guidelines on the Offering of Private Debt Securities issued by the SC on 26
July 2004 and the Guidelines on Due Diligence Conduct for Corporate Proposals
issued by the SC on 1 February 2008; and
(v)
save for the professional fees charged in relation to its roles as the Principal
Adviser/Lead Arranger, the Facility Agent and the Joint Lead Manager for the
Programme, PIVB will not be deriving any other monetary benefit from the Programme
outside its aforesaid capacities.
In order to further mitigate any such potential conflict of interest, the following measures have
been and will be taken:(i)
PIVB has obtained confirmation from PBB and PBFIN wherein the respective boards
of directors of PBB and PBFIN have acknowledged that they are fully aware of the
potential conflict of interest situation and the mitigating measures and also confirmed
that the board of directors of PBB and PBFIN have no objection and is agreeable to
PIVB undertaking the abovementioned roles;
(ii)
PBB has also appointed other advisers/parties such as CIMB and RHB Investment
Bank as the Joint Lead Managers, Messrs. Adnan Sundra and Low as the Solicitors
for the Principal Adviser/Lead Arranger and AmanahRaya Trustees Berhad as the
Trustee for the Holders; and
(iii)
the potential conflict of interest situation is disclosed in this IM.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
SECTION 4.0
4.1
BACKGROUND INFORMATION OF THE PUBLIC BANK GROUP
Introduction
The Group is the third (3rd) largest banking group in Malaysia in terms of total assets. As at 31
December 2008, the Group had total assets of RM196.2 billion and customer deposits of
RM162.3 billion. The Group recorded net profits after minority interests of RM2.58 billion for
the year ended 31 December 2008 and RM589.3 million for the three (3) month period ended
31 March 2009.
As at 31 December 2008, the Group had a domestic branch network in Malaysia of 242
branches, 450 automated teller machines (“ATMs”), and 788 cheque and cash deposit
machines. The Bank also offers comprehensive telephone banking and internet banking
facilities. The Bank also has branches in Hong Kong, Sri Lanka and Laos. As at 31 December
2008 the Group had 16,160 employees.
The Group’s main business operations consist of banking and finance company businesses
through the Bank, as well as banking, financing, Islamic banking, investment banking and
stock broking and fund management operations through its principal subsidiaries, Public Bank
(Hong Kong) Limited (“Public Bank (Hong Kong)”), Cambodian Public Bank Plc (“Campu
Bank”), Public Finance Limited (“Public Finance”), Public Islamic Bank Berhad (“Public Islamic
Bank”), Public Investment Bank, and Public Mutual Berhad (“Public Mutual”) respectively. The
following diagram shows the relationship between the Bank and its principal subsidiaries:-
Public Bank
Berhad
100%
100%
73.2%
Public
Islamic Bank
Berhad
Public
Investment
Bank Berhad
Public Financial
Holdings
Limited
100%
100%
Public
Consolidated
Holdings Sdn Bhd
100%
Public Bank
(Hong Kong)
Limited
100%
Public
Finance
Limited
46
Public
Mutual
Berhad
100%
Cambodian
Public Bank
Plc
Information Memorandum
NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The following table shows the contribution to the Group’s profit before tax for the year ended
31 December 2008 and for the three (3) month period ended 31 March 2009 and the total
assets of the Group as at 31 December 2008 and as at 31 March 2009 by the Bank and its
principal subsidiaries:Profit before tax
Total Assets
Year ended
31 December
2008(4)
(%)
Three (3) month
period ended 31
March 2009(4)
(%)
As at
31 December
2008
(%)
Public Bank
80.4
68.6
85.0
84.3
Public Islamic Bank
1.9
(3)
12.5
8.4
8.2
Public Mutual
5.4
6.8
0.2
0.2
Public Financial Holdings
Group (1)
4.9
N/A(2)
8.1
N/A(2)
Campu Bank
3.7
3.5
1.8
1.7
Public Investment Bank
1.0
1.0
2.9
2.7
As at 31 March
2009
(%)
Notes :(1) Public Financial Holdings Group comprises Public Financial Holdings Limited and its subsidiary companies.
(2) The latest available financial results of Public Financial Holdings Group is for the year ended 31 December 2008,
which were released to the Stock Exchange of Hong Kong Limited.
(3) Public Islamic Bank commenced its business on 1 November 2008 subsequent to the transfer of the Islamic
banking business of Public Bank to Public Islamic Bank.
(4) Excluding income/expenses which are eliminated at Group level.
A more detailed description of the Bank’s principal subsidiaries is set out under Section 4.6 “Principal Subsidiaries” below.
4.2
History
The Bank was incorporated as Public Bank Limited in Malaysia on 30 December 1965 and
changed its name to Public Bank Berhad on 15 April 1966. The Bank commenced business on
6 August 1966 and it has been listed on Bursa Securities since 6 April 1967.
The Group expanded into Hong Kong with the setting up of a representative office in July
1985. The Group expanded further in Hong Kong with the acquisition of Public Finance in
January 1990. The Hong Kong representative office was upgraded to a restricted licensed
bank branch in August 1990 and was subsequently further upgraded to a full licensed bank
branch in August 2003. Public Financial Holdings Limited (“Public Financial”), the holding
company of Public Finance, has been listed on the Stock Exchange of Hong Kong Limited
since October 1991.
The Bank established a joint venture bank, Campu Bank with the National Bank of Cambodia
on 20 February 1992. Campu Bank commenced business in Cambodia on 25 May 1992.
Campu Bank became a wholly-owned subsidiary of the Bank with effect from 9 December
1997.
The Bank acquired the former Sime Merchant Bankers Berhad in October 2000 (which
subsequently changed its name to Public Merchant Bank Berhad in November 2000) thereby
expanding the Group’s business into the Malaysian merchant banking industry.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The Bank completed the acquisition of the former Hock Hua Bank Berhad and the finance
company business of the former Advance Finance Berhad on 31 March 2001 and 31
December 2000 respectively. These acquisitions were in line with BNM’s restructuring and
consolidation of the Malaysian domestic controlled banking and financial services industry into
ten (10) domestic banking groups.
The Bank completed the merger of the finance company business of its subsidiary, PBFIN
Berhad (formerly known as Public Finance Berhad) with the banking business of the Bank on 4
September 2004.
Public Financial had on 30 May 2006 acquired the former Asia Commercial Bank Ltd (which
subsequently changed its name to Public Bank (Hong Kong)), an authorised institution under
the Hong Kong Banking Ordinance providing banking and related services.
The merger of the merchant banking business of Public Merchant Bank Berhad with the stock
broking business of PB Securities Sdn Bhd, the Bank’s wholly-owned stock broking company,
was completed on 18 December 2006 whereupon PB Securities Sdn Bhd was transformed
into an investment bank and changed its name to Public Investment Bank Berhad.
The Islamic banking business carried out by the Bank was transferred to Public Islamic Bank,
a wholly-owned subsidiary of the Bank on 1 November 2008.
4.3
Share Capital and Substantial Shareholders
Share Capital
The authorised, issued and paid-up capital of Public Bank as at 31 March 2009 are as follows:Number of Shares
Par Value
Total
Authorised share capital
10,000,000,000
RM1.00
RM10,000,000,000
Issued and paid-up capital
3,531,925,834
RM1.00
RM3,531,925,834
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Substantial Shareholders
The substantial shareholders of Public Bank (holding 5.0 per cent. or more of Public Bank’s
issued and paid-up capital excluding treasury shares) and their respective shareholding in
Public Bank based on the Register of Substantial Shareholders as at 31 March 2009 are as
follows:Direct Interests
No. of PBB
%*4
shares held
Name
Indirect Interests
No. of PBB
%*4
shares held
Tan Sri Dato’ Sri Dr. Teh Hong
Piow
22,139,228
0.64
808,939,118 *1
23.44
Employees
Provident
(“EPF”) Board
Fund
509,727,087
14.77
-
-
Consolidated Teh Holdings Sdn
Bhd
81,750,535
2.37
170,446,256 *2
4.94
Sekuriti Pejal Sdn Bhd
207,148,819
6.00
39,827,165 *3
1.15
Notes:*1
Deemed to have interests in the ordinary shares of RM1.00 each in PBB (“PBB Shares”) held by other corporations by
virtue of Section 6A(4) of the Companies Act, 1965 (“Act”). These other corporations are Sekuriti Pejal Sdn Bhd,
Kepunyaan Perindustrian Sdn Bhd, Syarikat Kepunyaan Khas Sdn Bhd, Consolidated Teh Holdings Sdn Bhd, Securities
Holdings Sdn Bhd, Selected Holdings Sdn Bhd, Monivest Sdn Bhd, Kepunyaan Pejal Sdn Bhd, Selected Securities Sdn
Bhd, Fairbanks Holdings (Pte) Ltd, Kayakita Corporation Sdn Bhd, Kepunyaan Chintamani Sdn Bhd, Kepunyaan Moden
Sdn Bhd, London & Pacific Holdings Sdn Bhd, LPI Capital Bhd, Lonpac Insurance Bhd, Luhur Management Sdn Bhd,
Magnificient Equities Sdn Bhd, Tong Meng Industries Ltd, Tong Meng Company (Malaya) Sdn Bhd and TMI Securities
Pte Ltd.
*2
Deemed to have interests in PBB Shares held by Selected Holdings Sdn Bhd, Securities Holdings Sdn Bhd and Kayakita
Corporation Sdn Bhd by virtue of Section 6A(4) of the Act.
*3
Deemed to have interests in PBB Shares held by Syarikat Kepunyaan Khas Sdn Bhd and Kepunyaan Perindustrian Sdn
Bhd by virtue of Section 6A(4) of the Act.
*4
Excluding a total of 80,472,168 PBB Shares bought-back by PBB and retained as treasury shares as at 31 March 2009.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
4.4
Background Information of PBFIN Berhad
As at 31 March 2009, the authorised share capital of PBFIN is RM1,000,000,000 divided into
1,000,000,000 ordinary shares of RM1.00 each. The total issued share capital of PBFIN now
stands at 2 ordinary shares of RM1.00 each, and the paid-up capital is RM2.00. PBFIN is a
wholly-owned subsidiary of PBB and is currently dormant. PBFIN’s principal activities will be to
issue the Subordinated Notes and to on-lend the proceeds of the issue of the Subordinated
Notes to Public Bank.
Profile of Directors of PBFIN Berhad
Chan Kok Kwai
Chan Kok Kwai, aged 52 joined PBB in 1982 and was appointed Head of Credit Administration
and Supervision Division in 1992. He is responsible for PBB’s credit control and recovery of
non-performing loans for retail loans. He holds a Bachelor Degree in Economics.
He was appointed as a Director of PBFIN on 17 September 2007. His directorships in other
companies in the PBB Group are in PB International Factors Sdn Bhd, Public Leasing &
Factoring Sdn Bhd, Public Nominees (Tempatan) Sdn Bhd and Public Nominees (Asing) Sdn
Bhd.
Chew Han Kang
Chew Han Kang, aged 53 joined PBB Group in 1976 and was appointed Director of HP
Financing in 1997. He has thirty three (33) years of experience in hire purchase financing. He
is responsible for PBB’s HP Operations since 2008. He holds a Diploma in Management.
He was appointed as a Director of PBFIN on 4 September 2004. His directorships in other
companies in the PBB Group are in Public Leasing & Factoring Sdn Bhd and PB International
Factors Sdn Bhd.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
4.5
The Business of the Public Bank Group
The Public Bank Group’s main business operations can be grouped under six (6) customerfocused operations. These are the Hire Purchase, Retail Operations, Corporate Lending,
Treasury and Capital Market Operations, Investment Banking and Fund Management.
The following tables show an analysis of the financial performance of the Public Bank Group’s
business operations for the year ended 31 December 2008 and for the three (3) month period
ended 31 March 2009 :For the financial year ended 31 December
2008
Operating
Assets
Segment
Revenue
employed
results(1)
(RM million)
(RM million)
(RM million)
The Public Bank Group’s Business
By Business Segment
Hire Purchase #
Retail Operations #
Corporate Lending #
Treasury and capital Market Operations #
Investment Banking
Fund Management (2)
Others
1,546.5
6,098.5
707.8
2,564.8
229.8
396.9
15.5
28,943.9
110,227.6
16,439.8
64,876.0
5,005.1
261.0
269.3
224.4
2,731.2
96.7
291.1
74.9
183.3
15.4
Total Operating Business Segments
11,559.8
226,022.7
3,617.0
Head Office
Inter-segment elimination
General allowance
Share of profit after tax of equity accounted associated
companies
Investment in associated companies
Unallocated assets
Intangible assets
1,292.5
(2,352.0)
-
790.7
(33,487.3)
-
(18.2)
(232.1)
-
127.8
637.2
2,072.0
12.5
-
Total
10,500.3
196,163.1
3,379.2
857.0
16,609.3
341.4
9,438.0
1,062.3
176,114.8
20,048.3
3,058.2
321.0
10,500.3
196,163.1
3,379.2
# of which Islamic Banking operations
By Geographical Location
Malaysia
Overseas
Total
(Source: Extracted from the audited financial statements of the Group for the year ended 31 December 2008)
Notes: (1) Segment results represent profit before tax.
(2) For the details of the fund management business segment, please refer to Section 4.5 – “The Business of the
Public Bank Group – (iii)(b) Fund Management” below.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
For the three (3) month period ended 31
March 2009
Operating
Assets
Segment
Revenue
employed
results(1)
(RM million)
(RM million)
(RM million)
The Public Bank Group’s Business
By Business Segment
Hire Purchase #
Retail Operations #
Corporate Lending #
Treasury and Capital Market Operations #
Investment Banking
(2)
Fund Management
Others
410.5
1,414.8
135.4
454.3
43.5
86.3
4.1
29,573.6
115,641.1
18,608.4
65,765.6
4,634.7
307.8
272.5
137.3
476.2
46.3
78.7
10.3
50.6
4.6
Total Operating Business Segments
2,548.9
234,803.7
804.0
Head office
Inter-segment elimination
General allowance
Share of profit after tax of equity accounted associated
companies
Investment in associated companies
Unallocated assets
Intangible assets
290.4
(407.8)
-
108.7
(38,961.7)
-
6.6
(68.0)
-
136.9
1,001.1
2,137.9
2.3
-
Total
2,431.5
199,226.6
744.9
225.0
16,588.6
95.6
Malaysia
Overseas
2,175.8
255.7
179,110.1
20,116.5
679.2
65.7
Total
2,431.5
199,226.6
744.9
# of which Islamic Banking operations
By Geographical Location
(Source: Extracted from the unaudited consolidated interim financial statements for the three (3) month period ended
31 March 2009)
Notes: (1) Segment results represent profit before tax.
(2) For the details of the fund management business segment, please refer to Section 4.5 – “The Business of the
Public Bank Group – (iii)(b) Fund Management” below.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Hire Purchase
The hire purchase operations are focused on the provision of motor vehicle financing to all
types of customers.
As at 31 December 2008, Hire Purchase Operations had total assets of RM28.9 billion, which
was 12.8 per cent. of the total assets of the Group’s operating business segments.
Motor vehicle financing is the second (2nd) largest component of the Group’s consumer credit
business. This type of financing, primarily for passenger vehicles, is offered mainly on a flat
rate basis and is secured by the vehicle being purchased, with financing typically amounting to
85.0 per cent. of the assessed collateral value of the vehicle (although the Group’s policy
allows a maximum of 90.0 per cent. of the value of the vehicle to be financed). This form of
financing typically has a repayment term of three (3) to seven (7) years with a maximum of
nine (9) years.
In 2008, the Group’s hire purchase financing portfolio registered a growth of 12.4 per cent. or
RM3.2 billion, where 69.0 per cent. was for the financing of new passenger vehicles. As at 31
December 2008, the hire purchase financing portfolio stood at RM29.3 billion. This was
achieved through the strengthening of relationships with car dealers by actively participating in
joint sales promotion, car carnivals and road shows. The Group has established motor vehicle
financing business relationship with a network of over 7,000 car dealers nationwide as at 31
December 2008.
Retail Operations
The principal business activities of the Retail Operations of the Group are the provision of
consumer loans (such as housing loans, credit cards, retail share margin financing and
personal consumer loans), small-and medium-sized enterprise (“SME”) loans, wealth
management products (other than fund management) and cash management services. The
Group’s main focus is on the banking and financing needs of retail consumers and middle
market commercial enterprises, particularly SMEs.
As at 31 December 2008 Retail Operations had total assets of RM110.2 billion, which was
48.8 per cent. of the total assets of the Group’s operating business segments.
Retail Operations comprise four (4) strategic business areas, namely Consumer Credit, SME
Lending, Wealth Management and Cash Management Services.
(i)
Consumer Credit
The Consumer Credit business comprises the following:•
Residential Property Financing;
•
Credit Cards;
•
Share Margin Financing; and
•
Personal Consumer Loans.
Outstanding loans extended by the Consumer Credit business units amounted to
RM53.4 billion, representing 44.3 per cent. of the Group’s gross loans as at 31 December
2008.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
(a)
Residential Property Financing
Residential property financing, comprising loans to the residential housing sector, represents
the Group’s largest component of consumer credit. These loans are typically secured by the
residential property being purchased or refinanced and are generally term loans or overdrafts
(or a combination of both). The Group’s housing loans typically have repayment terms of ten
(10) to twenty (20) years with a maximum tenor of up to forty (40) years or up to the customer’s
age of seventy (70) years, whichever is the earlier. With the exception of low cost housing, the
Group’s policy is to lend up to 95.0 per cent. of the assessed market value of the property. The
Group has introduced a range of housing loan products under the brand names of 5HOME
Plan and MORE Plan, both of which offer various financing plans for customers including multitier interest rate options, Islamic financing and fixed interest rate options.
In 2008, total housing loans approved of RM8.4 billion accounted for 36.1 per cent. of total
retail operations loans approved and led to the growth in the Group’s housing loans portfolio by
RM5.4 billion or 20.5 per cent. to RM31.6 billion as at 31 December 2008. As at 31 March
2009, lending to the residential housing sector stood at RM32.7 billion and accounted for 42.8
per cent. of the Group’s retail operations loans portfolio.
(b)
Credit Cards
The Group commenced its credit card operations in May 1992. Revenues from the Group’s
credit card operations consist principally of annual fees paid by cardholders, finance charges
on outstanding balances, cash advance fees and merchant discount rates payable by business
establishments. As at 31 December 2008, credit card receivables of the Group stood at
RM1,028.8 million, amounting to 0.9 per cent. of the Group’s gross loans outstanding as at the
same date.
