THE WAY FORWARD

2018 ANNUAL REPORT

LED BY GREAT AND PURPOSEFUL LEADERSHIP, WE CONTINUE TO REMAIN SUCCESSFUL BY MEETING DEMANDS AND EXPECTATIONS OF STAKEHOLDERS AND CUSTOMERS. OUR EFFECTIVE STRATEGIES AND PRUDENT MANAGEMENT HAS HELPED US DECISIVELY MOVE FORWARD AND RESPOND TO CHANGES IN THE BANKING INDUSTRY. THE WAY FORWARD 2018 ANNUAL REPORT

WE WILL CONTINUE TO MOVE FORWARD IN LINE WITH TECHNOLOGICAL ADVANCEMENT. FOR THE CONVENIENCE OF OUR CUSTOMERS, WE WILL ENSURE EASY AND SIMPLIFIED ACCESS TO ONLINE BANKING, ENABLING THEM TO ANYWHERE AND AT ANY TIME.

THE WAY FORWARD 2018 ANNUAL REPORT

OUR SUPERIOR PERFORMANCE IN CUSTOMER SERVICE HAS ALWAYS BEEN AN INDUSTRY BENCHMARK. AS A CUSTOMER-CENTRIC BANK, WE SUPPORT THE NEEDS OF OUR CUSTOMERS AND ASSIST THEM TO ACHIEVE THEIR FINANCIAL GOALS IN ANY WAY POSSIBLE.

THE WAY FORWARD 2018 ANNUAL REPORT

OUR DEDICATED AND COMMITTED EMPLOYEES FORM THE BACKBONE OF OUR ORGANISATION. WE WILL INSTIL IN THEM THE NECESSARY SKILLS AND KNOWLEDGE TO FACE CHALLENGES AHEAD. IT IS OUR AIM TO CREATE A DIGITALLY ENABLED WORKFORCE AND EMBED INNOVATION INTO OUR WORKPLACE CULTURE AS WE MOVE FORWARD. THE WAY FORWARD 2018 ANNUAL REPORT ABOUT THIS REPORT WHAT’S INSIDE 1 HIGHLIGHTS 2 Corporate Philosophy 3 Corporate Mission 4 Notice of Annual General Meeting 7 Financial Calendar 8 Financial Highlights 9 Simplified Group Balance Sheet 10 Corporate Information RATIONALE 12 Group Corporate Structure 14 Corporate Profile Public Bank stood tall for the past 52 years, drawing our strength from stability in leadership, financial management, business acumen, professionalism and service excellence.

We remain committed towards sustaining our footprints on corporate excellence as we embark on a digital journey to meet the future needs and expectations of our stakeholders, focusing on taking the Bank’s performance to the next level. We will increase efficiency, empower our employees with the knowledge and expertise needed to compete in 2 the future and drive change in order to remain competitive. OVERVIEW Public Bank will continue to sustain our legacy of high 16 Corporate Milestones from 1966 growth, performance excellence and value creation for all our stakeholders. 20 Media Highlights 2018 22 Five-Year Group Financial Summary The cover design encapsulates the theme The Way Forward 24 Summary of Five-Year Group Growth through the use of arrowheads as a symbol of positive movement and focus on set targets. Arrows also denote 26 Key Interest Bearing Assets & Liabilities speed, power and dynamism; traits that drive the Bank 27 Segmental Analysis forward to meet the challenging demands of the future. 28 Group Quarterly Performance The move towards digitalisation is accentuated by the optic lines superimposed on the people, denoting today’s 29 Statement of Value Added futuristic lifestyle and convenience to enhance customer experience. 3 ACHIEVEMENTS 30 2018 Awards & Achievements This annual report is available on the web at www.publicbankgroup.com To contact us, please refer to the Corporate Information on page 10 and the Group Corporate Directory on page 281

The financial statements are available in the Financial Statements book of the 2018 Annual Report

4 7 LEADERSHIP SUSTAINABILITY STATEMENT 34 Statement by Tan Sri Dato’ Sri Dr. Teh Hong 186 Sustainability Statement Piow, Founder, Chairman Emeritus, Director 230 Calendar of Significant Events 2018 and Adviser 38 Joint Statement by Chairman and Managing Director/Chief Executive Officer 40 Board of Directors 8 42 Board of Directors’ Profile OTHERS 246 Bursa Listing Requirements Compliance Information 5 247 Malaysian Economy: Review and Outlook CORPORATE GOVERNANCE 256 Investor Information 54 Corporate Governance Overview Statement 260 Analysis of Shareholdings 66 Risk Management 264 Share Capital 78 Ethics, Integrity and Trust 277 Summary of Properties Owned by Public Bank Group 82 Statement on Risk Management and Internal Control 278 Top 10 List of Properties Owned by Public Bank Group 88 Audit Committee Report 280 International Network 281 Group Corporate Directory Form of Proxy

