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FHBM1114Management
Marking Scheme for GroupReport Assignment (October 2015 Trimester)
COMPONENTS Marks Allocation Deserved
Marks
1. Introduction
 Company background 5
 Competitive advantages 5
2. Planning and Strategic Management
 SWOT Analysis 20
 Types of uncertainties faced 15
 Methods used to respond to uncertainties 10
 Competitive strategies used 20
3. Conclusion
Overall achievement of the company 10
References and Appendices 5
Grammar/ Presentation/ Language 5
Peer Evaluation (Contribution up to 5 points) * 5
TOTAL 100

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Introduction
1.1 Company background
Public Bank Berhad is a bank based in Kuala Lumpur, Malaysia offering financial services in
Malaysia as well as the Asia-Pacific region. The Public Bank group , established by its
Founder and Chairman , Tan Sri Dato’ Sri Dr. Teh Hong Piow in 1966. It is the third largest
banking group in Malaysia with an asset size of RM 345.72 billion as at the end of 2014.
Public Bank is the third largest company listed on the main market of Bursa Malaysia
Securities with a market capitalization of RM 71.04 billion as at the end of 2014.
Public Bank currently offers a comprehensive range of financial products and services which
include personal banking, commercial banking , Islamic banking , investment banking , share
broking , trustee services , nominee services , sale and management of unit trust funds,
bancassurance and banking business particularly on the retail consumers and small and
medium enterprises
1.2 Competitive Advantages
Public Bank Group has a competitive advantage on strong assets quality. The Public Bank
Group’s total assets stood at RM 345.72 billion as at the end of 2014 , which was an increase
of RM 40 billion or 13.1% over the previous financial year. The strong growth in the assets
was mainly contributed by growth in loans and financial investments of 10.8% and 55.8%
respectively.

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Public Bank Group also has a competitive advantage on market capitalization. The Public
Bank Group is a well-known bank with the reputation “the largest non government-linked
listed company by market capitalization” With the market capitalization of RM 71.04 billion
as at the end of 2014. Public bank completed a rights issue exercise in August 2014 which
raised a total of RM4.8 billion in equity capital. The Group is now the second highest
capitalized banking group in Malaysia in terms of Tier 1 capital ratio.
Thus , Public Bank Group has a competitive advantage on customer experience management.
Customer experience one of the most important factors in determining the choice of the
primary bank for customers in Malaysia. Public Bank received the Malaysia Best Customer
Experience in Banking Award in 2014 by Frost and Sullivan.
In addition, Public Bank Group has a competitive advantage on Recognition of Banking
Excellence. In the past few years, Public Bank Berhad had received lots of awards or
excellence banking. In 2014, Public Bank Berhad had received a total of 26 awards including
3 Best Bank in Malaysia which were awarded by Global Finance, Finance Asia and Alpha
Southeast Asia
Furthermore , Public Bank Group continues to stand out among the Malaysian banking peers
in terms of profitability, cost efficiency and asset quality, with the highest net return on equity
of 19.9% and lowest cost to income ratio and gross impaired loans ratio of 30.0% and 0.6%
respectively.

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PLANNING AND STRATEGIC MANAGEMENT
2.1 SWOT Analysis
2.1.1 Strength
The strength of Public Bank Berhad is the largest bank in Malaysia by shareholders'
funds, second largest by market capitalization, and third largest by total assets which is
RM345, 722 billion. Next, the Public Bank have achieved impressive financial performances
in 2014. Net profit grew by 11% which is RM 41 Billion in 2013 to RM 45 Billion in 2014.
Market Capitalization has increased from RM 68.67 Billion to RM 71.04 Billion in 2014.
Furthermore, prudence in management is the third strength we have found in Public Bank
Berhad. Public Bank currently has a network of 259 branches and 1,801 self-service
terminals and support more than 18,000 employees in Malaysia. The Groups continued to
improve on assets quality with NPL ratio at 0.6%. Moreover, credit rating by local agency.
The purpose is to increase the confidence of investor and customers towards Public Bank. For
example, Standard & Poor's reaffirmed Public Bank's A- long-term rating and A-2 short-term
counterparty credit rating with stable outlook. Moody's Investors Service also reaffirmed
Public Bank's foreign currency long-term deposit rating of A3 and short-term deposit rating
of P-2 with a positive outlook. Rating Agency Malaysia reaffirmed the Bank's long-term
rating of AAA, the highest rating accorded by Rating Agency Malaysia, and its short-term
rating of P1. On the other hand, The Group of Public Bank have recorded unbroken profit
track.