The Group’s credit card business has seen healthy growth in its card base due to the Group’s
marketing and promotion efforts and cross-selling within the Group. The Group’s credit card
base increased by 12.5 per cent. in 2008 to over 678,000 cards, whilst credit card sales
improved by 15.0 per cent. to RM3.7 billion, when compared to 2007.
The Group is licensed to issue Visa and MasterCard credit and debit cards and also to conduct
merchant acquiring business for both Visa and MasterCard.
(c)
Share Margin Financing
The Group’s share margin financing and share trading services provide facilities for customers
of the Bank and Public Investment Bank to finance and trade in shares listed on Bursa
Securities. The Bank’s share margin financing and share trading services product, PB
Sharelink, which provides share margin financing and cash or collaterised trading features,
gives customers more flexibility to trade in shares through Public Investment Bank.
In 2008, the Bank undertook various initiatives to expand the Bank’s customer share trading
and share margin business. These steps included increasing the Bank’s panel of stockbroking
companies from thirteen (13) to sixteen (16), expanding the number of Share Investment Units
at strategically located branches from thirty two (32) to thirty six (36) to tap on the branches’
potential customer base and to offer more convenient access to the Bank’s PB Sharelink
service.
The global financial crisis and economic turmoil in 2008 had a negative impact on the
performance of Bursa Securities. Despite the lacklustre performance of the Malaysian stock
market and the keen competition in the share margin financing business, the number of PB
Sharelink accounts grew by 36.2 per cent. and approved limits grew by 25.9 per cent.. This
resulted in an increase in total gross interest income from the share margin business by 7.0
per cent. However, customer share trading business volume dropped by 47.7 per cent. whilst
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the Bank’s total gross brokerage income from customer share trading business declined by
49.3 per cent.
(d)
Personal Consumer Loans
The Group’s personal consumer loans business is carried out primarily by Public Finance in
Hong Kong and in the provision of personal financing by Public Islamic Bank under the Islamic
Financing principle of Bai Al Einah (“BAE”) in Malaysia.
The personal consumer loans provided by Public Finance in Hong Kong is typically provided to
low and middle income individuals including government servants and overseas contract
workers. As at 31 December 2008, personal consumer loans in Hong Kong amounted to
HKD3.8 billion and accounted for 1.4 per cent. of the Group’s total loans.
In Malaysia, the Group’s personal consumer loan business is driven by its BAE Personal
Financing-i offerings. The BAE Personal Financing-i is offered primarily to staff of government
corporations and cooperative. In 2008, the Group continued to expand it’s BAE Personal
Financing-i business by enlisting seventy (70) new government and state agencies with an
additional 24,200 employees eligible for BAE Personal Financing-i. As at 31 December 2008,
the Group provided its BAE Personal Financing-i to a total of 218 government agencies, quasi
government corporations and cooperative with 282,000 employees eligible for BAE Personal
Financing-i. With the proactive enlistment of additional new agencies, the Group’s BAE
Personal Financing-i portfolio increased significantly by RM570.9 million or 54.4 per cent. from
RM1.0 billion as at 31 December 2007 to RM1.6 billion as at 31 December 2008.
The number of BAE Personal Financing-i sales and marketing personnel increased from fortysix (46) to ninety (90) to serve the BAE Personal Financing-i customers.
(ii)
SME Lending
Lending to SMEs constitutes a major component of the Group’s commercial lending market
segment. Loans to SMEs, amounting to RM23.0 billion, accounted for 19.0 per cent. of the
Group’s total loans as at 31 December 2008. The loans were channelled to finance SMEs
involved in a wide spectrum of economic sectors. Total loans approved to SMEs in 2008
amounted to RM10.5 billion and accounted for 44.9 per cent. of total new retail operations
loans approved in 2008.
A broad range of financial products and services are promoted to SMEs. The products are
tailored to the needs of SMEs and include the SWIFT (“Shophouse, Warehouse, Industrial
Factory and Trade Financing”) Plan and the SMILAX (“Small, Medium Industries – Loan
Assistance for eXpansion”) Plan. Both the SWIFT Plan and the SMILAX Plan offer a
combination of term loans, overdraft and trade financing facilities and are attractively priced
with flexible repayment term. A free legal documentation option is also available under the
SWIFT Plan where all legal expenses are absorbed by the Bank when customers refinance
their credit facilities with other financial institutions with credit facilities from the Bank.
In addition to the above, the Bank actively supports the Government promoted loan schemes
such as the Fund for Small and Medium Industries 2 and the New Entrepreneurs Fund 2 as
well as Credit Guarantee Corporate schemes such as the Credit Enhancer Scheme, the
revised Flexi Guarantee Scheme, the revised Small Entrepreneur Guarantee Scheme and
SME Assistance Guarantee Scheme. These loan schemes provide SMEs with access to low
interest rate loan facilities designed to assist SMEs to expand their business capacity and
enhance their competitiveness.
For SMEs involved in import and export businesses, the Bank also offers a range of trade bills
facilities where trade bills processing has been centralised at the Bank’s Trade Finance Centre
to enhance operational efficiency as well as to facilitate speedy service delivery. The Bank also
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offers competitive foreign exchange rates for trade settlement and SMEs are given the option
to open foreign currency accounts to retain funds in foreign currencies in order to hedge
against currency fluctuations.
(iii)
Wealth Management
(a)
Customer deposits
The Group offers its customers a variety of deposit products, each of which aims to meet the
financial requirements of a targeted customer profile. Core deposit products offered by the
Group fall into the following broad categories:•
fixed deposits, which generally require the customer to maintain a deposit for a fixed
term during which interest accrues at a fixed rate and withdrawals may be made upon
maturity or with interest penalties before maturity;
•
saving deposits, which allow the customer to deposit and withdraw funds at any time and
interest is accrued at rates (usually lower than that for fixed deposits) that vary from time
to time; and
•
demand deposits, which generally do not accrue interest and which can be withdrawn at
any time.
The majority of the Group’s core deposits are in the form of fixed deposits which in general
carry higher interest rates than saving deposits and demand deposits. The total amount of core
customer deposits of the Group was RM112.4 billion as at 31 December 2008. The Group
continues to capitalise on the high standards of service delivery at the front office of branches
to attract lower-cost saving deposits and demand deposits. In 2008, more than 520,000 saving
accounts and more than 70,000 current accounts were opened. Saving deposits and demand
deposits expanded by 12.4 per cent. and 12.5 per cent. respectively in 2008.
In addition, the Group also accepts money market deposits from individuals as well as
corporate and institutional depositors. These deposits are predominantly short term in nature
with the majority maturing within three (3) months. As at 31 December 2008, total outstanding
money market deposits of the Group amounted to RM33.5 billion.
The Group also issues Negotiable Instruments of Deposit (“NIDs”) to both interbank
counterparties as well as non-interbank counterparties. As at 31 December 2008, outstanding
NIDs issued by the Group amounted to RM15.1 billion, the majority of which mature within
twelve (12) months.
(b)
Fund Management
The Group’s fund management business is carried out by Public Bank’s wholly-owned
subsidiary, Public Mutual. Public Mutual is the largest private sector unit trust fund manager in
Malaysia with a 39.0 per cent. market share of assets under management as at the end of
2008. Its assets under management stood at RM23.3 billion as at the end of 2008,
representing a decline of 17.9 per cent. from the end of 2007, due to weak market sentiment
and market volatility. Amidst the challenging market environment, Public Mutual continued to
maintain its dominant 54.3 per cent. market share of the private sector unit trust industry’s
equity assets and a 68.1 per cent. market share of the private sector unit trust industry’s
Islamic equity assets. The total number of unit trust funds managed increased by twelve (12)
in 2008 to sixty-seven (67) as at the end of 2008 and Public Mutual’s agency force increased
to 42,003 agents as at the end of 2008.
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Public Bank sells Public Mutual trust units as an institutional unit trust agent, marketing a
separate and dedicated PB-series of unit trust funds. In 2008, Public Bank’s share of total fund
distribution was raised to 32.3 per cent. as compared to 25.3 per cent. in the previous year.
In 2008, Public Mutual received the highest number of fund performance awards among
private unit trust management companies in Malaysia, winning a total of twenty (20) fund
performance and other related awards for 2007. Public Mutual received eight (8) The EdgeLipper Malaysia Fund Awards, including the prestigious Best Fund Group (Equity Group)
Award for three (3) years, won four (4) out of a total of six (6) fund awards at the inaugural
Morningstar Asia (Malaysia) 2007 Fund Awards, the “Best Islamic Fund Manager in Asia
2007” award from Failaka Advisors and the “Most Outstanding Islamic Fund Manager” award
at the Kuala Lumpur Islamic Finance Forum Islamic Finance Awards 2008. Public Mutual was
also awarded the Most Improved House and Most Improved House for Offshore Funds at the
Asia Asset Management Best of the Best Country Awards 2007 and two (2) AsianInvestor
2008 Investment Performance Awards for the five (5) year Performance and the Malaysia
Onshore Fund House of the Year (Malaysia Equities) categories.
(c)
Structured Investment Products
In 2007, Public Bank achieved total sales of RM263.0 million for its first (1st) structured
investment product offering called the PB OrientExpress Investment (“PBOEI”). PBOEI is
100.0 per cent. capital protected in Ringgit if held to maturity with a minimum investment
amount of RM250,000 for an investment tenure of eighteen (18) months. This Ringgit
investment product is linked to the performance of a portfolio of equities in China’s selected
growth industries in banking, telecommunications, energy and alternative energy.
The Bank launched three (3) offerings of structured investment products in 2008 which were
also 100.0 per cent. capital protected in Ringgit if held to maturity and with maturity periods
ranging from one (1) year to three (3) years. These structured investment products were
offered to customers via Floating Rate Negotiable Instruments of Deposit (FRNID). The
minimum investment was RM100,000 with multiples of RM50,000 thereafter.
PB Asian ACES, a three (3) year structured investment product that invests in a basket of
stocks providing a potential for unlimited enhanced returns. PB Asian ACES is based on a
market neutral quantitative strategy, which aims to buy low and sell high, and does not depend
on market timing and emotions in investment decisions.
PB TwinWIN Investment has a relatively short tenure of one (1) year that allowed customers to
participate in both upside and downside of the price movement of WTI Crude Oil as long as it
stayed within a specified range of 79.5 per cent and 130.0 per cent. of a reference price for
WTI Crude Oil. In addition, customers enjoy a guaranteed coupon payment of 1.20 per cent.
per annum.
At the beginning of the third (3rd) quarter of 2008, the Bank launched the PB Commodities and
Resources Basket (“PB CARB”) Investment with a tenure of two (2) years that allowed
participation in the bullish trend of the currencies of key exporting countries of commodities
and resources such as the Canadian Dollar, the Australian Dollar, the Russian Rouble and the
Brazilian Real. PB CARB Investment has a lock-in feature where during any of the monthly
observation dates, if the underlying basket has appreciated at or above the lock-in level, the
minimum return to the customers at maturity will be the lock-in return of either 6.0 per cent. or
12.0 per cent., depending on which lock-in level is reached.
The total sales amount garnered from the three structured investment products launched in
2008 amounted to RM488.0 million.
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(d)
Bancassurance
On 7 November 2007, Public Bank and ING Asia/Pacific Limited entered into a ten (10) year
exclusive distribution agreement to provide life, health and investment-linked insurance
products in Malaysia and Hong Kong to customers and the public through the various
distribution channels of the Group. The bancassurance agreement came into effect on 1
January 2008 and the Group received an immediate goodwill payment of RM200.0 million. The
marketing of life insurance and investment-linked insurance products would be carried out by
bancassurance sales executives while branch credit staff will sell credit life protection to loan
customers. The distribution channels will also be expanded to include telemarketing, work-site
marketing and web-based selling. From the full range of ING’s bancassurance products
distributed by Public Bank in Malaysia, a total of RM463.0 million in premiums was generated
in the first (1st) year of the tie-up with the ING representing 165.0 per cent. of the initial
premium target of RM281.0 million for 2008. In Hong Kong, the bancassurance business
started in March 2008 and the total premium production was HKD7.2 million. In the medium- to
longer-term, the bancassurance distribution partnership is expected to add a new fee-based
revenue source to the Group from commissions earned from the sale of insurance products.
(iv)
Cash Management Services (“CMS”)
The Group’s CMS are actively promoted to large corporations and government bodies and
agencies. This business relies on access to the wide branch network and infrastructure of the
Group to facilitate value transfer activities of CMS customers with their customers and
suppliers.
The wide range of CMS services promoted include the collection of bills and other receivables
from consumers on behalf of large corporations, such as utilities and insurance companies; the
undertaking of electronic credit payments for SMEs and large corporations; the provision of
bulk cheque issuance facilities to SMEs and large corporations that issue a high volume of
cheques to their suppliers, agents or dealers; and the collection of income tax for the Inland
Revenue Board from individuals and businesses as well as the collection of EPF and
Pertubuhan Keselamatan Sosial or “PERKESO” contributions by employers.
Corporate Lending
The Group’s corporate lending portfolio recorded a 44.3 per cent. growth in 2008 to stand at
RM16.65 billion as at the end of 2008. The strong growth of the corporate lending activities in
2008 was supported by merger and acquisition funding exercises and strong demand for loans
in the property, agriculture, business services and manufacturing sectors.
Notwithstanding the strong growth of the Group’s corporate lending portfolio, the net NPL ratio
of the Group’s corporate lending portfolio improved to 0.3 per cent. as at the end of 2008 as
compared to 0.4 per cent. as at the end of 2007. This is attributed to the Group’s stringent
credit policy and proactive actions taken. The profit before tax of the Group’s corporate lending
operations declined by 36.4 per cent. to RM96.7 million in 2008 mainly due to net NPL
recovery of RM49.7 million in the previous year and additional specific allowance amounting to
RM43.1 million in 2008 in respect of impaired loans of the Group’s Hong Kong operations as
well as full allowances made for old NPLs accounts which were more than seven (7) years in
arrears. These accounts are fully provided for with no value assigned to the collateral. The
strong volume growth in corporate loans over the years have also translated to higher net
interest income of RM194.2 million in 2008 as compared to RM140.4 million in 2007 even as
lending margins continued to be squeezed as a result of stiff competition.
As at 31 December 2008, corporate loans accounted for 14.0 per cent. of the Group’s total
loans.
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Treasury and Capital Markets Operations
The Treasury operations of the Group are focused primarily on the management of the excess
liquidity of the Group, the sale and distribution of foreign exchange related products to meet
the business requirements of its customers and the acceptance of deposits from corporate and
institutional investors. The Group is also engaged in proprietary trading in the Malaysian
capital market for debt securities through the Bank and Public Investment Bank, while the
Bank and Public Bank (Hong Kong) are engaged in limited proprietary trading in the foreign
exchange market.
The Bank is a principal dealer (“Principal Dealer”) for the domestic debt capital market. As at
31 March 2009, the Bank continued to hold this appointment. As a Principal Dealer, the Bank
is required to underwrite a minimum of 10.0 per cent. of the primary issues of Malaysian
Government Securities, Malaysian Government Treasury Bills, Bank Negara Monetary Notes,
Government Investment Issues and Sukuk Bank Negara Malaysia Ijarah (collectively
“Specified Securities”), and to bid at least 10.0 per cent. in the money market and repo
auctions conducted by BNM. The Bank is also required to maintain a minimum market share of
2.5 per cent. of total transactions in Specified Securities traded in the secondary market.
As part of its liquidity management practices, the Group invests in a portfolio of high quality
liquefiable assets as liquidity reserve. Its investments in high grade securities such as
Malaysian Government Securities, Malaysian Government Treasury Bills and Bank Negara
Monetary Notes increased by 41.4 per cent. in 2008 compared to 2007.
Investment Banking and Stock Broking
The investment banking business conducted by Public Investment Bank covers a range of
investment banking services, including acting as an adviser on initial public offerings and other
capital raising and debt restructuring exercises (see Section 4.6 – “Principal Subsidiaries –
Public Investment Bank Berhad” below).
The stock broking business of the Group is conducted by Public Investment Bank and focuses
on the retail market and by leveraging on the Group’s retail customer base and the Bank’s PB
Sharelink service.
Islamic Banking
With the establishment of Public Islamic Bank which operates under the Islamic Banking Act,
1983, the Group will be able to undertake a wider variety of Shariah-compliant products and
services. The business of Public Islamic Bank currently focuses on residential and commercial
property financing for both individual and business enterprises, motor vehicle financing and
consumer financing.
Islamic banking products offered by Public Islamic Bank consist of deposits products
comprising Wadiah Savings Account-i, Wadiah Current Account-i and Mudharabah General
Investment Account-i and financing products which include financing for the purchase of motor
vehicles under Al-Ijarah Thumma Al-Bai Hire Purchase-i, financing for the purchase of
properties under Al-Bai Bithaman Ajil Financing-i and personal financing under BAE Personal
Financing-i.
As at 31 December 2008, Islamic banking assets amounted to RM16.6 billion or 8.5 per cent.
of the Group’s total assets.
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International Operations
The Group has presence in five (5) overseas locations with subsidiaries in Hong Kong and
Cambodia, a joint venture bank in Vietnam and the Bank’s branches in Hong Kong, Sri Lanka
and Laos. The international operations of the Group contributed 9.5 per cent. of the Group’s
profit before taxation for the year ended 31 December 2008, primarily from the operations of
Public Financial Holdings Group in Hong Kong and Campu Bank in Cambodia.
(a)
Hong Kong
The Bank’s listed subsidiary in Hong Kong, Public Financial, acquired the former Asia
Commercial Bank Limited, an authorised institution on 30 May 2006 and renamed it
Public Bank (Hong Kong). Since then, Public Bank (Hong Kong) has opened sixteen
(16) new branches in Hong Kong and two (2) new branches in Shenzhen in the
People’s Republic of China, bringing the branch network of Public Bank (Hong Kong)
to thirty-one (31) branches as at 31 December 2008, comprising twenty-eight (28)
branches in Hong Kong and three (3) branches in Shenzhen. The total loans of Public
Bank (Hong Kong) increased by 30.1 per cent. from HKD15.5 billion as at the end of
2007 to HKD20.1 billion as at the end of 2008. Customer deposits also grew by 6.0 per
cent. from HKD20.4 billion as at the end of 2007 to HKD21.7 billion as at 31 December
2008.
The Group’s consumer financing operations in Hong Kong is undertaken primarily by
Public Finance. As at 31 December 2008, Public Finance’s loans and advances stood
at HKD4.2 billion while customer deposits stood at HKD3.8 billion.