6 MANAGEMENT PERSPECTIVE 96 Group Management Profile 102 Heads of Division 110 Management Discussion and Analysis 112 Group Financial Review 140 Business Operations Review 182 Outlook for 2019 2 2018 ANNUAL REPORT PUBLIC BANK BERHAD

CORPORATE PHILOSOPHY

Public Bank Cares… For Its Customers • By providing the most courteous and efficient service in every aspect of its business • By being innovative in the development of new banking products and services

For Its Shareholders • By forging ahead and consolidating its position as a stable and progressive financial institution • By generating profits and a fair return on their investment

For Its Employees • By promoting the well-being of its staff through attractive remuneration and fringe benefits • By promoting good staff morale through proper staff training and development and provision of opportunities for career advancement

For The Community It Serves • By assuming its role as a socially responsible corporate citizen in a tangible manner • By adhering closely to national policies and objectives thereby contributing towards the progress of the nation

…With Integrity

3rd largest RM5.59 billion bank in Malaysia record net profit attributable to equity holders THE WAY FORWARD 3

CORPORATE MISSION

To sustain the position of being the most efficient, profitable and respected premier financial institution in Malaysia.

RM419.69 billion 432 branch network in total assets in the region 4 2018 ANNUAL REPORT PUBLIC BANK BERHAD NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the 53rd Annual General Meeting of Public Bank Berhad (PBB or Company) (6463-H) will be held at the Grand Ballroom, Shangri-La Hotel, Jalan Sultan Ismail, 50250 on Monday, 22 April 2019 at 11.00 a.m. for the following purposes: AS ORDINARY BUSINESS 1. To lay before the meeting the Audited Financial Statements for the financial year ended 31 December 2018 and the Reports of the Directors and Auditors thereon. 2. To re-elect the following Directors who retire pursuant to Article 109 of the Company’s Articles of Association (Constitution): i. Mr Lee Chin Guan Ordinary Resolution 1 ii. Dato’ Mohd Hanif bin Sher Mohamed Ordinary Resolution 2 3. To re-elect the following Directors who retire by rotation pursuant to Article 111 of the Company’s Articles of Association (Constitution): i. Tan Sri Dato’ Sri Tay Ah Lek Ordinary Resolution 3 ii. Ms Lai Wai Keen Ordinary Resolution 4 4. To approve the payment of Directors’ fees, Board Committees Members’ fees, and allowances to Ordinary Resolution 5 Directors amounting to RM3,659,567 for the financial year ended 31 December 2018. 5. To approve the payment of remuneration and benefits-in-kind (excluding Director’s fee and Board Ordinary Resolution 6 meeting allowance) amounting to RM40,879,961 for financial year ended 31 December 2018 to the then Chairman in financial year ended 31 December 2018, Tan Sri Dato’ Sri Dr. Teh Hong Piow. 6. To re-appoint Messrs Ernst & Young as Auditors of the Company for the financial year ending Ordinary Resolution 7 31 December 2019 and to authorise the Directors to fix the Auditors’ remuneration. AS SPECIAL BUSINESS

7. To consider and if thought fit, to pass the following resolution in relation to the proposed Special Resolution 1 amendments of the existing Memorandum and Articles of Association of the Company as set out in Appendix II of the Circular to Shareholders dated 21 March 2019 despatched together with the Company’s 2018 Annual Report and the proposed adoption of a new Constitution of the Company:

“THAT approval be and is hereby given to revoke the existing Memorandum and Articles of Association of the Company with immediate effect and in place thereof to adopt the proposed new Constitution of the Company as set out in Appendix III of the Circular to Shareholders dated 21 March 2019 despatched together with the Company’s 2018 Annual Report;

AND THAT the Directors be and are hereby authorised to assent to any modification, variation and/or amendments as may be required by any relevant authorities and to do all acts necessary to give effect to the proposed new Constitution.”

By Order of the Board

Dato’ Chia Lee Kee MAICSA 7008270 Company Secretary

Kuala Lumpur 21 March 2019 THE WAY FORWARD 5

Notes: 1. In respect of deposited securities, only Members whose names appear in the Record of Depositors on 15 April 2019 (General Meeting Record of Depositors) shall be entitled to attend, speak and vote at this 53rd Annual General Meeting (AGM).

2. A Member entitled to attend, speak and vote at this 53rd AGM may appoint a proxy to attend, speak and vote on his behalf. A proxy need not be a Member of the Company.

3. A Member shall not be entitled to appoint more than 2 proxies to attend and vote at this 53rd AGM provided that where a Member is an authorised nominee as defined in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint up to 2 proxies in respect of each Securities Account it holds with ordinary shares in the Company standing to the credit of the said Securities Account.

Where a Member appoints 2 proxies, the appointment shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.