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2.1.2 Weaknesses
The weakness of Public Bank is the expenses incurred in 2014 are higher than expenses
in 2013. The personnel costs increase from RM 1.88 billion in 2014 from 1.74 billion in 2013
due to increase 11% in salaries, allowances and bonuses. Establishment costs have increased
by 1.3% or RM6.2 million in 2014 as a result of higher expenses incurred for utility and
rental. Moreover, Public Bank only a regional player and limited in global presence because
the essential to compete with other commerce banks such as Maybank, CIMB and HSBC.
2.1.3 Opportunities
The opportunities of Public Bank are growth in wealth management products and
services, to mitigate pressures on net interest margins. The increasing number of affluent
customers in Malaysia with high savings and deposits which is RM25.67 billion in the
banking system should continue in order to provide opportunities for growth, particularly to
innovate financial services. Next, the Group of Public Bank can further expand their retail
and add more Automated Teller Machine (ATM) in shopping mall. Furthermore, improve in
internet banking and mobile banking service capabilities for greater convenience.
2.1.4 Threats
The threats facing by Public Bank are increasing competition in home mortgages will
inevitably result in some compression of the net interest margin. There are many commerce
banks such as Maybank, CIMB, HSCB, etc that provide financial services for home
mortgages. Next, Public Bank faces more stringent rules to lending introduced by Bank
Negara Malaysia (BNM). For example, customer can lend the loan that is rescheduled or
restructured by Agensi Kaunseling dan Pengurusan Kredit (AKPK) and lastly for retail loans,
where a banking institution elects not to increase the installment amount following an
increase in the base rate/base lending rate in cases where the increase is less than RM50 per
month.

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2.2 Types of uncertainties faced
During the 1997-1998, Malaysia struggle economic Asian financial crisis and applied
several valuable lessons to its economic management strategies that contributed to the
economic resilience to 20008-2009 global financial crisis. This financial crisis started due to
the weakness of USA financial industry. Beside, the export and industrial output worsened
and investment declined. The GDP growth in 4th quarter of 2008 lower at 0.1% compare with
an average of5.9% in the first month of the year. During 1997-1998, stock market and
currency market nearly collapsed and occur capital low. Relatively modest as domestic bank
has negligible exposure to US subprime loan products, plus the weak business environment
and expected rise in unemployment, the banking system non-performing loan expected to
rise. Furthermore, the percentage of export drop particularly in manufactured exports and
electronic and electrical appliances. The employment rates relatively stable and low during
the crisis, but many foreign labours were sent back.
Commercial bank branches in Segamat and Labis, Johor had to close today as a result
of the flood situation. For and on behalf of its 10 member banks concerned, The Association
of Banks in Malaysia (ABM) says that the situation is being monitored closely and the banks
are hoping to reopen soonest for business.
Members of the banking public may obtain updates at ABM’s toll free number,
ABMConnect 1-300-88-9980 which is opened from Mondays to Fridays (save and except for
public holidays), 9:00 am to 5:30 pm or at the telephone numbers listed below. Tuesday, 1
February 2011 is a public holiday for Wilayah Persekutuan. Hence the public is advised to try
to contact the numbers listed on Wednesday, 2 February 2011 in the event they are unable to
reach anyone at the numbers listed.

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2.3 Response to uncertainties
Through the study of management, we can know that there are 4 ways that how those
companies can response to those uncertainties that they faced. The 4 response to uncertainties
are defenders, prospectors, analyzers and reactor.
The company that we study, Public Bank use prospectors and reactor to response to
their uncertainty. As we know that during year 1997 to 1998, Malaysia struggled
economically from the Asian financial crisis. The GDP growth in 4th quarter of 2008 lower at
0.1 % compare with an average of 5.9 % in the first month of the year. Besides that, stock
market and currency market nearly collapsed.
When facing this worst situation, Public bank act as a prospectors to seek out solution
by introduced knowledge-based economy master plan in year 2002. This solution was taken
to transform the economy into an innovation-based economy with improved efficiency and
productivity to enable Malaysia achieved high income country by year 2020. This also show
that Public bank act as a reactors when faced this uncertainty because they make adjustments
when finally forced to by environmental pressures. After Public bank took that solution,
Malaysia GDP grew 7.2% in 2010. It also helps the central bank maintains a conservative
regulatory environment, having prohibited some of the riskier assets in vogue elsewhere.

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2.4 Competitive strategies
2.4.1 Introduction
The model of the Five Competitive Forces was developed by Michael E. Porter that becomes
an important tool for analysing an organizations industry structure in strategic processes. This
model is applicable to the banking industry. Public Bank do compete with the other financial
institution in Malaysia, however they also must cooperate with one another in many
respects. There is an underlying problem which is the banks in Malaysia are so similar that
there is essentially nothing one of them can do that the others cannot easily duplicate.
2.4.2 Five Forces Analysis
a. Threat of New Entrants
Malaysia has not put a ‘barrier to entry’ for any financial institution mainly banks in
Malaysia, thus making it easy for any financial institution to penetrate into the industry.
b. Bargaining power of suppliers
A bank has three suppliers of its product, money:
i). Its depositors
Depositors, has no bargaining power whatever in reality. If they make time deposits the bank
will set the price or interest rate it will pay.
ii). The credit market
The credit market as a source of supply of the raw material, money, is open to all
at all time if they are qualified participants. The source of supply can be argued to be infinite.