The Group’s operations in Hong Kong had undertaken extensive brand-building
initiatives since the beginning of 2006 to promote Public Bank (Hong Kong) and Public
Finance as well as the PB Brand. As a result of the Group’s continued expansion in
branch network in Hong Kong coupled with aggressive brand-building advertising and
promotional activities in building the “Public Bank” brand name, one-off impairment
charges, and higher specific impairment allowances for impaired loans, Public
Financial Holdings Group recorded a fall in pre-tax profit of 50.5 per cent. from
HKD785.1 million in 2007 to HKD388.4 million in 2008. The reduced pre-tax profit in
2008 was also due to the non-recurrent gains from the disposal of long terms
investments in listed securities in the previous year that contributed to the higher profit
in 2007.
In October 2008, Public Bank (Hong Kong) completed the acquisition of the entire
issued and paid-up capital of its fellow subsidiary, Public Finance, as part of the
integration of the Group’s business operations in Hong Kong, which will enhance
organisational efficiency and capital management and provide greater economies of
scale and better cost synergies.
(b)
Cambodia
The Bank’s wholly-owned subsidiary in Cambodia, Campu Bank, increased its branch
network to twelve (12) branches as at 31 December 2008. Campu Bank was awarded
the Bank of The Year 2008 in Cambodia by The Banker, London. This is the sixth (6th)
time Campu Bank has won this best bank award. Campu Bank is currently the largest
bank in Cambodia in terms of assets, loans and capital.
Campu Bank registered strong business and profitability growth, registering a pre-tax
profit of USD38.0 million for the year ended 31 December 2008, as compared to
USD24.0 million in 2007. Loans and advances grew by 77.4 per cent. to USD643.9
million whilst customer deposits increased by 24.2 per cent. to USD372.6 million.
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In August 2007, CampuBank Lonpac Insurance Plc (“CLIP”) commenced business in
Cambodia. The Group holds 55.0 per cent. equity interest in CLIP whilst Lonpac
Insurance Bhd holds 45.0 per cent. equity interest. CLIP offers a wide range of general
insurance products including fire insurance, motor insurance, engineering insurance,
workmen’s compensation insurance and personal accident insurance.
4.6
PRINCIPAL SUBSIDIARIES
Public Islamic Bank Berhad
Public Islamic Bank, a wholly-owned subsidiary of the Bank commenced business on 1
November 2008 upon the completion of the transfer of the Islamic banking business of Public
Bank to Public Islamic Bank. Public Islamic Bank had 125 employees as at 31 December 2008
(see Section 4.5 - “The Business of the Public Bank Group - Islamic Banking” above).
As at 31 March 2009
(RM million, except %)
Total assets
Shareholder’s funds
Percentage of total assets of the Group
16,427.3
1,054.6
8.2
For the three (3) month
period ended 31 March 2009
(RM million, except %)
Net profit for the financial period
Percentage of net profit of the Group
69.3
11.8
(Source: Information obtained from management reports of Public Islamic Bank for the three (3) month period ended
31 March 2009)
Note:(1) The percentage contribution is derived after the elimination of inter-companies balances.
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Public Investment Bank Berhad
Public Investment Bank is a wholly-owned subsidiary of the Bank. Public Investment Bank was
incorporated in Malaysia on 28 August 1974 under the name of G.P. Securities (Sendirian); It
changed its name to G.P. Securities Sendirian Berhad on 10 July 1981 and upon acquisition
by PBB, changed its name to PB Securities Sdn Bhd on 30 September 1987. On 18 December
2006, PB Securities Sdn Bhd converted to a public company and changed its name to Public
Investment Bank Berhad upon the completion of the merger of the merchant banking business
of the former Public Merchant Bank Berhad with the stock broking business of PB Securities
Sdn Bhd. Public Investment Bank had 185 employees as at 31 December 2008 (see Section
4.5 - “The Business of the Public Bank Group - Investment Banking and Stock Broking”
above).
As at 31 March 2009
(RM million, except %)
Total assets
Shareholder’s funds
Percentage of total assets of the Group
5,412.5
230.1
2.7
For the three (3) month
period ended 31 March 2009
(RM million, except %)
Net profit for the financial period
Percentage of net profit of the Group
5.8
1.0
(Source: Information obtained from management reports of Public Investment Bank for the three (3) month period
ended 31 March 2009)
Note:(1) The percentage contribution is derived after the elimination of inter-companies balances.
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Public Financial Holdings Limited
Public Financial is a 73.2 per cent. owned subsidiary of the Bank as at 31 March 2009 and is
listed on the Stock Exchange of Hong Kong Limited. Public Financial was incorporated in
Bermuda on 16 August 1991. Public Financial, through its three (3) main direct and indirect
subsidiaries, which are Public Bank (Hong Kong), Public Finance and Winton (B.V.I.) Ltd,
provides commercial banking, consumer finance services and taxi financing services and carry
on the trading of taxi licences respectively. Public Financial Holdings Group had 1,181
employees as at 31 December 2008 (see Section 4.5 - “The Business of the Public Bank
Group – International Operations” above).
As at 31 December 2008 (1)
(HKD million, except %)
Total assets
Shareholders’ funds
Percentage of total assets of the Group
35,330
5,770
8.1%
For the year ended 31 (1)
December 2008
(HKD million, except %)
Net profit for the financial year
Percentage of net profit of the Group
358
4.5%
(Source: Information obtained from audited financial statements of Public Financial for the year ended 31 December
2008)
Notes: (1) The financial information is as at 31 December 2008, being the latest available financial results of Public Financial
Holdings Group for the year ended 31 December 2008, and which were released to the Stock Exchange of Hong
Kong Limited.
(2) The conversion rate used is HKD1.00 : RM0.44705 on 31 December 2008.
(3) The percentage contribution is derived after the elimination of inter-company balances and minority interests.
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Public Mutual Berhad
Public Mutual is a wholly-owned subsidiary of Public Consolidated Holdings Sdn Bhd, which is
itself a wholly-owned subsidiary of the Bank. Public Mutual was incorporated in Malaysia on 21
July 1975 and became a subsidiary of the Bank in May 1993. The principal activities of Public
Mutual are the sale of trust units and the management of unit trusts. Public Mutual had 703
employees as at 31 December 2008 (see Section 4.5 – “The Business of the Public Bank
Group – Retail Operations -(iii)(b) Fund Management” above).
As at 31 March 2009
(RM million, except %)
Total assets
Shareholder’s funds
Percentage of total assets of the Group
447.9
90.8
0.2
For the three (3) month
period ended 31 March 2009
(RM million, except %)
Net profit for the financial period
Percentage of net profit of the Group
42.3
7.2
(Source: Information obtained from management reports of Public Mutual for the three (3) month period ended 31
March 2009)
Note: (1) The percentage contribution is derived after the elimination of inter-company balances.
Cambodian Public Bank Plc
Campu Bank is a wholly-owned subsidiary of the Bank. Campu Bank was incorporated in
Cambodia on 20 February 1992. The principal activity of Campu Bank is banking. Campu
Bank had 367 employees as at 31 December 2008 (see Section 4.5 – “The Business of the
Public Bank Group – International Operations” above).
As at 31 March 2009
(USD million, except %)
Total assets
Shareholder’s funds
Percentage of total assets of the Group
925.9
169.3
1.7
For the three (3) month
period ended 31 March 2009
(USD million, except %)
Net profit for the financial period
Percentage of net profit of the Group
5.5
3.4
(Source: Information obtained from management reports of Campu Bank for the three (3) month period ended 31
March 2009)
Notes :(1) The conversion rate used is USD1.00 : RM3.646 on 31 March 2009.
(2) The percentage contribution is derived after the elimination of inter-company balances.
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4.7
Stature of Public Bank
The Bank possesses a strong domestic franchise and has won many awards. The major
awards and accolades accorded to the Bank in 2007 and 2008 include the following:•
Best Bank in Malaysia 2007 and 2008 (by Euromoney)
•
Best Bank in Malaysia 2007 and 2008; Asia’s Best Managed Company for Malaysia
2007 and 2008; and Best Asian Bank 2008 (by FinanceAsia)
•
Best Domestic Bank in Malaysia 2007 and 2008 (by The Asset)
•
Best Domestic Bank in Malaysia 2007 and 2008; and Malaysia’s Best Managed
Company Large-Cap Corporate of the Year 2007 (by Asiamoney)
•
Best Bank in Malaysia 2007 and 2008 (by Alpha South East Asia)
•
Bank of the Year for Malaysia 2008 (by The Banker)
•
Best Retail Bank in Malaysia for 2007 (by The Asian Banker)
•
Malaysia Retail Bank of the Year 2007 (by Asian Banking and Finance)
•
Reader’s Digest Trusted Brands Gold Award 2007 and 2008 for the Bank Category in
Malaysia (by Reader’s Digest)
•
BrandLaureate 2006-2007 / 2007-2008 Award for Brand Excellence in the Financial
Services – Banking & Finance (by Asia Pacific Brands Foundation)
•
2007 Automotive Finance Company of the Year (Malaysia) Award (by Frost & Sullivan)
•
Corporate Governance Asia Recognition Award 2008 (by Corporate Governance Asia)
•
Best Company in Malaysia for Corporate Governance 2007 (by The Asset)
•
Overall winner and Best Return to Shareholders in the Malaysian Business – CIMA
Enterprise Governance Awards 2008 (by Malaysian Business)
•
Ranked No. 1 in Corporate Governance Survey 2007; Overall Excellence Award 2008
and Industry Excellence Award 2008 for Finance Sector (by the Minority Shareholders’
Watchdog Group and Nottingham University Business School, Malaysia Campus)
•
Asia’s Best Corporate Governance 2008 (by FinanceAsia)
•
Ranked No.1 in Best Corporate Governance (for Malaysia) (by Euromoney)
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4.8
Profile of Directors
The primary role of the board of directors of Public Bank is to approve the overall business
strategies and policies of Public Bank.
The Bank’s Articles of Association provide that the number of directors shall not be less than
five (5) and not more than eighteen (18), unless otherwise determined by its shareholders. The
Board currently consists of nine (9) members, comprising seven (7) non-executive Directors,
six (6) of whom are independent, and two (2) executive Directors. The independent nonexecutive Directors are independent of management and have no business or relationship
connections in order to facilitate effective discharge of their duties and responsibilities, void of
conflict of interest situations. The current Directors of the Bank are as follows:Name
Position
Tan Sri Dato’ Sri Dr. Teh Hong Piow
Non-Executive Chairman
Chairman of Board Executive Committee
Tan Sri Dato’ Thong Yaw Hong
Independent Non-Executive Co-Chairman
Chairman of Audit Committee
Chairman of Nomination Committee
Chairman of Remuneration Committee
Chairman of Risk Management Committee
Tan Sri Dato’ Sri Tay Ah Lek
Managing Director
Dato’ Lee Kong Lam
Executive Director
Dato’ Yeoh Chin Kee
Independent Non-Executive Director
Y.A.M. Tengku Abdul Rahman Ibni Sultan Haji
Ahmad Shah Al-Mustain Billah
Independent Non-Executive Director
Dato’ Haji Abdul Aziz bin Omar
Independent Non-Executive Director
Co-Chairman of Audit Committee
Co-Chairman of Risk Management Committee
Dato’ Dr. Haji Mohamed Ishak bin Haji Mohamed
Ariff
Independent Non-Executive Director
Quah Poh Keat
Independent Non-Executive Director
The Board meetings are chaired by Tan Sri Dato’ Thong Yaw Hong and the Board meets on a
scheduled basis at least once a month. The Bank complies with BNM’s “Guidelines on
Corporate Governance for Licensed Institutions” and its governance structure also adheres to
the principles and best practices prescribed by the Malaysian Code on Corporate Governance
(Revised 2007).
The Board has established the following Board committees, the main functions of which are
shown below:•
The Audit Committee comprises the six (6) independent non-executive Directors of the
Board and is chaired by the Co-Chairman of the Bank. The primary function of the Audit
Committee is to review the financial condition of the Bank, its internal controls,
performance and findings of internal auditors and to propose appropriate remedial
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actions. It meets monthly to review audit reports and management actions. The Audit
Committee meets with the external auditors at least twice a year to review the Bank’s
financial statements and their audit findings.
•
The Risk Management Committee is chaired by the Co-Chairman of the Bank. The
Committee’s roles and responsibilities include the supervision and management of all
risks and the formulation of risk management policies. In addition, the Committee also
monitors the parameters for risk exposure, and sets risk limits (see Section 8.0 - “Risk
Management” below).
•
The Remuneration Committee is chaired by the Co-Chairman of the Bank and its terms
of reference include to formalise the procedure for the remuneration of Directors. The
Remuneration Committee carries out annual review of the overall remuneration policy for
the Directors, Chief Executive Officer and key senior management officers whereupon
recommendations are submitted to the Board for approval. It evaluates the performance
of and proposes the levels of remuneration for the Chief Executive Officer and the
Executive Director.
Tan Sri Dato' Sri Dr. Teh Hong Piow
(Non-Executive Chairman)
Tan Sri Dato' Sri Dr. Teh Hong Piow, aged 79, began his banking career in 1950 and has more
than 59 years experience in the banking and finance industry. He founded PBB in 1965 at the
age of 35. He was appointed as a Director of PBB on 30 December 1965 and had been the
Chief Executive Officer of the PBB Group since its inception in December 1965. He was redesignated as Chairman of PBB and Chairman of PBB Group with effect from 1 July 2002. He
serves as Chairman of the Board Executive Committee. He is the Chairman of the Assets &
Liabilities Management Committee, the Share Investment Committee and the Group Human
Resource Committee.
Tan Sri Dato' Sri Dr. Teh Hong Piow had won numerous domestic and international awards
and accolades for inter-alia his outstanding achievements as a banker and the Chief Executive
Officer of a leading financial services group.
Tan Sri Dato' Sri Dr. Teh Hong Piow was awarded the Medal 'For the Course of Vietnamese
Banking' by the State Bank of Vietnam in 2002 for his contributions to the Vietnamese banking
industry over the past years. Tan Sri Dato' Sri Dr. Teh Hong Piow was conferred the
Recognition Award 2007 by the National Bank of Cambodia in appreciation of his excellent
achievement and significant contribution to the banking industry in Cambodia.
In recognition of his contributions to society and the economy, he was conferred the Doctor of
Laws (Honorary) from University of Malaya in 1989.
He had served in various capacities in public service bodies in Malaysia; he was a member of
the Malaysian Business Council from 1991 to 1993; a member of the National Trust Fund from
1988 to 2001; a founder member of the Advisory Business Council since 2003; and is a
member of the IPRM Accreditation Privy Council. He is a Fellow of several institutes which
include the Institute of Bankers Malaysia; the Chartered Institute of Bankers, United Kingdom;
the Institute of Administrative Management, United Kingdom; the Institute of Chartered
Secretaries and Administrators, Australia and the Malaysian Institute of Management.
His directorships in other public companies in the PBB Group are in PIVB (Chairman), Public
Mutual Bhd (Chairman), Public Islamic Bank Bhd (Chairman), Public Financial Holdings Ltd
(Chairman), Public Bank (Hong Kong) Ltd (Chairman), Cambodian Public Bank Plc and
CampuBank Lonpac Insurance Plc (Chairman); he is the Chairman of several other
subsidiaries of the PBB Group. His directorships in other public companies are in LPI Capital
Bhd (Chairman), Lonpac Insurance Bhd (Chairman) and Tong Meng Industries Ltd
(Chairman).
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Tan Sri Dato’ Thong Yaw Hong
(Independent Non-Executive Co-Chairman)
Tan Sri Dato' Thong Yaw Hong, aged 78, was appointed as a Director of PBB on 23 June
1986 and was made its Chairman in October 1986. He was re-designated as Co-Chairman of
PBB with effect from 1 July 2002. He serves as Chairman of the Audit Committee, the
Nomination Committee, the Remuneration Committee and the Risk Management Committee.
He graduated with a Bachelor of Arts (Hons) degree in Economics from University of Malaya
and a Master’s degree in Public Administration from Harvard University. He attended the
Advanced Management Program at Harvard Business School. In June 1998, he was
appointed a Pro-Chancellor of University Putra Malaysia from which he had retired in end June
2006. In September 2006, he was conferred the Doctor of Economics (Honorary) from
University Putra Malaysia.
He has had a distinguished career with the Government of Malaysia, primarily in the fields of
socio-economic development planning and finance. He had served in the Economic Planning
Unit in the Prime Minister's Department since 1957 and became its Director-General from 1971
to 1978 and served as Secretary-General, Ministry of Finance from 1979 until his retirement in
1986.
Tan Sri Dato’ Thong Yaw Hong also serves as member on the Boards of Trustees of Program
Pertukaran Fellowship Perdana Menteri Malaysia, Tun Razak Foundation and the Malaysian
Institute of Economic Research, among others. He is a member of the Economic Council and
is also a Senior Member of the Working Group of the Executive Committee for the Economic
Council and National Implementation Task Force (NITF). Tan Sri Dato’ Thong Yaw Hong is a
Distinguished Fellow of the Institute of Strategic and International Studies (ISIS) Malaysia and
is also a Fellow of the Institute of Bankers Malaysia.
His directorships in other public companies in the PBB Group are in PIVB (Co-Chairman),
Public Mutual Bhd (Co-Chairman), Public Islamic Bank Bhd (Co-Chairman), Public Financial
Holdings Ltd (Co-Chairman), Public Bank (Hong Kong) Ltd (Co-Chairman), Cambodian Public
Bank Plc (Chairman) and CampuBank Lonpac Insurance Plc (Co-Chairman); he is also a
Director of several subsidiaries of the PBB Group. His directorships in other public companies
are in Berjaya Sports Toto Bhd (Chairman), LPI Capital Bhd (Co-Chairman), Lonpac Insurance
Bhd (Co-Chairman), Batu Kawan Bhd, Kuala Lumpur Kepong Bhd, Glenealy Plantations
(Malaya) Bhd and Malaysian South-South Corporation Bhd.
Tan Sri Dato’ Sri Tay Ah Lek
(Managing Director)
Tan Sri Dato’ Sri Tay Ah Lek, aged 66, has 48 years experience in the banking and finance
industry. He was appointed as an Executive Director of PBB on 18 June 1997 and was redesignated as Managing Director with effect from 1 July 2002. He joined the PBB Group as a
pioneer staff in 1966. He was the Executive Vice President of PBB from 1995 to 1997 and prior
to this appointment, he was the Executive Vice President of the former Public Finance Berhad.
He is a member of the Board Executive Committee. He is the Chairman of the Credit
Committee and the IT Steering Committee, and is a member of the Assets & Liabilities
Management Committee, the Share Investment Committee and the Group Human Resource
Committee.
Tan Sri Dato’ Sri Tay Ah Lek holds a Master’s degree in Business Administration from Henley,
United Kingdom and attended the Advanced Management Program at Harvard Business
School. He is a Fellow of the Financial Services Institute of Australasia, the Institute of
Bankers Malaysia and the Malaysian Institute of Management.
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He is presently the Chairman of the Association of Finance Companies of Malaysia and the
Association of Hire Purchase Companies Malaysia. He is a Member of the National Payments
Advisory Board.
His directorships in other public companies in the PBB Group are in PIVB, Public Mutual Bhd,
Public Islamic Bank Bhd, Public Financial Holdings Ltd, Public Bank (Hong Kong) Ltd and
Cambodian Public Bank Plc. He is also a Director of several other subsidiaries of PBB Group.
His directorships in other public companies are in Cagamas Berhad, ASEAN Finance
Corporation Ltd and Financial Mediation Bureau.
Dato’ Lee Kong Lam
(Executive Director)
Dato' Lee Kong Lam, aged 67, has 41 years experience in the banking and finance industry.
He was appointed as an Executive Director of PBB on 28 November 2001. He joined PBB in
November 1996 as General Manager and was subsequently appointed Senior General
Manager in 1997 and Executive Vice President in 1998. He is a member of the Board
Executive Committee. He is the Chairman of the Operational Risk Management Committee
and the Business Continuity Management Committee; and is a member of the Credit
Committee, the IT Steering Committee, the Assets & Liabilities Management Committee, the
Share Investment Committee and the Group Human Resource Committee.
Prior to joining PBB, he was with BNM and was involved primarily in the supervision and
examination of banking institutions. He retired in August 1996 as the Head of BNM's
Examination Department and as a member of the BNM's Management Committee.
He is a Fellow of the Certified Practising Accountants of Australia; a Fellow of the Chartered
Institute of Bankers, United Kingdom; and a Chartered Accountant of the Malaysian Institute of
Accountants.
His directorships in other public companies in the PBB Group are in PIVB, Public Mutual Bhd,
Public Islamic Bank Bhd, Cambodian Public Bank Plc and CampuBank Lonpac Insurance Plc;
he is also a Director of several other subsidiaries of the PBB Group.
Dato’ Yeoh Chin Kee
(Independent Non-Executive Director)
Dato' Yeoh Chin Kee, aged 66, began his banking career in 1961 and has 48 years experience
in the banking and finance industry. He was appointed as a Director of PBB on 9 May 1978.
He was the Executive Director of PBB from May 1978 to May 1997. He is a member of the
Audit Committee, the Nomination Committee, the Remuneration Committee and the Risk
Management Committee. He is also the Chairman of the Credit Risk Management Committee.
He is a Fellow of the Certified Practising Accountants of Australia and the Financial Services
Institute of Australasia.
His directorships in other public companies in the PBB Group are in PB Trustee Services Bhd
(Chairman), PIVB and Public Islamic Bank Bhd; he is also a Director of Public Bank (L) Ltd, the
offshore bank subsidiary of PBB. His directorships in other public companies are in LPI Capital
Bhd and Lonpac Insurance Bhd.
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Y.A.M. Tengku Abdul Rahman Ibni Sultan Haji Ahmad Shah Al-Mustain Billah
(Independent Non-Executive Director)
Y.A.M. Tengku Abdul Rahman Ibni Sultan Haji Ahmad Shah Al-Mustain Billah, aged 48, was
appointed as a Director of PBB on 16 July 1984. He is a member of the Audit Committee, the
Nomination Committee, the Remuneration Committee and the Risk Management Committee.
He was educated at Harrow College, United Kingdom in Business Administration.
His directorships in other public companies in the PBB Group are in PIVB and Public Islamic
Bank Bhd. His directorship in other public company is in Atlan Holdings Bhd.
Dato’ Haji Abdul Aziz bin Omar
(Independent Non-Executive Director)
Dato’ Haji Abdul Aziz bin Omar, aged 61, was appointed as a Director of PBB on 5 January
2000. He is the Co-Chairman of the Audit Committee and Risk Management Committee, and
is a member of the Nomination Committee and the Remuneration Committee. He is the CoChairman of the Credit Risk Management Committee.
He qualified as a Chartered Accountant from the Institute of Chartered Accountants in England
& Wales, and is also a Chartered Accountant of the Malaysian Institute of Accountants.
During his previous banking experiences, he became a Fellow of the Institute of Bankers
Malaysia. His other past experiences had been in the areas of audit and accounting, taxation,
property, plantation, hotelling, trading and manufacturing.
His directorships in other public companies in the PBB Group are in PIVB, Public Mutual Bhd,
Public Islamic Bank Bhd and PB Trustee Services Bhd. His directorships in other public
companies are in LPI Capital Bhd and Lonpac Insurance Bhd.
Dato’ Dr. Haji Mohamed Ishak bin Haji Mohamed Ariff
(Independent Non-Executive Director)
Dato’ Dr. Haji Mohamed Ishak bin Haji Mohamed Ariff, aged 73, was appointed as a Director of
PBB on 28 November 2001. He is a member of the Audit Committee, the Nomination
Committee, the Remuneration Committee and the Risk Management Committee.
He is a Professional Chartered Town Planner and a Professional Landscape Architect from the
University of Newcastle-upon-Tyne, England. He was honoured by the University of
Newcastle-upon-Tyne, England with the Honorary Degree of Doctor in Civil Law in May 1993.
He is a Fellow of the Royal Town Planning Institute London; Fellow of Malaysian Institute of
Planners; and Fellow of Institute of Landscape Architects Malaysia.
He had served various State and Federal Governments before retiring in 1993. He was a
member of the Advisory Board of the City of Kuala Lumpur (Dewan Bandaraya Kuala Lumpur)
until December 2004. Over the years and through his involvement as a Director of several
public listed companies, he has accumulated vast experiences in various sectors namely,
property and housing development, hotel management, food manufacturing and expressway
management.
His directorships in other public companies in the PBB Group are in PIVB, Public Mutual Bhd
and Public Islamic Bank Bhd. His directorship in other public company is in Yee Lee
Corporation Bhd (Chairman).
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Quah Poh Keat
(Independent Non-Executive Director)
Quah Poh Keat, aged 56, was appointed as a Director of PBB on 30 July 2008. He is a
member of the Audit Committee, the Nomination Committee, the Remuneration Committee
and the Risk Management Committee.
He is a Fellow of the Malaysian Institute of Taxation and the Association of Chartered Certified
Accountants; and a Member of the Malaysian Institute of Accountants, the Malaysian Institute
of Certified Public Accountants and the Chartered Institute of Management Accountants.
He was a partner of KPMG since October 1982 and appointed Senior Partner (also known as
Managing Partner in other practices) in October 2000 until 30 September 2007. He retired from
the firm on 31 December 2007. He is experienced in auditing, tax and insolvency practices and
had worked in Malaysia and United Kingdom; his experiences include restructuring, demergers
and privatisation.
He is active in the banking and service sectors and was one of the tax advisers to the
Association of Banks in Malaysia on taxation of interest-in-suspense. He was involved in
providing tax and audit services to various domestic and foreign banks in Malaysia.
His directorships in other public companies in the PBB Group are in PIVB, Public Financial
Holdings Ltd and Public Bank (Hong Kong) Ltd. His directorships in other public companies are
in LPI Capital Bhd, Lonpac Insurance Bhd, IOI Corporation Bhd, IOI Properties Bhd, PLUS
Expressways Bhd and Telekom Malaysia Bhd.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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4.9
Senior Management
The Bank’s business is managed by the Board Executive Committee comprising the following:Chairman
-
Tan Sri Dato’ Sri Dr. Teh Hong Piow
Managing Director
-
Tan Sri Dato’ Sri Tay Ah Lek
Executive Director
-
Dato’ Lee Kong Lam
The Chief Operating Officers and Heads of Divisions are as follows:Name
Position
Division/Portfolio
Dato’ Chang Kat Kiam
Chief Operating Officer
-
Leong Kwok Nyem
Chief Operating Officer
-
Wong Jee Seng
Chief Operating Officer
-
Soong Hoe Seng
Group Chief Internal Auditor
Internal Audit Division
Chia Lee Kee
General Manager
Secretariat Division
Chong You Lin
General Manager
PB Card Services & Support
Nasaruddin bin Arshad
Group Economist
Economics & Corporate Planning
Division
Sulaiman bin Abd. Manap
General Manager
Credit Operations Division
Abd Razak bin Md. Dali
General Manager
Public Affairs Division
Salmah bt Mohd Yunus
General Manager
Human Resource Division
Chan Chew Fung
Director
Corporate Banking & Trade Finance
Division
Chang Siew Yen
Director / Chief Financial Officer
Finance Division
Chew Han Kang
Director
HP Operations
Eddie Chan Kok Kwai
Director
Credit Administration & Supervision
Division
Tan Teck Kong
Director
Information Technology Division
Lim Then Fui
Director
Risk Management Division
Nizam bin Hj. Zainal Abidin
Director
Security Division
Sim Goay Chye
Director
Property Division
Acting Director
Banking Operations Division
Jerry Wong Tuck Kwai
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4.10
Public Bank Group’s Strategy
The Group will continue to remain focused on consumer financing, retail banking and lending
to middle market commercial enterprise, particularly SMEs. In addition, the Group will continue
to mobilise lower cost deposits, expand its retail fee-based income, enhance service delivery
channels, develop new products and services, maintain high customer service and delivery
standards, focus on effective cost and productivity management and effective risk
management. The major thrusts of the Group’s strategy are as follows:•
To increase its earnings by growing existing businesses and strengthening existing
customer relationships: The Group will remain focused on growing consumer lending
(particularly housing loans, motor vehicle financing, personal loans, credit cards, and
share margin financing), retail commercial lending to SMEs and Islamic banking and
financing. The Group aims to further strengthen its relationship with its customers,
particularly with SMEs through the provision of competitive products and services.
•
To expand the core customer deposits of the Group, particularly lower cost deposits: The
Group will continue to develop competitive core deposit products and packages and
promote deposits acquisition campaigns and activities to expand the Group’s core
customer deposits, particularly lower cost savings and demand deposits.
•
To expand the Group’s retail fee-based income: The Group will pursue initiatives to
expand fee-based income activities particularly from the expansion and market share
growth of the unit trust business of Public Mutual, the promotion of structured investment
products and the development and expansion of the bancassurance business of the
Group pursuant to the strategic tie-up and ten (10) year exclusive bancassurance
distribution agreement with ING Asia/Pacific Limited.
•
To improve the effectiveness and cost efficiency of delivery channels: The Group will
continue to leverage on its multiple delivery channels such as its extensive branch
network, e-banking, telebanking, ATMs and an increasing number of self-service
machines such as cheque and cash deposit machines to efficiently deliver its products
and services.
•
To sustain its high customer service and delivery standards: The Group will continue to
implement customer service and delivery standards which meet customer requirements
and which are benchmarked to international standards and sustain the existing high
standards of customer service at the front office and in loan delivery which have already
achieved bank-wide ISO 9001:2000 certification.
•
To develop further the “PB Brand” as a premier brand: The Group will continue to focus
on enhancing the “PB Brand” through the introduction of new products and services and
sustained high service delivery standards whilst promoting the PB Brand actively in its
overseas operations, in particular in Hong Kong and in Cambodia with active brand
promotional activities and branch network expansion.
•
To realise group-wide synergies through the cross-selling of products and optimise
access to the customer bases and distribution networks of companies in the Group:
Existing customers also benefit from priority financing packages for credit cards, hire
purchase loans and commercial loans. These priority financing packages are also
extended to subsidiary companies of the Group, such as Public Mutual. The Group will
continue to develop strategies to tap the synergies of the companies in the Group to
achieve greater market share.
•
To achieve best practices in corporate governance and continuously improve the
Group’s risk management policies: The Group will continue to emphasise prudent and
effective risk management. In this regard, the Bank and the Group will also continue to
maintain a healthy and efficient capital position, high asset quality and healthy balance
sheets, in addition to a prudent credit culture and good corporate governance.
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SECTION 5.0
CAPITALISATION AND INDEBTEDNESS
The following table sets out the capitalisation and indebtedness of the Group as at 31
December 2007 and 2008 and as at 31 March 2009:Audited as at 31 December
Unaudited as at
31 March
2009
(RM million)
2007
(RM million)
2008
(RM million)
138,764.6
162,279.6
168,133.4
10,438.1
5,589.9
6,868.4
2.3
3,452.3
3.062.4
2,456.7
3,956.4
153.2
2,347.7
349.7
4,537.3
495.1
2,422.8
860.2
1,229.9
362.4
2,139.3
906.6
365.9
22.2
159,852.4
382.5
1.9
179,631.7
359.0
2.0
182,457.7
2,468.6
1,855.8
4,324.4
4,178.2
2,124.5
6,302.7
4,301.2
2,123.8
6,425.0
164,176.8
185,934.4
188,882.7
3,527.9
3,531.9
3,531.9
2,112.2
3,613.7
1,362.3
(1,273.9)
2,132.5
3,243.7
1,902.7
(1,274.1)
1,439.9
3,370.4
1,848.0
(581.6)
9,342.2
9,536.7
9,608.6
636.2
692.0
735.3
9,978.4
10,228.7
10,343.9
174,155.2
196,163.1
199,226.6
Off-balance sheet exposures
40,807.5
52,866.9
56,605.2
Total Capitalisation
13,666.6
15,839.4
16,033.6
Short-term and long-term
liabilities
Deposits from customers
Deposits and placements of
banks and other financial
institutions
Obligations on securities sold
under repurchase
agreements
Bills and acceptances payable
Recourse obligations on loans
sold to Cagamas
Derivative financial liabilities
Other liabilities
Borrowings
Provision for tax expense and
zakat
Deferred tax liabilities
Loan capital
Subordinated notes
Hybrid capital securities
Total Liabilities
Equity
Share capital
Reserves
Share premium
Other reserves
Retained profits
Treasury shares
Equity attributable to equity
holders of the Bank
Minority interests
Total Equity
Total Liabilities and Equity
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
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SECTION 6.0
FUNDING AND CAPITAL ADEQUACY
Funding
The Group’s primary source of funding is customer deposits, accounting for 87.3 per cent. of
the Group’s total liabilities as at 31 December 2008. The Group’s other sources of funding
include interbank deposits, bills and acceptances payable, loans sold with recourse to
Cagamas, borrowings, subordinated notes and innovative hybrid Tier 1 capital securities. The
Group has established policies which set out measures to manage and monitor the Group’s
funding and liquidity requirements. Such measures include the diversification of funding
sources, subjecting future cashflows to sensitivity and stress analysis as well as managing
adequate contingent funding sources.
Customer Deposits
The Group’s customer deposits primarily comprise fixed deposits, savings deposits, demand
deposits, money market deposits and NIDs, representing 47.8 per cent., 11.7 per cent., 9.7 per
cent., 20.7 per cent. and 9.3 per cent. respectively, of the Group’s total customer deposits as
at 31 December 2008. Fixed deposits, savings deposits and demand deposits form the
Group’s core customer deposits. Customer deposits concentration has been steady, with a top
ten (10) customer depositors to total customer deposits ratio of 15.2 and 17.4 per cent.
respectively of the Group’s total deposits as at 31 December 2008 and 31 December 2007. As
at 31 December 2008, 88.3 per cent. of total customer fixed deposits, money market deposits
and NIDs had remaining maturities of less than six (6) months and a further 11.2 per cent. of
fixed deposits, money market deposits and NIDs had remaining maturities within the period of
six (6) months to one (1) year. Based on the Group’s experience, a substantial portion of core
customer deposits will be rolled over upon maturity, thereby providing the Group with a stable
source of funding.
Based on BNM statistics, as at 31 December 2008, the Group’s domestic core customer
deposits accounted for 14.7 per cent. of total domestic customer deposits in the Malaysian
banking system, with a market share of 15.6 per cent., 9.7 per cent. and 18.9 per cent. of fixed
deposits, demand deposits and savings deposits respectively as at the same date. The Group
is focused on increasing its lower cost savings and demand deposits by leveraging on its high
customer service delivery standards at the front office and an extensive branch network.
The following tables illustrate the profile of the Group’s customer deposits as at 31 December
2007 and 2008 and as at 31 March 2009:Profile of Customer Deposits by Type
Deposit Type
As at 31 December
2007
2008
(RM million)
(RM million)
Demand deposits
Savings deposits
Fixed deposits
Negotiable instruments of deposit
Money market deposits
Other deposits
Total
As at 31 March
2009
(RM million)
14,021.6
16,937.4
64,507.9
18,090.5
24,454.5
752.7
15,775.6
19,036.6
77,564.3
15,129.7
33,504.9
1,268.5
16,115.8
19,919.2
84,804.9
14,845.1
30,709.9
1,738.5
138,764.6
162,279.6
168,133.4
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
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As at 31 December
2007
2008
(%)
(%)
Deposit Type
Demand deposits
Savings deposits
Fixed deposits
Negotiable instruments of deposit
Money market deposits
Other deposits
Total
As at 31 March
2009
(%)
10.1
12.2
46.5
13.0
17.6
0.6
9.7
11.7
47.8
9.3
20.7
0.8
9.6
11.9
50.4
8.8
18.3
1.0
100.0
100.0
100.0
(Source:
Computed based on extraction from audited financial statements of the Group for the year ended
31 December 2008 and unaudited consolidated interim financial statements of the Group for the three (3) month
period ended 31 March 2009)
Maturity Structure for Fixed Deposits, Money Market Deposits and Negotiable
Instruments of Deposits
As at 31 December
2007
2008
(%)
(%)
Maturity Structure
Due within six (6) months
Six (6) months to one (1) year
One (1) year to three (3) years
Total
As at 31 March
2009
(%)
88.2
11.1
0.7
88.3
11.2
0.5
87.2
12.5
0.3
100.0
100.0
100.0
(Source: Computed based on extraction from audited financial statements of the Group for the year ended 31
December 2008 and management reports of the Group for the three (3) month period ended 31 March 2009)
Interbank Deposits
The Group has the capacity to obtain funds, comprising short-term funds, deposits and
placements by financial institutions and NIDs from other financial institutions in the interbank
market. The Group obtains interbank funds primarily from other banks for periods from
overnight to up to 180 days at prevailing interbank rates. As at 31 December 2008, deposits
and placements of banks and other financial institutions accounted for 3.0 per cent. of the
Group’s total liabilities.