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iii). The central bank
The Central bank is effectively the resource of last resort. Apparently, at least for the
moment, it will continue to supply liquidity to the banking system in virtually unlimited
quantities at very reasonable cost.
c. Bargaining power of buyers
In the banking industry, customer have has very limited bargaining power. However the
customers may option in changing to other banks that they think is offering a better offer than
Public Bank.
d. Threat of substitute products
For the most part there is no real threat of substitute products in the banking
industry. However there probably will be continues evolution of products from paper to
electronic in coming years. This is an area of potential competition for whomever banks
that choose to use it in their services.
e. Rivalry among competitors
Generally all banks offer somewhat the same products and services to their customers, thus
there is not much differentiation between Public Banks and the other competitors. This
is making the competition much higher. Public Bank is actually ranked as the top banks
earners in Malaysia in 2014 alongside with Maybank, Bumiputra Commerce, RHB Capital
and Hong Leong Bank.

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Conclusion
As informed by TAN SRI DATO’ SRI TAY AH LEK, MANAGING
DIRECTOR/CHIEF EXECUTIVE OFFICER, AT PUBLIC BANK’S 49th ANNUAL
GENERAL MEETING ON 30 MARCH 2015, Public Bank Group registered another set of
commendable results in 2014 with a record net profit attributable to shareholders of RM4.52
billion. This represents 11.2% growth as compared to 2013. Pre-tax profit increased by 9.5%
to RM5.81 billion in 2014. As a result, earnings per share rose from 116.1 sen in 2013 to
123.7 sen in 2014. Besides, Public Bank Group’s customer deposit increased by 10.2% in
2014 to RM277 billion, outpacing the domestic banking industry’s deposit growth of 7.6%.
This has resulted in market share of customer deposits further improving from 15.7% as at
the end of 2013 to 15.9% as at the end of 2014. In 2014, the Public Bank Group’s non-
interest income increased steadily by 9.2% as compared to 2013. This was mainly contributed
by higher income from unit trust business, investment income and fee income from banking
operations. In view of the Public Bank Group’s commendable performance in 2014, a second
interim dividend of 31 sen was paid on 5th March 2015. Together with the first interim
dividend of 23 sen paid in August 2014, total dividend for 2014 amounted to 54 sen. This
resulted in a total dividend payout of RM2.08 billion for 2014, an increase of 14% as
compared to RM1.82 billion paid for 2013, and represents 46.1% of the Group’s net profit for
2014. 3 With a market capitalization of RM71 billion as at the end of 2014, Public Bank is
the largest non-government linked company in Malaysia by market capitalization. With the
completion of the rights issue, the Group is currently the second highest capitalized banking
group in Malaysia in terms of Tier I capital ratio. Furthermore, Public Bank Group Achieved
15.2% Growth In Net Profit Attributable To Shareholders To RM1.17 Billion For The First
Quarter Of 2015.

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Strong Growth in Loans and Deposits help Public Bank to achieve this goal. The
Public Bank Group maintained a strong loan growth momentum at an annualized rate of
13.1% in the first quarter of 2015, largely supported by the domestic loans which grew by an
annualized rate of 12.1% over the period. Moreover, commendable growth in non-interest
income, sustainable and efficient cost structure, superior asset quality, overseas operations,
healthy capital position and group’s prospect also help Public Bank to achieve this goal.
Public Bank’s shared goals are to realize its Corporate Vision ‘To Be Ranked among The
Top 100 Banks in The World’ and to maintain its Corporate Mission ‘To Sustain The
Position of Being The Most Efficient, Profitable and Respected Financial Institution In
Malaysia’. To achieve these shared goals, the Public Bank Group continues to uphold its
corporate philosophy in caring for its customers, employees, the community it serves, and
shareholders through relentless team spirit and loyalty in line with the Public Bank Group’s
motto ‘Excellence is Our Commitment’. These shared corporate goals are continually
reinforced upon the Group’s 12,537 employees through induction programmes, training
courses, consistent management practices, Chairman’s speeches and messages, incentives,
and the implementation of caring human resource management policies that provide
opportunities for career advancement and promote staff productivity, well-being and high
morale. Together with strong support from all stakeholders, including our 86,624
shareholders, the Public Bank Group’s proactive mindsets of ‘we can’ and ‘we will’ will
continue to prevail.
Public Bank have made a strategy planning, and decided the ways to achieve it, so
they are able to have the great achievement like this.

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REFERENCES
1. The Star: New Bank Negara guidelines seen weighing on earnings.
http://www.thestar.com.my/business/business-news/2015/05/04/rr-impact-on-
banks/?style=biz
2. Wikipedia : Public Bank Berhad
https://en.wikipedia.org/wiki/Public_Bank_Berhad
3. Moody’s Investors Service about Public Bank Berhad
https://www.moodys.com/credit-ratings/Public-Bank-Berhad-credit-rating-
600019815
4. Rating Agency Malaysia about Public Bank Berhad
http://www.ram.com.my/pressReleaseView.aspx?ID=81862d24-25cb-4d45-
b367-b08cc3e42693
5. Annual Report 2014 for Public Bank Berhad
https://www.pbebank.com/corporate/PBB2014_Corporate%20Book.pdf