Other Funding Sources
The Group is also able to obtain funding for three (3) years to up to ten (10) years tenures by
selling loans for the purchase of residential properties (“housing loans”), loans for the purchase
of industrial properties, hire purchase and leasing debts to Cagamas with recourse to the
Group. Housing loans typically have maturities greater than ten (10) years and can be resold
to Cagamas at the end of the applicable funding period. The Group continues to service such
loans, retaining the interest collected on the loans sold to Cagamas and paying a fixed or
floating rate of interest to Cagamas as agreed upon at the time of the sale. The sale of housing
loans, industrial property loans and hire purchase and leasing debts by the Group to Cagamas
is an alternative source of funding for the Group. As at 31 December 2008, the amount of
outstanding loans sold to Cagamas with recourse to the Group stood at RM4.5 billion,
accounting for 2.4 per cent. of the Group’s total liabilities.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The Group’s foreign currency funding and liquidity requirements are sourced primarily from the
interbank market, the international debt capital markets and foreign currency deposits in
Malaysia and respective domestic market in which the Group’s overseas subsidiaries,
branches or joint venture company operates. In June 2004, the Bank issued USD350.0 million
of subordinated notes due in 2014 callable with step-up in 2009 which will mature on 22
September 2014. In June 2005, the Bank issued USD400.0 million of subordinated notes due
in 2017 callable with step-up in 2012 which will mature on 20 June 2017. In May 2006, Public
Financial obtained a HKD2.0 billion short term bridging loan, which was refinanced by a three
(3) year syndicated term loan on 21 July 2006 and has been reduced to HKD1.1 billion as at
31 December 2008. In August 2006, the Bank issued USD200.0 million innovative Tier 1
capital securities. In December 2006, the Bank issued RM1.2 billion innovative Tier 1 capital
securities. The innovative Tier 1 capital securities may be redeemed by the Bank on the first
(1st) optional redemption date which is ten (10) years from their respective issue dates and on
every subsequent coupon payment date or redemption by way of stock settlement on the
coupon payment date falling thirty (30) years from their respective issue dates. In May 2008,
the Bank issued RM1.4 billion of subordinated notes due in 2018 callable with step-up in 2013
under its subordinated medium term note programme of up to RM5.0 billion. Public Bank
(Hong Kong) had obtained unsecured one (1) year term loans of HKD800.0 million and
HKD300.0 million in July 2008 and September 2008 respectively.
The Bank accepts foreign currency deposits from its retail and corporate customers, and these
deposits represent a stable source of foreign currency funding for the Bank. As a result of the
relaxation of exchange control regulations by BNM in 2007 with regards to investments in
foreign currency assets by Malaysian residents, customers’ deposits in foreign currencies with
the Bank have grown from RM1.5 billion equivalent as at 31 December 2007 to RM3.1 billion
equivalent as at 31 December 2008.
Capital Adequacy
As at 31 December 2008, the Group’s core capital ratio (the ratio of Tier 1 capital to riskweighted assets) and risk-weighted capital ratio (the ratio of the capital base to risk-weighted
assets) before deducting the then proposed final dividend were 8.3 per cent. and 13.7 per
cent. respectively, and the Bank’s core capital ratio and risk-weighted capital ratio before
deducting the then proposed final dividend were 10.9 per cent. and 13.4 per cent. respectively.
BNM’s risk-adjusted capital standards require all banks in Malaysia to maintain a minimum risk
weighted capital ratio of 8.0 per cent. at all times based on both the entity and consolidated
levels. If a bank fails to maintain such minimum ratio, BNM may impose penalties on such
bank ranging from a fine to the revocation of its license.
Capital adequacy is measured by risk-weighted capital ratios. Risk-weighted capital ratios are
calculated as the percentage of the capital base divided by the risk-weighted assets. The
capital base is the sum of Tier 1 and Tier 2 capital less investments in subsidiary and
associated companies. Tier 1 capital is the core capital, which includes paid-up ordinary share
capital, share premium, statutory reserves, general reserves, retained profit/loss, minority
interests, innovative hybrid Tier 1 capital securities, non-innovative Tier 1 capital securities and
after deducting goodwill and deferred tax assets. Tier 2 capital is the supplementary capital,
which includes general allowances for loan losses, subordinated debt with an initial maturity of
at least five (5) years, revaluation surpluses and any innovative and non-innovative hybrid Tier
1 capital securities in excess of the limit set by BNM to qualify as Tier 1 capital which is
approved by BNM as Tier 2 capital.
For the years prior to 31 December 2007, the Group and the Bank derived its risk-weighted
assets based on the capital adequacy regulations (“Basel I”) issued by BNM. Under this
approach, the amount of risk-weighted assets is the sum of (i) the credit risk weights of the
different categories of on-balance sheet exposures and credit equivalent of off-balance sheet
exposures and (ii) the risk-weighted asset equivalent for market risk calculated on the trading
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
book positions of the Group and the Bank. The credit risk-weights and credit conversion
factors for off-balance sheet credit equivalents are based on guidelines issued by BNM.
With effect from 1 January 2008, the Group and the Bank have adopted the revised RiskWeighted Capital Adequacy Framework (Basel II) (“Basel II Framework”) issued by BNM.
Under the Basel II Framework, the Group and the Bank has adopted the standardised
approach for credit risk and market risk, and the basic indicator approach for operational risk.
The amount of risk-weighted assets is derived as the sum of (i) the credit risk-weighted amount
of on-balance sheet exposures and credit equivalent of off-balance sheet exposures, (ii) the
risk-weighted asset equivalent for market risk of the Group and the Bank’s trading book
positions and (iii) the risk-weighted asset equivalent for operational risk. The risk weights and
credit conversion factors for off-balance sheet credit equivalents are based on guidelines
issued by BNM.
The following table sets out the capital adequacy ratios of the Bank as at 31 December 2007
and 2008 and as at 31 March 2009:As at 31 December
As at 31 March
2007 (1)
2008 (2)
2009 (2)
(RM million, except %)
Tier 1 capital
Paid-up share capital
Share premium
Other reserves
Treasury shares
Hybrid capital securities
Less: Intangible assets
Less: Deferred tax assets, net
3,527.9
2,112.2
5,030.1
(1,273.9)
1,487.6
(695.4)
(271.5)
3,531.9
2,132.5
5,325.3
(1,274.1)
1,541.5
(695.4)
(285.2)
3,531.9
1,439.9
4,696.2
(581.6)
1,430.4
(695.4)
(285.2)
Total Tier 1 capital
9,917.0
10,276.5
9,536.2
Tier 2 capital
General allowance
Subordinated notes
Hybrid capital securities
1,381.7
2,469.8
370.7
1,433.4
3,988.8
348.7
1,495.7
4,125.5
496.0
Total Tier 2 capital
4,222.2
5,770.9
6,117.2
Total capital
14,139.2
16,047.4
15,653.4
Less: Investment in subsidiary and associated
companies
(2,270.1)
(3,318.4)
(3,318.4)
Total capital base
11,869.1
12,729.0
12,335.0
Risk-weighted assets
89,151.5
94,647.3
93,710.8
Core capital ratio
11.1%
10.9%
10.2%
Risk-weighted capital ratio
13.3%
13.4%
13.2%
(Source: Extracted from audited financial statements of the Bank for the year ended 31 December 2008 and unaudited
consolidated interim financial statements of the Bank for the three (3) month period ended 31 March 2009)
Notes:(1)
The capital adequacy ratios of the Bank as at 31 December 2007 has been computed based on the capital
adequacy regulations (Basel I) issued by BNM.
(2)
The capital adequacy ratios of the Bank as at 31 December 2008 and 31 March 2009 have been computed
based on the Basel II Framework issued by BNM.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The following is a breakdown of the risk-weighted assets of the Bank in the various categories
of risk weights as at 31 December 2007:As at 31 December
2007
Notional
Risk-weighted
(RM million)
Risk-weighted assets for credit risk:0%
10%
20%
50%
100%
45,294.9
385.4
11,250.0
24,099.7
72,903.5
38.6
2,250.0
12,049.8
72,903.5
Total credit risk
Risk-weighted assets for market risk
153,933.5
87,241.9
-
1,909.6
Total
153,933.5
89,151.5
(Source: Extracted from audited financial statements of the Bank for the year ended 31 December 2008)
The following is a breakdown of the risk-weighted assets of the Bank in the various categories
of risk weights as at 31 December 2008 and as at 31 March 2009:As at 31 December
As at 31 March
2008
2009
Notional (1)
Risk-weighted
Notional (1)
Risk-weighted
(RM million)
Risk-weighted assets for credit
risk:0%
20%
35%
50%
75%
100%
150%
33,461.7
13,303.7
11,203.2
13,845.5
54,800.8
29,699.9
902.0
2,660.7
3,921.1
6,922.8
41,100.6
29,699.9
1,353.0
28,201.3
10,643.6
11,980.5
15,696.9
53,053.7
29,187.6
1,047.4
2,128.7
4,193.2
7,848.5
39,790.3
29,187.6
1,571.0
Total credit risk
Risk-weighted assets for market
risk
Risk-weighted assets for
operational risk
157,216.8
85,658.1
149,811.0
84,719.3
-
1,752.8
-
1,702.6
-
7,236.4
-
7,288.9
Total
157,216.8
94,647.3
149,811.0
93,710.8
(Source: Extracted from audited financial statements of the Bank for the year ended 31 December 2008 and
management reports of the Bank for the three (3) month period ended 31 March 2009)
Note:(1)
The notional amounts are stated after credit risk mitigation.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The following table sets out the capital adequacy ratios of the Group as at 31 December 2007
and 2008 and as at 31 March 2009:As at 31 December
As at 31 March
2007 (1)
2008 (2)
2009 (2)
(RM million, except %)
Tier 1 capital
Paid-up share capital
Share premium
Other reserves
Treasury shares
Hybrid capital securities
Minority interests
Less: Intangible assets
Less: Deferred tax assets, net
3,527.9
2,112.2
4,924.5
(1,273.9)
1,345.9
636.2
(1,983.9)
(316.3)
3,531.9
2,132.5
5,507.0
(1,274.1)
1,439.5
692.0
(2,045.6)
(386.5)
3,531.9
1,439.9
4,877.9
(581.6)
1,323.3
728.8
(2,111.6)
(386.5)
Total Tier 1 capital
8,972.6
9,596.7
8,822.1
Tier 2 capital
General allowance
Subordinated notes
Hybrid capital securities
1,523.0
2,469.8
512.3
1,759.5
3,968.8
450.6
1,833.0
4,105.1
603.1
Total Tier 2 capital
4,505.1
6,178.9
6,541.2
13,477.7
15,775.6
15,363.3
-
(0.9)
(0.9)
Total capital base
13,477.7
15,774.7
15,362.4
Risk-weighted assets
99,092.4
115,341.9
115,497.4
9.1%
8.3%
7.6%
13.6%
13.7%
13.3%
Total capital
Less: Investment in insurance subsidiary
company
Core capital ratio
Risk-weighted capital ratio
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
Notes:(1)
The capital adequacy ratios of the Group as at 31 December 2007 has been computed based on the capital
adequacy regulations (Basel I) issued by BNM.
(2)
The capital adequacy ratios of the Group as at 31 December 2008 and 31 March 2009 have been computed
based on the Basel II Framework issued by BNM.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
The following is a breakdown of the risk-weighted assets of the Group in the various categories
of risk- weights as at 31 December 2007:As at 31 December
2007
Notional
Risk-weighted
(RM million)
Risk-weighted assets for credit risk:
0%
10%
20%
50%
100%
48,711.2
385.4
14,891.6
25,985.3
80,860.6
38.5
2,978.3
12,992.7
80,860.6
Total credit risk
Risk-weighted assets for market risk
170,834.1
-
96,870.1
2,222.3
Total
170,834.1
99,092.4
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008)
The following is a breakdown of the risk-weighted assets of the Group in the various categories
of risk- weights as at 31 December 2008 and as at 31 March 2009:As at 31 December
As at 31 March
2008
2009
Notional(1)
Risk-weighted
Notional(1)
Risk-weighted
(RM million)
Risk-weighted assets for credit
risk:0%
20%
35%
50%
75%
100%
150%
41,489.6
10,912.8
14,552.1
13,476.9
72,062.8
34,462.9
1,092.8
2,182.6
5,093.2
6,738.5
54,047.1
34,462.9
1,639.1
35,087.5
9,990.7
15,877.2
14,775.0
68,896.4
35,462.8
1,278.9
1,998.1
5,557.0
7,387.5
51,672.3
35,462.8
1,918.3
Total credit risk
Risk-weighted assets for market
risk
Risk-weighted assets for
operational risk
188,049.9
104,163.4
181,368.5
103,996.0
-
1,835.6
-
1,914.9
-
9,342.9
-
9,586.5
Total
188,049.9
115,341.9
181,368.5
115,497.4
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
management reports of the Group for the three (3) month period ended 31 March 2009)
Note:(1)
The notional amounts are stated after credit risk mitigation.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
SECTION 7.0
ASSET QUALITY
Loan Portfolio
The Group has an expanding and diversified loan portfolio, with its largest exposures being
loans granted for the purchase of landed property (both residential and non-residential
properties), purchase of transport vehicles and working capital.
As at 31 December 2008, the Group’s total outstanding gross loans stood at RM120.7 billion,
of which 78.5 per cent. were loans of the Bank. Of the Group’s total outstanding gross loans,
88.2 per cent. comprised domestic loans. Overseas loans constituted 11.8 per cent. of the
Group’s total outstanding gross loan, of which 80.5 per cent. were in Hong Kong. As at 31
December 2008, 87.5 per cent. of the Group’s total outstanding gross loans were denominated
in Ringgit Malaysia (“RM” or “Ringgit”) with 3.4 per cent. denominated in United States Dollars
(“USD”) and 8.8 per cent. denominated in Hong Kong Dollars (“HKD”).
Loans, advances and financing by type
The following table sets out a breakdown of the Group’s gross loan portfolio by product type as
at 31 December 2007 and 2008 and as at 31 March 2009:As at 31 December
2007
2008
(RM million)
(RM million)
Overdraft
Term loans
Bills receivables
Trust receipts
Claims on customers under acceptance
credits
Staff loans
Revolving credits
Lease, factored and confirming receivables
Hire purchase
Credit card receivables
Less: unearned interest
Gross loans and advances
Less: Islamic house financing sold to
Cagamas
As at 31 March
2009
(RM million)
8,815.5
60,024.0
171.4
442.2
9,607.9
74,783.8
129.9
481.1
9,743.0
78,961.3
147.6
398.6
2,569.0
648.1
3,537.0
22.0
29,601.4
944.3
3,072.0
693.4
3,660.0
1.6
33,172.3
1,028.8
2,953.6
730.5
3,953.9
1.6
33,828.8
994.2
106,774.9
(5,360.0)
126,630.8
(5,962.2)
131,713.1
(6,081.7)
101,414.9
120,668.6
125,631.4
(410.0)
(350.0)
(200.0)
101,004.9
120,318.6
125,431.4
Allowance for bad and doubtful debts
General
Specific
(1,523.0)
(153.9)
(1,759.5)
(172.8)
(1,833.0)
(185.4)
Net loans, advances and financing
99,328.0
118,386.3
123,413.0
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and the
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Loans and advances by economic purpose
The following table sets out a breakdown of the Group’s gross loans, advances and financing
portfolio by economic purpose as at 31 December 2007 and 2008 and as at 31 March 2009 :As at 31 December
2007
2008
(RM million)
(RM million)
Purchase of securities
Purchase of transport vehicles
Purchase of landed properties of which:
-residential
-non-residential
Purchase of fixed assets (excluding landed
properties)
Personal use
Credit card
Purchase of consumer durables
Construction
Mergers & acquisitions
Working capital
Other purpose
Gross loans, advances and financing
Less: Islamic house financing sold to
Cagamas
As at 31 March
2009
(RM million)
518.4
26,128.7
45,165.7
26,654.8
18,510.9
1,811.3
29,268.7
56,032.2
32,223.7
23,808.5
1,793.9
29,854.9
58,000.2
33,437.1
24,563.1
232.2
6,327.3
944.3
30.5
720.7
11.0
17,174.6
4,161.5
272.4
7,264.9
1,028.8
59.1
1,399.3
10.2
18,820.6
4,701.1
284.0
7,643.7
994.2
54.1
1,540.5
54.0
20,030.2
5,381.7
101,414.9
120,668.6
125,631.4
(410.0)
(350.0)
(200.0)
101,004.9
120,318.6
125,431.4
(Source: Extracted from the audited financial statements of the Group for the year ended 31 December 2008 and the
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
Purchase of residential properties
The Group’s largest concentration of loans is in loans for the purchase of residential properties
(“housing loans”), and loans to this sector comprised 26.7 per cent. of the Group’s total
outstanding gross loans as at 31 December 2008 compared to the Malaysian banking industry
average of 26.5 per cent. as at 31 December 2008. This reflects the Group’s strategy of
maintaining housing loans as a core product, providing the Group with both recurring income
and opportunities for product bundling and cross-selling. Loans to this sector are principally to
individuals for house purchases or to build houses for owner occupation. Loans to this sector
are generally secured by mortgages over the residential property being financed.
The Group has a policy of setting loan to value ratios for housing loans at a maximum of 95.0
per cent. of the appraised value of the property to be financed at the time of granting of the
housing loan, except for low cost housing, where the maximum loan to value ratios could be
higher. The loan to value ratio is lower for more expensive houses and for houses purchased
for investment where repayments are generally dependent upon rental income from such
properties.
Purchase of transport vehicles
The Group’s second (2nd) largest concentration of loans is in loans for the purchase of
transport vehicles, primarily passenger vehicles, and comprised 24.3 per cent. of the Group’s
total outstanding gross loans as at 31 December 2008. The Group has a strong domestic
market share in this sector, amounting to 23.9 per cent. as at 31 December 2008. This strong
market share was achieved through the aggressive marketing efforts of the Bank’s hire
purchase centers and branches, the continued development of the Bank’s relationships with
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
car dealers, the expansion of network of car dealers who refer vehicle purchases to the Bank
for financing and the Bank’s competitive passenger vehicle financing packages. Loans to this
sector are extended to individuals and business enterprises and are generally secured by the
transport vehicle purchased under the hire purchase agreement.
Purchase of non-residential properties
As at 31 December 2008 the third (3rd) largest concentration of the Group’s loans was in loans
for the purchase of non-residential properties, which include shophouses, factories and
warehouses, and comprised 19.7 per cent. of the Group’s total outstanding gross loans as at
that date. Such properties are typically used by business enterprises and companies for their
businesses or rented out to business enterprises. The concentration of the Group’s loans in
this sector reflects the focus of the Group’s lending to SMEs. The loans in this sector are
generally secured by mortgages over the non- residential property being financed.
Working capital
As at 31 December 2008, the fourth (4th) largest concentration of the Group’s loans was in
loans for working capital purposes, which comprised 15.6 per cent. of the Group’s total
outstanding gross loans as at that date. The concentration of the Group’s loans in this sector
reflects the focus of the Group’s lending to SMEs.
Loan maturity profile
As at 31 December 2008, loans maturing in less than one (1) year constituted 18.6 per cent. of
the Group’s total outstanding gross loans, 10.0 per cent. of total outstanding gross loans had
maturities of one (1) to three (3) years, 13.4 per cent. of total outstanding gross loans had
maturities of three (3) to five (5) years and 58.0 per cent. of total outstanding gross loans had
maturities of more than five (5) years. The category of loans with maturities of less than one (1)
year includes revolving credits, overdraft facilities and trade financing facilities.
The following table sets out the breakdown of the Group’s total gross loan portfolio by
remaining maturity as at 31 December 2007 and 2008 and as at 31 March 2009:-
Loan maturity
Due within one (1) year
One (1) to three (3) years
Three (3) to five (5) years
Over five (5) years
Gross loans, advances and
financing
Less: Islamic house financing sold to
Cagamas
As at 31 December
2007
2008
(RM million)
(RM million)
As at 31 March
2009
(RM million)
21,203.3
9,655.3
13,451.4
57,104.9
22,490.5
12,117.0
16,108.7
69,952.4
23,284.6
13,537.8
15,829.5
72,979.5
101,414.9
120,668.6
125,631.4
(410.0)
(350.0)
(200.0)
101,004.9
120,318.6
125,431.4
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
management reports of the Group for the three (3) months period ended 31 March 2009)
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Twenty (20) Largest Borrowers
As at 31 December 2008, the Group’s twenty (20) largest borrowers accounted for RM10.5
billion or 8.7 per cent. of total outstanding gross loans, advances and financing. Most of these
borrowers were domestic conglomerates with diversified business activities such as business
services, real estate, construction, manufacturing and trading. All of the loans to the Group’s
customers and customer groups are within the Single Customer Limit guidelines prescribed by
BNM (see Section 7.0 - “Asset Quality - Single Customer Limit” below).
Credit Approval Procedures
The Group’s credit risk management aims to maintain superior asset quality to enhance
shareholder value and confidence and to ensure compliance with BNM guidelines. The Group
seeks to achieve this through, inter-alia, a multi-level credit approval process and credit
policies and procedures which comply with BNM’s best practices for the management of credit
risk.
Approval Process
Lending authority for credit facilities is determined in accordance with the discretionary powers
granted to the approving authority by the Bank’s Board. The lending authority of officers at
branch level is lower than that of officers at Head Office of a similar grade. For loans approved
at branch level, the lending authority is dependent on the grade of the branch managers and
business managers approving the loan application. For loans submitted to Head Office for
approval, the lending authority ranges from the discretionary powers given to assistant
managers up to that of the Credit Committee to approve loan applications, with increasingly
higher levels of discretionary powers corresponding to the levels of seniority of the approving
authority. The applicable level of loan approval is dependent on the types of credit facilities,
aggregation of credit lines or facilities and the Bank’s total exposure to each customer.
Single Customer Limit
BNM’s guidelines set a single customer limit which prohibits a bank from lending to any single
customer or related group of customers an amount in excess of 25.0 per cent. of a bank’s
capital funds (the sum of Tier 1 and Tier 2 capital). The Bank is in compliance with BNM’s
guidelines on single customer limit.
Large Loan Exposure
BNM’s guidelines set a large loan exposure limit which prohibits a bank from granting a large
loan (defined as an exposure that exceeds 15.0 per cent. of a bank’s capital funds) if the total
of all large loans exceeds 50.0 per cent. of the bank’s total loans. The Bank is in compliance
with BNM’s guidelines on large loan exposure.
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NIT-1 Stapled Securities Programme for the Issue of up to RM5 billion of Stapled Securities
Non-Performing Loans
Classification of and Specific Allowance Requirement for Non-Performing Loans
BNM’s guidelines classify NPLs into three (3) categories, based on how many months a loan is
in arrears. When a loan is more than three (3) months but less than nine (9) months in arrears,
the NPL is classified by the Group as sub-standard, this being a more stringent classification
than that required by BNM’s guidelines on NPLs; when a loan is nine (9) to less than twelve
(12) months in arrears, the NPL is classified as doubtful; and when a loan is twelve (12)
months or more in arrears, the NPL is classified as bad.
For NPLs classified as substandard, the specific allowance made by the Bank is 20.0 per cent.
of the outstanding amount less the value of any collateral and unearned interest (the
Reservable Amount). This is a more stringent allowance policy than BNM’s guidelines, which
requires 20.0 per cent. specific allowance on NPL’s classified as substandard and which are in
arrears of six (6) months or more. For NPLs classified as doubtful, the specific allowance
required is 50.0 per cent. of the Reservable Amount and for NPLs classified as bad, the
specific allowance required is 100.0 per cent. of the Reservable Amount. For loans classified
as NPLs, interest accrued and recognised as income prior to the date the loan is classified as
an NPL is reversed out of income and set-off against the accrued interest receivable account
in the balance sheet. Thereafter, interest on the NPL loan is recognised as income on a cash
basis. A bank may also provide a specific allowance immediately when a loan is in arrears
under appropriate circumstances.
The following summarises the Group’s policy on the classification of NPLs and specific
allowance:Classification of
Requirement(1)
Non-Performing
Loans
by
Arrears
and
Specific
Allowance
Months in Arrears
Classification
Treatment
3 – <9
Substandard
20% specific allowance
9 – <12
Doubtful
50% specific allowance
≥ 12
Bad
100% specific allowance
Note:(1) The specific allowance is required against the Reservable Amount.
For the purpose of determining the allowance, BNM’s guidelines require collateral (other than
shares) to be valued based on the lower of force sale value or, if an auction is pending, the
auction reserve price. In exceptional circumstances, a bank may use the fair market value if
evidence exists that the property is worth its fair market value. Normally, listed shares are
valued based on the latest market prices with an appropriate discount for thinly traded shares
or shares which comprise a large block of a company’s shares. Plant, machinery and
equipment, in the absence of a professional appraisal, are based on net book value using 20.0
per cent. straight-line depreciation. Guarantees by a bank or investment bank or by the
Government are given full value and personal and corporate guarantees are generally given
no value.
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In compliance with BNM directives, since 31 December 2004, values assigned to collateral
held for NPLs secured by properties is determined based on the realisable values of the
properties, being the force sale value or reserve price provided by independent parties/valuers,
on the following basis:(i)
Assigning only 50.0 per cent. of the realisable value of the properties held as collateral
for NPLs which are in arrears for more than five (5) years but less than seven (7) years;
and
(ii)
No value will be assigned to the realisable value of the properties held as collateral for
NPLs which are in arrears for more than seven (7) years.
The Group complies with the specific allowance requirements of the BNM/Garis Panduan
(“BNM/GP”) 3 guidelines on NPLs. From time to time the Group may make a specific
allowance for more than the Reservable Amount. When a loan has been classified as nonperforming, the Group will suspend interest from the date of first (1st) default. The Group seeks
to prevent loans from becoming non-performing through early detection and proactive remedial
actions. The Group maintains a watch list of accounts and close attention accounts with a
higher probability of default in order to identify and monitor potential non-performing accounts,
tracking information such as outstanding loan balances, interest and principal payments,
targeted actions and responses and other information about the borrower. Generally, once the
Group is concerned about a particular loan, a higher frequency of reviews and proactive
management of the relevant account is undertaken.
The following table sets out the classification by performance of the Group’s total outstanding
gross loan portfolio as at 31 December 2007 and 2008 and as at 31 March 2009:As at 31 December
2007
2008
(RM million)
(%)
(RM million)
(%)
As at 31 March
2009
(RM million)
(%)
Performing loans
Non-performing loans:-Sub-standard
-Doubtful
-Bad
100,011.2
98.6
119,458.5
99.0
124,399.3
99.0
625.4
161.5
616.8
0.6
0.2
0.6
545.0
160.3
504.8
0.5
0.1
0.4
544.3
171.3
516.5
0.4
0.2
0.4
Gross loans
101,414.9
100.0
120,668.6
100.0
125,631.4
100.0
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
management report of the Group the three (3) month period ended 31 March 2009. Ratios are computed based on the
extracted figures)
Loan Loss Allowance Policy
The Group’s policy is to maintain its loan loss allowance at a level which it believes is
adequate to address risks inherent in its loan portfolio in line with its risk management policies
and which complies with BNM guidelines. Pursuant to BNM’s guidelines, the Group maintains
both a general and a specific allowance for bad and doubtful debts. As at 31 December 2008,
the Bank’s and the Group’s general allowance were 1.50 per cent. and 1.46 per cent.
respectively, in line with BNM’s requirement for Malaysian banks to maintain a general
allowance equal to at least 1.50 per cent. of gross loans less specific allowance, and to comply
with the local regulatory requirements of the Group’s overseas subsidiary companies. The
specific allowance is based on the payment history of individual loans, and at a minimum,
complies with BNM/GP3 guidelines. Loans which are written off reduce both the amount of
gross loans and the specific allowance, while recoveries are credited back to income. Specific
allowances made can be written back to income where there is cash payment by borrowers.
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The following table sets out the movements in the Group’s allowance for bad and doubtful
debts for the years ended 31 December 2007 and 2008 and for the three (3) month period
ended 31 March 2009:As at 31 December
As at 31 March
2007
2008
2009
(RM million, except %)
General Allowance
At 1 January
Allowance made
Exchange differences
1,318.5
210.3
(5.8)
1,523.0
232.1
4.4
1,759.5
68.0
5.5
At 31 December/31 March
1,523.0
1,759.5
1,833.0
1.50%
1.46%
1.46%
258.3
467.0
153.9
542.7
172.8
141.6
(107.6)
(453.7)
(74.6)
(460.1)
(18.7)
(115.1)
-
0.7
1.2
(0.2)
(9.9)
(0.3)
10.5
3.6
153.9
172.8
185.4
As % of gross loans, advances and
financing less specific allowance
Specific Allowance
At 1 January
Allowance made
Amount written back in respect of
recoveries
Amount written off
Reinstatement of amount written off
previously due to
restructuring/rescheduling, now
classified as performing loan
Amount transferred to accumulated
impairment loss in value of securities/
foreclosed properties
Exchange differences
At 31 December/31 March
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
Write-Off Policy
BNM guidelines stipulate that banks may write-off an uncollectible loan if, having taken into
consideration the realisable value of any collateral, there is no realistic prospect of recovery.
Write-offs of all loans must be approved by the Bank’s Board. Losses incurred from write-offs
are tax deductible only if it can be shown that all legally available and necessary steps for
recovery had been taken. Prior to writing-off a loan, the Bank will begin legal proceedings,
which, in the case of collateralised loans, will, inter alia involve foreclosure proceedings. In the
case of collateralised loans, the Bank will attempt to realise the collateral or seek an order for
sale from the court to conduct a public sale of the property and distribute the proceeds to the
Bank. Any proceeds recovered from a sale of collateral will reduce the amount of the NPL.
After foreclosure, any uncollected amounts with respect to accrued interest, penalty interest,
principal and other charges will be written-off when civil action is at an advanced stage and/or
judgment having been obtained against the borrowers and the guarantors.
BNM allows the partial write-off of NPLs under the following conditions: (i) the value of the
collateral (determined under BNM’s guidelines) is less than the outstanding balance of the loan
(including principal, accrued interest, penalty interest and other charges) and the borrower is
not likely to provide more collateral; (ii) the outstanding balance of the loan (including principal,
accrued interest, penalty interest and other charges) in excess of the value of the collateral is
uncollectible; (iii) the lending institution is in the final stage of foreclosing/realising the
collateral; (iv) the amount is rounded down to the value of the security (i.e. the shortfall in the
value of security over the outstanding balance is written off); and (v) the lending institution is in
an advanced stage of legal action against the borrower.
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Profile of Non-Performing Loans
The Group’s gross NPLs stood at RM1.2 billion as at 31 December 2008. The ratio of gross
NPLs to total loans was 1.0 per cent. and the ratio of net NPLs to net loans was 0.9 per cent.
Based on BNM statistics, as at 31 December 2008, the ratio of gross NPLs based on three (3)
month classification to total loans for the Malaysian banking industry was 4.1 per cent. and the
ratio of net NPLs based on three (3) month classification to net loans was 2.2 per cent. BNM
defines net loans as gross loans (including loans sold to Cagamas) less specific allowance.
Shown in the table below are the Group’s total NPLs and NPL ratios for the years ended 31
December 2007 and 2008 and for the three (3) month period ended 31 March 2009:As at 31 December
As at 31 March
2007
2008
2009
(RM million, except %)
Gross loans, advances and financing (including
Islamic house financing sold to Cagamas)
101,414.9
120,668.6
125,631.4
(153.9)
(172.8)
(185.4)
101,261.0
120,495.8
125,446.0
Non-performing loans
Specific allowance
1,403.7
(153.9)
1,210.1
(172.8)
1,232.1
(185.4)
Net NPLs
1,249.8
1,037.3
1,046.7
Allowance for bad and doubtful debts
General
Specific
1,523.0
153.9
1,759.5
172.8
1,833.0
185.4
Total allowance for bad and doubtful debts
1,676.9
1,932.3
2,018.4
1.4%
1.2%
119.5%
1.0%
0.9%
159.7%
1.0%
0.8%
163.8%
Less: Specific allowance
Gross loans, advances and financing less
specific allowance
Ratios:Gross NPL ratio
Net NPL ratio
(1)
Allowance for bad and doubtful debts/NPL
(Source: Extracted from audited financial statements of the Group for the year ended 31 December 2008 and
unaudited consolidated interim financial statements of the Group for the three (3) month period ended 31 March 2009)
Note:(1) “Allowance for bad and doubtful debts/NPL” means total specific allowance and general allowance for bad and
doubtful debts as percentage of NPLs.
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Non-Performing Loans by Economic Purpose
The table below sets out the Group’s NPLs by economic purpose as at 31 December 2007 and
2008 and as at 31 March 2009:As at 31 December
2007
2008
(RM million)
(RM million)
Purchase of securities
Purchase of transport vehicles
Purchase of landed properties of which:-residential
-non-residential
Purchase of fixed assets (excluding landed
properties)
Personal use
Credit card
Purchase of consumer durables
Construction
Working capital
Other purpose
Gross NPLs
As at 31 March
2009
(RM million)
7.3
230.4
771.8
647.8
124.0
4.1
187.6
622.5
523.4
99.1
2.8
183.3
609.1
499.3
109.8
1.9
116.3
15.2
0.9
232.5
27.4
0.6
111.5
15.9
1.8
252.0
14.1
0.7
120.9
17.2
1.4
0.2
283.1
13.4
1,403.7
1,210.1
1,232.1
(Source: Extracted from the audited consolidated financial statements of the Group for the year ended 31 December
2008 and unaudited consolidated interim financial statements for the three (3) month period ended 31 March 2009)
Portfolio of Securities
The Group’s securities portfolios are classified as securities held-for-trading, securities held-tomaturity and securities available-for-sale as required under the revised BNM/GP8 guidelines
as follows:-
(i)
Securities held-for-trading
Securities are classified as held-for-trading if they are acquired principally for the purpose of
benefiting from actual or expected short-term price movement or to lock in arbitrage profits.
Securities held-for-trading will be stated at fair value and any gains or losses arising from a
change in their fair values and the derecognition of securities held-for-trading are recognised in
the income statement.
As at 31 December 2008, the securities held-for-trading constituted 5.8 per cent. of the
Group’s total assets. The Group’s securities held-for-trading comprised mainly NIDs (45.3 per
cent.) and Cagamas bonds (43.1 per cent.).
(ii)
Securities held-to-maturity
Securities held-to-maturity are financial assets with fixed or determinable payments and fixed
maturity that the Group intends and has the ability to hold to maturity. Securities held-tomaturity are measured at accreted/amortised cost based on the effective yield method.
Amortisation of premium, accretion of discount and impairment as well as gains or losses
arising from derecognition of securities held-to-maturity are recognised in the income
statement.
As at 31 December 2008, securities held-to-maturity constituted 4.2 per cent. of the Group’s
total assets. The Group’s securities held-to-maturity comprised mainly securities issued by the
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Malaysian Government, Cagamas and quasi government bodies (45.4 per cent.), NIDs (46.6
per cent.), private debt securities (5.1 per cent.) and bankers’ acceptances and Islamic
accepted bills (0.3 per cent.).
(iii)
Securities available-for-sale
Securities available-for-sale are financial assets that are not classified as held-for-trading or
held-to-maturity. Securities available-for-sale are measured at fair value or at amortised cost
(less impairment losses) if the fair value cannot be reliably measured. Any gains or losses
arising from a change in fair value is recognised directly in equity through the statement of
changes in equity, until the financial asset is sold, collected, disposed or impaired, at which
time the cumulative gain or loss previously recognised in equity will be transfer to the income
statement.
As at 31 December 2008, the securities available-for-sale constituted 2.9 per cent. of the
Group’s total assets. The Group’s securities available-for-sale comprised mainly unquoted
private debt securities (53.1 per cent.) and unit trusts (44.7 per cent.).
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As at 31 December 2007 and 2008 and 31 March 2009, the securities-held-for-trading,
securities available-for-sale and securities held-to-maturity were/are as follows:As at
31 December
2007
(RM million)
Securities held-for-trading
At fair value
Money market instruments:
Malaysian Government Treasury Bills
Malaysian Government Securities
Cagamas bonds
Negotiable instruments of deposit
Bank Negara Malaysia Monetary Notes
Bank Negara Malaysia Bills
Quoted securities:
Shares in Malaysia
Trust units outside Malaysia
Unquoted securities:
Private debt securities in Malaysia
Total Securities held-for-trading
Securities available-for-sale
At fair value
Money market instruments:
Malaysian Government Securities
Negotiable instruments of deposit
Bank Negara Malaysia Negotiable notes
Quoted securities:
Shares and convertible loan stocks in Malaysia
Shares outside Malaysia
Trust units in Malaysia:
- Public Institutional Bond Fund
- Others
Unquoted securities:
Shares in Malaysia
Shares outside Malaysia
Private debt securities in Malaysia
Total Securities available-for-sale
Securities held-to-maturity
At amortised cost
Money market instruments:
Malaysian Government Treasury Bills
Malaysian Government Securities
Malaysian Government Investment Certificates
Bankers’ acceptances and Islamic accepted bills
Cagamas bonds
Cagamas Mudharabah bonds
Negotiable instruments of deposit
Bank Negara Malaysia Monetary Notes
Bank Negara Malaysia Bills
Hong Kong Government Treasury Bills
Sri Lanka Government Treasury Bills
Quoted securities:
Private debt securities outside Malaysia
Unquoted securities:
Shares in Malaysia
Private debt securities in Malaysia
Private debt securities outside Malaysia
Accumulated impairment losses
Total Securities held-to-maturity
As at
31 December
2008
(RM million)
As at
31 March
2009
(RM million)
25.7
4,188.8
3,702.5
92.8
-
255.5
4,896.8
5,139.4
890.2
49.8
99.3
223.6
1,470.7
7,072.1
1,371.7
-
1.8
5.2
1.0
-
1.0
-
45.1
8,061.9
117.1
11,349.8
10,238.4
-
42.4
-
251.5
43.5
773.0
39.1
33.7
45.0
11.6
46.0
11.5
1,218.7
100.4
1,256.6
1,257.8
1,274.4
1,264.2
19.7
3.0
2,666.7
4,081.3
20.8
3.3
2,988.9
5,626.4
22.2
3.3
3,068.1
6,757.7
58.6
128.7
231.6
500.0
1.4
577.8
1,039.6
29.9
126.1
8.0
44.6
3,220.4
378.8
21.3
15.2
3,864.7
100.7
142.9
1.6
14.9
2,125.6
378.9
1,286.5
15.1
1,115.4
150.6
20.4
8.5
8.9
9.4
87.5
86.3
1,006.9
(18.5)
3,872.4
88.0
150.1
263.6
(14.1)
8,286.7
88.0
155.4
629.3
(13.4)
5,976.1
(Source: Extracted from the audited consolidated financial statements of the Group for the year ended 31 December
2008 and unaudited consolidated interim financial statements for the three (3) month period ended 31 March 2009)
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SECTION 8.0 RISK MANAGEMENT
The Group has developed a clearly structured risk management framework to manage all key
areas of risks. The Group’s risk management system was created in order to define risk policy,
monitor risk exposure limits and establish a formal approach in risk assessment and
measurement. The Group established the Risk Management Committee in 2002 and the
composition of the Risk Management Committee is in line with BNM’s “Guidelines on
Corporate Governance for Licensed Institutions”.
Risk Management Committee
The Bank’s Board is ultimately responsible for the management of risks. The Board, through
the Risk Management Committee, maintains overall responsibility for risk oversight within the
Group. The Risk Management Committee’s main function is to provide oversight and
management of the Group’s risks. It also ensures that infrastructure, resources and systems
are in place for risk management activities and for the development of a proactive risk
management culture. The Risk Management Committee ensures that there is an ongoing
process to continuously and proactively manage the Group’s risks and sets the risk
management policies that are followed by the Group.
As at 31 March 2009, the Risk Management Committee comprised the following Independent
Non-Executive Directors: Tan Sri Dato’ Thong Yaw Hong, Dato’ Yeoh Chin Kee, Y.A.M.
Tengku Abdul Rahman Ibni Sultan Haji Ahmad Shah Al-Mustain Billah, Dato’ Haji Abdul Aziz
bin Omar, Dato’ Dr. Haji Mohamed Ishak bin Haji Mohamed Ariff and Mr. Quah Poh Keat. The
Risk Management Committee is chaired by the Independent Non-Executive Co-Chairman of
the Bank, Tan Sri Dato’ Thong Yaw Hong.
The Group has identified (amongst others) specific areas of risk management, and the Board
has established dedicated committees with clear reporting structures, roles and responsibilities
to manage each particular area. These committees, details of which are set out below, support
the Risk Management Committee:
(i)
Assets & Liabilities Management Committee, which oversees market and liquidity risks;
(ii)
Credit Risk Management Committee, which oversees credit risk; and
(iii)
Operational Risk Management Committee, which oversees operational risk.
The Risk Management Committee determines and approves the most appropriate risk
strategies, policies and limits. The dedicated independent risk management and control
functions, Internal Audit Division, Risk Management Division, Credit Administration &
Supervision Division and Banking Operations Division are responsible to ensure
implementation of risk policies and compliance. They assist the risk management committees
to manage risks and recommend measures to control and mitigate risks.
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The business risk units are responsible for implementing the risk policies and complying with
the risk policies. They also ensure that the Group’s day-to-day business activities are carried
out within the risk parameters. The major business risk units include:
(i)
Retail Banking and Financing Operations;
(ii)
Treasury and Capital Market Operations;
(iii)
Corporate Lending;
(iv)
Investment Banking;
(v)
Stock Broking and Fund Management; and
(vi)
Islamic Banking.
Assets & Liabilities Management
Market Risk Management
Market risk of the Group is identified into trading market risk and non-trading market risk. The
Assets & Liabilities Management Committee is responsible for overseeing the Group's market
risk.
Trading Market Risk
Trading market risk arises from changes in interest rates, foreign exchange rates, equity prices
and credit spreads on the value of assets held for trading. The Group’s trading market risk
arises from market-making, arbitrage and proprietary position taking activities conducted
primarily by the Treasury operations of the Group. The Group's market risk framework
comprises market risk policies and practices, delegation of authority and market risk limits and
valuation methodologies. The Group's trading market risk for its interest sensitive fixed income
instruments is measured by the present value of one basis point change ("PV01") and is
monitored on a daily basis by a compliance unit which is independent of the business units.
The Group maintains its policy of prohibiting exposures in trading off-balance sheet positions
or derivatives positions unless with prior specific approval of the Board of Directors. As at the
date of this report, the Group did not have such exposures.
Non-Trading Market Risk
Non-trading market risk arises from changes in interest rates, foreign exchange rates, and
equity prices. The Group's main non-trading market risk is interest rate risks, arising from the
re-pricing mismatches of its assets and liabilities from its banking activities and also the
Group's investment of its surplus funds. Specific guidelines are set to govern the Group's
investment of its surplus funds including management limits on portfolio size, credit quality and
maximum tenor.
Interest Rate Risk
In managing interest rate risk, the primary objective is to monitor and avert significant volatility
in net interest income ("NII") and economic value of equity (“EVE”). The Public Bank Group
manages its interest rate risk in a variety of ways that involve the offsetting of positions against
each other for any matching assets and liabilities, the acquisition of new financial assets and
liabilities to narrow the mismatch in interest rate sensitive assets and liabilities and through the
use of derivatives such as interest rate swaps as a hedge against interest rate risk. To monitor
this risk, the Group uses various tools including re-pricing gap reports, sensitivity analysis and
income scenario simulations.
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Exchange Risk
The Public Bank Group's foreign exchange exposure arises primarily from its net investment in
the Group’s overseas operations. The Group's policy is to protect the net investment by
identifying, measuring and managing the potential adverse impact of foreign exchange
movements. In this respect, the Group funds its net investment by borrowings in the same
currencies as the functional currencies involved, where possible. The decision to hedge the
Group’s net investment in its overseas operations is based on its potential economic benefit
and is periodically assessed by the Assets and Liabilities Management Committee of the
Group.
Liquidity Risk
Liquidity risk relates to the ability to maintain sufficient liquid assets to meet financial
commitments and obligations when they fall due at a reasonable cost. The Assets & Liabilities
Management Committee is also responsible for overseeing liquidity risk.
Liquidity management within the Group focuses on overall balance sheet structure and control,
within prudent limits, of risk arising from mismatches of maturities across the balance sheet
and from exposures to undrawn commitments and other contingent obligations. The structure
of the balance sheet is managed to maintain diversification and to minimise funding
concentration as well as to maintain a portfolio of high quality liquefiable assets.
The Group's sources of deposits are primarily from a retail deposit base and from the
wholesale deposit markets. The retail deposit base has traditionally provided a stable source
of funding. Additionally, the Group accesses wholesale deposit markets through the issuance
of certificate of deposits and the taking of money market deposits to meet short term
obligations. The Group's strong reputation, earnings generation capacity, strong financial
position and strong credit rating are key to maintain customers' confidence and ensure
liquidity.
Aligning with BNM’s New Liquidity Framework, liquidity risk is measured and managed based
on the projected cash requirements for the next one (1) week and next one (1) month. In
addition, cash flow mismatch limits are established to limit the Public Bank Group's liquidity
exposure. Liquidity contingency funding plans are in place to identify a liquidity crisis through
early warning indicators. Crisis escalation processes, funding and communication strategies
are clearly set out in these plans.
The Group practices pooling of funds where excess funds especially USD funds are
centralised at Public Bank and disseminated to overseas branches and subsidiaries when the
need arises. In the event of a liquidity crisis when they are unable to source sufficient funds for
their operational needs, the Bank would meet such requirements.
Credit Risk Management
Credit risk is the potential loss of revenue as a result of defaults by borrowers or counterparties
through the Group’s lending, hedging, trading and investing activities. The management of
credit risk is governed by a comprehensive set of credit policies and guidelines documenting
the lending standards, discretionary power for loans approval, credit risk rating, collateral and
valuation, review, rehabilitation and restructuring of problematic and delinquent loans. The
Group practises a stringent credit appraisal system which emphasises individual accountability
and clear lines of responsibility, with credit control function undertaken independently from the
loan originating units. Qualified credit personnel are involved in all credit processes to ensure
risks are properly identified, assessed, controlled and monitored throughout the credit chain.
Independent credit reviews are conducted to assess the quality of credit appraisals and
competency of credit personnel.
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The Group continues to improve and upgrade its credit risk management information system to
enable timely risk analysis and reporting for effective decision-making. With a strong credit risk
management information system, the risks emanating from adverse market changes that could
lead to deterioration in the credit quality of the portfolios and counterparties are analysed in
depth to facilitate prompt and swift pre-emptive measures to be implemented to mitigate such
risk.
The Group remains focused on retail lending activities and its loan portfolio is well diversified
with low volatility of credit risk. As part of the on-going credit monitoring process, the
independent credit control function has also carried out pre-emptive measures with more
frequent review of delinquent accounts and to increase the recovery ratio of these accounts.
The Group minimises its counterparties’ exposure through maximising placement of its surplus
funds with the central banks of the countries where the Group’s entities operate. Specific
guidelines governing the dealing with counterparties are counterparty limit, credit quality,
tenure and types of permissible transactions and these are reviewed regularly to ensure they
remain effective and robust as market condition changes. To effectively manage the exposures
of various counterparties, exposures to the same counterparties are aggregated and monitored
against the limits set at the operating entity and the Group level.
Operational Risk Management
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. To monitor and control such risk, the Group has
established an Operational Risk Management Framework to provide a sound and wellcontrolled operational environment which sets the direction of operational risk management
activities. The day-to-day management of operational risk exposures is through a
comprehensive system of internal controls to ensure that operational policies and procedures
are being adhered to at all levels throughout the Group.
The Operational Risk Management Committee assists the RMC in managing operational risks
of the Group. In particular, the Operational Risk Management Committee reviews the
adequacy of controls in order to manage the overall operational risks associated with business
activities and to ensure adequate and prompt operational risk reporting.
The Operational Risk Management Committee is supported by the Operational Risk
Management Department whose primary role is to assist the Operational Risk Management
Committee in the management of operational risk including reviewing regular reports on
operational risk management to identify and report any areas of concern and to ensure
corrective actions are taken.
To manage and control operational risk, the operational risk management framework is
supplemented with various tools including:
•
Control self-assessment - developed to enhance management assessment of the
state of the control environment
•
Key risk indicators - used to detect changes that may be indicative of risk concerns
and potential areas of operational control weaknesses
•
Operational risk incident reporting and data collection - to facilitate an enhanced
analysis and reporting of operational risk data
In order to further enhance operational risk management in response to threats of external
fraud, losses arising from fraud or control lapses are extensively analysed with emphasis on
identifying the causes of such losses and remedial actions needed to prevent recurrence. The
Public Bank Group keeps abreast with the emergence of new operational risks and fraud
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trends and implements pre-emptive measures and guidelines to combat fraud and to minimise
such losses.
Non-performing loans are analysed for any operational lapses which directly contribute to the
loans turning non-performing. The causes of the operational lapses are analysed and the
findings are disseminated to all business units to avoid recurrence. As a deterrant, appropriate
punitive actions are taken against the errant staff involved.
Included in the control framework is a disciplined product evaluation process. Each new
product or service introduced as well as variations of existing products and services are
subject to rigorous risk review and sign-off process where relevant risks are identified and
assessed by departments independent of the risk-taking unit proposing the product or service.
Disaster recovery and business continuity plans are in place as an integral part of the Group’s
strategy to mitigate risks and manage the impact of loss events. Where appropriate, the Group
mitigates risk of high impact loss events by appropriate insurance coverage.
Audit Committee
The Audit Committee provides an independent assessment of the adequacy and reliability of
the risk management processes and the compliance with risk policies and regulatory
guidelines by the business risk units of the Group.
The Audit Committee is supported by the Internal Audit Division. The Audit Committee
comprises six (6) Independent Non-Executive Directors, namely Tan Sri Dato’ Thong Yaw
Hong, Dato’ Yeoh Chin Kee, Y.A.M. Tengku Abdul Rahman Ibni Sultan Haji Ahmad Shah AlMustain Billah, Dato’ Haji Abdul Aziz bin Omar, Dato’ Dr. Haji Mohamed Ishak bin Haji
Mohamed Ariff and Mr. Quah Poh Keat. The Audit Committee is chaired by the Independent
Non-Executive Co-Chairman of the Bank, Tan Sri Dato’ Thong Yaw Hong.
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SECTION 9.0
SUPERVISION AND REGULATION
The Bank is regulated by BNM, which was established on 26 January 1959 pursuant to the
Central Bank of Malaysia Ordinance, 1958 (now the Central Bank of Malaysia Act, 1958) as
the Central Bank of Malaysia. BNM is directly involved in the regulation and supervision of
Malaysia’s financial system. Its principal functions are to (i) act as a banker and financial
adviser to the Government; (ii) issue currency and keep reserves to safeguard the value of the
currency; (iii) promote monetary stability and a sound financial structure; (iv) influence the
credit situation to the advantage of Malaysia; and (v) manage public debt, administer exchange
controls, supervise and regulate banks (including subsidiaries of foreign banks incorporated in
Malaysia), banking and finance companies, finance companies, investment banks, discount
houses and money brokering businesses and deal with international monetary institutions.
BNM and the Minister of Finance of Malaysia have extensive powers under BAFIA, which is
the principal statute that sets out the laws for the licensing and regulation of institutions
carrying on banking, finance company, merchant banking, discount houses and moneybrokering businesses. In addition to BAFIA, Malaysian licensed institutions are subject to
guidelines issued by BNM from time to time. The following discussion sets out information with
respect to the regulation of the banking industry by BNM:Licensing and limitation of business activities of banks. Under BAFIA, banking business,
which is defined to include deposit taking and provision of financing, can only be conducted by
a public company (which includes domestic public limited companies and subsidiaries of
foreign banks incorporated as public limited companies in Malaysia) which has obtained a
licence from the Minister of Finance.
Banks are also subject to a number of other restrictions on the operation of their business. In
particular, a bank may not: (i) pay any dividend on its shares until all of its capitalised
expenditures have been written off in full and the prior approval of BNM has been obtained; (ii)
accept its own shares or shares of its holding company as security; (iii) acquire or hold any
shares in any other corporation except as permitted under BAFIA or by prescribed regulation;
and (iv) open any branch offices unless the approval of BNM has been obtained.
Statutory reserves. BNM requires Malaysian banks to maintain a sum equivalent to the
Statutory Reserve Requirement (“SRR”) ratio in the form of non-interest bearing reserves with
BNM. The SRR ratio is currently set at 1.0 per cent. of total eligible liabilities.
Capital adequacy requirements. With effect from 1 September 1989, capital adequacy
regulations implementing the agreement reached by the Basle Committee on Banking
Regulations and Supervision Practices (the Basle Committee) in July 1988 were introduced
into the Malaysian banking system (Basel I). These regulations, which were phased in over a
two (2) year period, specify a minimum Tier 1 capital to risk-weighted assets ratio of 4.0 per
cent. and a minimum total capital to risk-weighted assets ratio of 8.0 per cent. Tier 1 capital
includes paid-up ordinary share capital, share premium, statutory reserves, general reserves,
retained profit/loss, minority interests, innovative and non-innovative Tier 1 capital instruments
approved by BNM and after deducting goodwill and deferred tax assets. Tier 2 capital includes
general allowances for loan losses, subordinated debts with an initial maturity of at least five
(5) years, any innovative and non-innovative hybrid Tier 1 capital instruments in excess of the
limits set by BNM to qualify as Tier 1 capital which is approved by BNM as Tier 2 capital and
revaluation surpluses.
Under capital adequacy regulations (Basel I) issued by BNM, risk-weighted assets is the sum
of (i) the credit risk weights of all the different categories of on-balance sheet assets; (ii) the
credit risk weights on off-balance sheet exposures after applying the credit conversion factors
to the types of off-balance sheet instruments and (iii) the risk weighted assets equivalent for
market risk calculated based on BNM’s Market Risk Capital Adequacy Framework. The credit
risk weights and the credit conversion factors are provided in the BNM guidelines.
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With effect from 1 January 2008, the Group and the Bank have adopted the revised Basel II
Framework issued by BNM. Under the revised Basel II Framework, the Group and the Bank
have adopted the standardised approach for credit risk and market risk, and the basic indicator
approach for operational risk. The amount of risk-weighted assets is the sum of (i) the credit
risk-weighted amount of on-balance sheet exposures and the credit equivalent of off-balance
sheet exposures; (ii) the risk-weighted asset equivalent for market risk for trading book
positions; and (iii) the risk-weighted asset equivalent for operational risk. The risk weights and
credit conversion factors for off-balance sheet credit equivalents are based on guidelines
issued by BNM.
Financial institutions that do not adopt the standardised approach for credit risk have been
given the option by BNM to migrate directly to the internal ratings based approach on 1
January 2010.
Single customer limit. Banks are prohibited from extending credit facilities to any customer in
excess of the prescribed percentage in relation to the capital funds of the bank, subject to
certain exemptions (see Section 7.0 - “Asset Quality - Credit Approval Procedures - Single
Customer Limit” above).
Qualifications of directors; power to remove directors. Under BAFIA, a person cannot be
appointed as a director of a bank if, for example, that person has been declared a bankrupt;
has suspended payments or has compounded with his creditors whether within or outside of
Malaysia; has been convicted of any offence under BAFIA; or if there has been any order of
detention, supervision, restricted residence, banishment or deportation made against him; or if
that person has been a director of or directly concerned in the management of any company
which is being or has been wound up by a court or has been a director of a bank whose
licence has been revoked under BAFIA. The appointment of directors, the chairman of the
Board and the chief executive officer of a bank is subject to the prior written approval of BNM.
The appointment of a director and the chief executive officer of a bank is subject to renewal
every three (3) years upon re-assessment by BNM pursuant to an application submitted by the
bank for the re-appointment. BNM’s guidelines on corporate governance for licensed
institutions stipulate, inter-alia, that:(i)
The Board of a licensed institution must have an appropriate number of directors that
commensurate with the complexity, size, scope and operations of the licensed institution.
(ii)
The Board should comprise of directors who as a group provide a mixture of core
competencies such as finance, accounting, legal, business management, information
technology and investment management.
(iii)
At least one-third of the Board must be independent directors.
(iv)
There should not be more than one (1) executive director on the Board of a licensed
institution. However, under exceptional circumstances, BNM may allow up to a maximum
of two (2) executive directors.
(v)
Directors who are errant, ineffective or negligent in discharging their responsibilities may
be removed from the Board. All resignation and removal of independent directors from
the Board can only take effect after the Board has cleared the resignation and removal
with BNM.
(vi)
There shall be clear separation between the roles of chairman and chief executive officer
of a licensed institution.
(vii)
Individuals who are active in politics cannot be appointed as a director of a licensed
institution.
BNM is also empowered under BAFIA to remove any director of a bank with the prior
concurrence of the Minister of Finance if, inter-alia, it is satisfied that the bank is carrying on its
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business in a manner detrimental to the interests of its depositors, its creditors or the public
generally or is insolvent or has become or is likely to become unable to meet all or any of its
obligations or is about to suspend payment of its debts.
Interest rate regulation. Effective 26 April 2004, BNM introduced an interest rate framework
aimed at enhancing the effectiveness of monetary policy transmission process and efficiency
of the operation of the financial markets as well as pricing by banking institutions. Under this
framework, banking institutions are allowed to determine their own lending rates on all credit
facilities and loan products, other than credit card loans, and loans where the lending rates are
governed by legislation or prescribed by BNM.
In addition, under this interest rate framework, the Overnight Policy Rate (“OPR”) replaced the
three month intervention rate as the policy rate. BNM will announce its monetary policy stance
through changes in the OPR. The implementation of monetary policy targets the overnight
interbank rate to fluctuate within a corridor around the OPR. To minimise excessive volatility in
the overnight interbank rate, BNM has set a corridor of +/- twenty five (25) basis points around
the OPR. BNM will ensure that overnight interbank rates trade within this corridor by providing
a lending facility and a deposit facility at the upper and lower limit of the corridor respectively.
Exchange control policy. The foreign exchange administration rules of Malaysia have been
progressively liberalised to facilitate a conducive and competitive business environment by
enhancing the efficiency of the regulatory delivery system. The remaining foreign exchange
administration rules retained are mainly for prudential purposes, and are broadly categorised
into six (6) main areas:(i)
Investments
•
•
•
(ii)
Borrowing & Lending
•
•
•
•
•
•
(iii)
Borrowing in foreign currency and Ringgit by residents
Lending in Ringgit by residents
Issuance of Ringgit and foreign currency denominated securities by residents
Lending in Ringgit and foreign currency by non-residents to residents
Borrowing in foreign currency and Ringgit by non-residents to residents
Issuance of Ringgit and foreign currency denominated bonds/sukuk in Malaysia by
non-residents
Export and import of:
•
•
•
(iv)
Investments in foreign currency assets by residents
Foreign direct and portfolio investments in Malaysia by non-residents
Investment in immovable properties in Malaysia by non-residents
Goods and services by residents
Ringgit and foreign currency by resident travellers
Ringgit and foreign currency by non-resident travellers
Foreign currency and Ringgit accounts
•
•
Opening of foreign currency accounts by residents
Opening of Ringgit and foreign currency accounts in Malaysia by non-residents
(v)
Payments between residents
(vi)
Hedging
• Hedging by residents
• Hedging by non-resident
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The gradual liberalisation of Malaysia’s foreign exchange administration rules is intended to
facilitate a conducive and competitive business environment for both residents and nonresidents.
Priority sector lending guidelines. There are three (3) priority sector lending guidelines
issued by BNM which are applicable to commercial banks, including Public Bank. These are (i)
loans for houses costing up to RM100,000 (for Peninsular Malaysia) and RM120,000 (for the
states of Sabah and Sarawak), (ii) lending to SMEs and bumiputera SMEs and (iii) lending to
the agriculture sector. The housing loan lending guideline is to ensure that financing of home
ownership is available to lower income groups. The prescribed maximum interest rate on such
loans is BLR plus 1.75 per cent. The guidelines on lending to SMEs is to facilitate access to
credit facilities by SMEs, including bumiputera SMEs, to finance their business operations. The
guideline for bumiputera SMEs lending is to ensure a minimum level of loans is extended to
this community. For this lending guideline, SMEs are defined as domestic business enterprises
under three sectors, these being primary agriculture, manufacturing (including agro-based and
manufacturing related services) and the services sector (including information and
communications technology) where the number of full-time employees must not be more than
50, 150 and 50 employees respectively or annual sales turnover must not exceed RM5.0
million, RM25.0 million and RM5.0 million respectively. The guidelines on lending to the
agriculture sector provide for financing of agriculture related activities engaged in agriculture,
hunting, forestry, breeding, keeping or cultivation of all kinds of animal or vegetable life except
forest trees and marine life.
Powers of enforcement. BNM has broad powers to enforce the BAFIA. In particular, where a
bank is insolvent or is likely to become unable to meet all or any of its obligations or is about to
suspend payment, BNM may, with the prior concurrence of the Minister of Finance, remove
from office any officer or director of the bank concerned, appoint any person as a director of
the bank concerned, appoint any person to advise the bank in relation to the proper conduct of
its business, recommend that the Minister of Finance place the bank under the control of BNM
or authorise BNM to make a court application to appoint a receiver or manager to manage the
affairs of the bank or authorise BNM to present a petition for winding-up of the bank
concerned.
In addition, if BNM is of the opinion that a bank is likely to become unable to meet its
obligations or is about to suspend payment, BNM may, with the concurrence of the Minister of
Finance, grant loans (against the security of shares of such bank) to, or purchase shares of,
such bank, or grant loans to another bank to purchase shares, or purchase part or all of the
properties and liabilities, of such bank.
Inspections by BNM. BNM is empowered to examine from time to time, without any prior
notice, the books or other documents, accounts and transactions of a bank and may be
directed by the Minister of Finance to do so in the event the Minister of Finance suspects that
the banking institution is carrying on its business in a manner which is, or which is likely to be,
detrimental to the interests of its depositors or creditors or has insufficient assets to cover its
liabilities to the public or is contravening any provisions of the BAFIA or the Central Bank of
Malaysia Act, 1958.
Lending to Connected Parties. Effective 1 January 2008, BNM revised the “Guidelines on
Credit Transactions and Exposures with Connected Parties” (“Connected Parties Guidelines”)
to provide greater flexibility for licensed institutions, including banks, to extend credit and make
investments in the ordinary course of business to/in connected parties which are of good credit
standing, while ensuring that connected parties, who by virtue of their positions which could
potentially exert influence over the credit approval process, do not inappropriately derive more
favourable terms and conditions than other loan customers. The Connected Parties Guidelines
sets out the broad parameters and conditions relating to the conduct of such transactions with
connected parties to ensure an appropriate level of prudence. It also outlines the roles and
responsibilities of the management and the Board of the licensed institution. The Connected
Parties Guidelines are issued pursuant to Section 62 and Section 126 of BAFIA.
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Listing Requirements of Bursa Securities. The primary roles of Bursa Securities are interalia, to oversee the listing approval process of companies, to ensure compliance with the
listing requirements of Bursa Securities, disclosure standards and other requirements by public
listed companies and to take enforcement actions for breaches of these requirements. It is also
responsible for the surveillance of the market place and for the dissemination of corporate
information of public listed companies.
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SECTION 10.0 OVERVIEW OF THE MALAYSIAN ECONOMY
Malaysian Economy for 2009
Global economic and financial conditions, which deteriorated sharply in the fourth quarter of
2008, are expected to weaken further in 2009. Being a highly open economy, Malaysia has
already been impacted by the adverse global environment with exports and industrial
production declining, in particular, steeply since December 2008. The rapid deterioration in
external demand also dampened private investment and consumption and has led to weaker
labour market conditions, which contributed to the significant moderation in domestic demand
in the fourth quarter of 2008. The Malaysian economy is expected to experience the full impact
of the global downturn in 2009.
In response, several policy measures have been put in place with a primary focus on
supporting domestic demand, as well as mitigating the impact of the global slowdown on the
affected segments of the economy. On 4 November 2008, the Government announced the first
economic stimulus package amounting to RM7 billion. The funds would be allocated to
projects which have a high and immediate multiplier impact on the economy. In addition,
several measures to directly support private consumption were also introduced, such as a
reduction of EPF contributions from 11% to 8% and higher vehicle loan eligibility for civil
servants. As the global economic conditions deteriorated further in the fourth quarter of 2008
and in the early part of 2009, a second economic stimulus package of RM60 billion or almost
9% of Gross Domestic Product (“GDP”) was announced on 10 March 2009. The package will
be implemented over 2009 and 2010, and will involve spending on training, job creation,
improving public infrastructure, school facilities and basic amenities, as well as establishing
guarantee facilities.
The projected economic performance of -1% to 1% for Malaysia in 2009 is based on the
weaker global conditions expected during the year, that will be partially offset by the
implementation of policy measures to support domestic demand. The timely implementation of
the economic stimulus is, therefore, critical in ensuring that the outcome will be at the higher
end of the projected range. There remains, however, significant uncertainties regarding the
global economic outlook. First, the turmoil in the international financial markets may be more
protracted and extend beyond this year, with problems in the financial sectors in a number of
countries remaining unresolved, thereby further exerting downward contractionary influence on
the global economy. Second, the large stimulus measures that are being implemented by
several countries would take some time to take effect. Thirdly, there is the risk of trade and
financial protectionism. These factors will influence the depth and length of the recession in the
advanced economies and the overall direction of the global economy. Nevertheless, the
strengths of the Malaysian economy, in terms of a strong banking sector, a healthy external
position, high savings as well as relatively low indebtedness among individuals, businesses
and the Government, provide flexibility for the economy to better weather this challenging
period and recover once the global economic and financial conditions stabilised.
(Source: Extracts from the BNM Annual Report 2008: Outlook and Policy)
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Domestic Demand Conditions for 2009
Domestic demand is projected to experience a moderate growth of 2.9% in 2009, reflecting
mainly the adverse spill over effects of the deepening global downturn on private sector
activity. Household consumption is projected to moderate while capital spending by
businesses is expected to contract further during the year. Nevertheless, domestic demand will
be supported by higher Government spending. The public sector will be the main impetus of
domestic demand, in particular following the implementation of two (2) economic stimulus
packages in 2009. With the prospect of inflation receding significantly, a substantial easing of
monetary policy is aimed at supporting domestic economic activities. In addition, the domestic
financial system has the capacity to continue to meet the financing needs of both households
and businesses.
Growth in private consumption expenditure is expected to moderate but register a positive
growth of 3.5% in 2009. The slower expansion in consumer spending will be affected largely
by the weaker domestic labour market conditions with higher retrenchments and less
favourable employment prospects. At the same time, affected companies have embarked on
cost-cutting measures, including salary reductions, shorter work-week, unpaid leave and
temporary layoffs. In addition, significant declines in commodity prices since the fourth quarter
of 2008 have substantially affected incomes of smallholders.
Private investment is projected to decline by 17.7% in 2009 as capital spending activities will
be affected by falling demand and negative business sentiments due to the worsening global
economic conditions. While this trend of declining private investment has taken place in the
fourth quarter of 2008, the impact of the slower economic growth is expected to be more
widespread, affecting most economic sectors in 2009.
Public consumption is expected to increase by 7.3% in 2009, due mainly to higher
expenditures on emoluments and supplies and services. Of importance, the higher allocation
for supplies and services is to ensure the effective delivery of Government services to support
the private sector and cushion the impact of the external downturn on affected segments.
Public investment is expected to increase strongly in 2009, as the Government implements
countercyclical measures to mitigate the impact of the externally-induced slowdown on the
economy. Federal Government spending will be higher, mainly channelled towards improving
the economic and social sectors of the economy. In addition to projects under the Ninth
Malaysian Plan (9MP), the Government is expected to accelerate the implementation of
various projects identified in the two stimulus packages.
(Source: Extracts from the BNM Annual Report 2008: Outlook and Policy)
Sectoral Outlook for 2009
On the supply side, the year 2009 will be a challenging year for most sectors in the economy,
particularly industries directly exposed to the external demand. The contraction in global
demand is expected to continue to adversely affect the manufacturing sector as well as tradeand tourism-related industries in the services sector. In addition, the spillover of weaknesses in
external demand and the generally cautious economic environment will lead to moderating
private sector activities in domestic dependent sectors, in line with the slower pace of growth in
domestic demand. Nonetheless, the domestic-oriented sectors will be partially supported by
expansionary fiscal and accommodative monetary policies. In particular, the construction
sector is expected to benefit from higher Government spending and register stronger growth in
2009.
Amidst slower overall economic activity, growth in the services sector is expected to moderate
to 4.5% in 2009. However, as the sector is more domestically driven, the slower but continued
growth in domestic demand, together with supportive fiscal and monetary policies, will provide
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some support against the weaker performance of trade-and tourism-related activities that are
expected to prevail in 2009. As a whole, the services sector will remain the key growth sector
of the economy in 2009, contributing 2.5 per centage points to the overall GDP growth.
The manufacturing sector is projected to decline sharply in 2009 (-8%; 2008: 1.3%), to be led
by steep contractions in export-oriented industries and weaker support from domestic-oriented
industries. In particular, the electronics and electrical industry is expected to be the worst
affected by the sharp deterioration in global conditions affecting the final demand for all
electronics and electrical products.
The agriculture sector is expected to register a decline of 2.0%, due mainly to lower production
of both palm oil and rubber as the expected lower prices of both commodities will reduce the
incentive for marginal producers to maintain the output growth trend seen in recent years.
The mining sector is projected to decline marginally by 0.4%, as the decline of 2.2% in crude
oil output to 675,000 barrels per day will be offset to some extent by a 2.9% increase in natural
gas output due to liquefied natural gas demand from a new buyer, People’s Republic of China,
which is expected to commence in the second half of 2009.
The construction sector is expected to expand by 3% in 2009, supported by the civil
engineering segment due to the implementation of projects under the two (2) economic
stimulus packages.
(Source: Extracts from the BNM Annual Report 2008: Outlook and Policy)
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SECTION 11.0 OTHER INFORMATION
11.1
Material Litigation
PBB
As at 2 March 2009, Public Bank is not engaged in any litigation, either as plaintiff or defendant
in any legal action, proceeding, arbitration or prosecution for any criminal offence which has a
material effect on the financial position of Public Bank. The directors of Public Bank do not
know of any proceedings pending or threatened or of any fact likely to give rise to any
proceedings, which may materially and adversely affect the position or the business of Public
Bank.
PBFIN
As at 2 March 2009, PBFIN is not engaged in any litigation, either as plaintiff or defendant in
any legal action, proceeding, arbitration or prosecution for any criminal offence which has a
material effect on the financial position of PBFIN. The directors of PBFIN do not know of any
proceedings pending or threatened or of any fact likely to give rise to any proceedings, which
may materially and adversely affect the position or the business of PBFIN.
11.2
Material Contracts Outside the Ordinary Course of Business
PBB
Public Bank has not entered into any contracts which are outside its ordinary course of
business.
PBFIN
PBFIN is currently dormant and it does not have any subsisting contract.
11.3
Material Contingent Liabilities and Material Capital Commitment
PBB
Save as those disclosed in PBB’s audited financial statements ended 31 December 2008, the
directors of PBB are not aware of any material contingent liabilities and material capital
commitment, which upon becoming enforceable may have substantial impact on the financial
position and the business of PBB.
PBFIN
PBFIN is currently dormant and it does not have any subsisting material contingent liabilities
and material capital commitment.
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Appendix I – Audited Financial Statements of Public Bank Berhad for the Year ended
31 December 2008 provided in the form of a compact disc
Appendix II – Audited Financial Statements of PBFIN Berhad for the Year ended
31 December 2008
ISSUERS
PUBLIC BANK BERHAD
32nd Floor, Menara Public Bank,
146, Jalan Ampang,
50450 Kuala Lumpur
PBFIN BERHAD
(Wholly-owned subsidiary of Public Bank Berhad)
27th Floor, Menara Public Bank,
146, Jalan Ampang,
50450 Kuala Lumpur
PRINCIPAL ADVISER/LEAD ARRANGER
Public Investment Bank Berhad
(Wholly-owned subsidiary of Public Bank Berhad)
25th Floor, Menara Public Bank
146, Jalan Ampang
50450, Kuala Lumpur
JOINT LEAD MANAGERS
CIMB Investment Bank
Berhad
10th Floor, Bangunan CIMB,
Jalan Semantan
Damansara Heights
50490 Kuala Lumpur
Public Investment Bank
Berhad
(Wholly-owned subsidiary of
Public Bank Berhad)
25th Floor, Menara Public Bank
146, Jalan Ampang
50450 Kuala Lumpur
RHB Investment Bank
Berhad
Level 11, Tower Three
RHB Centre
Jalan Tun Razak
50400 Kuala Lumpur
FACILITY AGENT
LEGAL COUNSEL
Public Investment Bank Berhad
(Wholly-owned subsidiary of Public Bank
Berhad)
25th Floor, Menara Public Bank
146, Jalan Ampang
50450, Kuala Lumpur
Adnan Sundra & Low
Level 11, Menara Olympia
No. 8 Jalan Raja Chulan
50200 Kuala Lumpur
TRUSTEE
CENTRAL DEPOSITORY AND PAYING
AGENT
AmanahRaya Trustees Berhad
15th Floor, Wisma AmanahRaya
No.2, Jalan Ampang
50450 Kuala Lumpur
Bank Negara Malaysia
Jalan Dato’ Onn
50480, Kuala Lumpur