Where a Member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (omnibus account), there is no limit to the number of proxies which the exempt authorised nominees may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act, 1991 which is exempted from compliance with the provisions of subsection 25A(1) of the said Act.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney of the corporation duly authorised.

5. The instrument appointing a proxy must be deposited at the office of the Share Registrar, Tricor Investor & Issuing House Services Sdn Bhd at Unit 32-01, Level 32, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 Kuala Lumpur, Malaysia not less than 48 hours before the time set for this 53rd AGM or no later than 20 April 2019 at 11.00 a.m.

6. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in this Notice will be put to vote by way of poll. 6 2018 ANNUAL REPORT PUBLIC BANK BERHAD NOTICE OF ANNUAL GENERAL MEETING

Explanatory Notes on Ordinary Businesses: 4. Ordinary Resolution 6 – Proposed payment of 1. Audited Financial Statements for the financial year remuneration and benefits-in-kind (excluding Director’s ended 31 December 2018 fee and Board meeting allowance) for the financial year ended 31 December 2018 to the then Chairman in The Audited Financial Statements are for discussion only as they do not require shareholders’ approval pursuant to financial year ended 31 December 2018, Tan Sri Dato’ Section 340(1)(a) of the Companies Act, 2016. Hence, Sri Dr. Teh Hong Piow this matter will not be put for voting. The proposed payment of remuneration and benefits-in-kind (excluding Director’s fee and Board 2. Re-election of Directors meeting allowance) amounting to RM40,879,961 for The profiles of Directors seeking re-election are set out in financial year ended 31 December 2018 to the then the Board of Directors’ Profile section of the Company’s Chairman in financial year ended 31 December 2018, 2018 Annual Report. Tan Sri Dato’ Sri Dr. Teh Hong Piow, is in deep appreciation and recognition of his invaluable contributions to PBB’s and PBB Group’s continued success. 3. Ordinary Resolution 5 – Proposed payment of Directors’ fees, Board Committees Members’ fees, and allowances to The benefits-in-kind included company car, medical Directors for the financial year ended 31 December 2018 coverage and other claimable benefits. The breakdown of the proposed payment of Directors’ fees, Board Committees Members’ fees, and allowances to Explanatory Note on Special Business: Directors amounting to RM3,659,567 for the financial year ended 31 December 2018 is as set out below: Special Resolution 1 – Proposed Adoption of a New Constitution of the Company in place of its existing Memorandum and Articles of Association RM per annum

Directors’ fees 2,083,067 The proposed Special Resolution 1, if passed, will streamline Board Committees Members’ fees 1,274,880 the Company’s existing Memorandum and Articles of Allowances to Directors 301,620 Association with the Companies Act 2016, which came into force on 31 January 2017, and to align to amendments made Total 3,659,567 to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, as well as for better clarity and to enhance administrative efficiency.

The proposed new Constitution of the Company is set out in Appendix III of the Circular to Shareholders dated 21 March 2019 despatched together with the Company’s 2018 Annual Report. THE WAY FORWARD 7 FINANCIAL CALENDAR Financial Year 2018

ANNOUNCEMENT OF CONSOLIDATED RESULTS

2 15 25 20 May August October February 2018 2018 2018 2019 Wednesday Wednesday Thursday Wednesday

UNAUDITED UNAUDITED RESULTS UNAUDITED AUDITED RESULTS RESULTS FOR FOR 2ND QUARTER RESULTS FOR FOR 4TH QUARTER 1ST QUARTER ENDED AND HALF-YEAR 3RD QUARTER ENDED AND FINANCIAL 31 MARCH 2018 ENDED 30 JUNE 2018 30 SEPTEMBER 2018 YEAR ENDED 31 DECEMBER 2018

ANNUAL GENERAL MEETING DIVIDENDS

NOTICE OF 53RD ANNUAL GENERAL MEETING 1ST INTERIM DIVIDEND OF 32.0 SEN PER SHARE 21 March 2019 (Thursday) Notice 15 August 2018 (Wednesday) Entitlement 7 September 2018 (Friday) Payment 19 September 2018 (Wednesday)

53RD ANNUAL GENERAL MEETING 2ND INTERIM DIVIDEND OF 37.0 SEN PER SHARE 22 April 2019 (Monday) Notice 20 February 2019 (Wednesday) Entitlement 7 March 2019 (Thursday) Payment 14 March 2019 (Thursday) 8 2018 ANNUAL REPORT PUBLIC BANK BERHAD FINANCIAL HIGHLIGHTS

Group Bank

2018 2017 2018 2017

PROFITABILITY (RM’MILLION) Operating revenue 22,042 20,858 15,994 15,669 Operating profit 7,270 7,319 5,754 6,366 Profit before tax expense and zakat 7,101 7,118 5,644 6,296 Net profit attributable to equity holders of the Bank 5,591 5,470 4,551 5,061

KEY BALANCE SHEET DATA (RM’MILLION) Total assets 419,693 395,276 331,787 313,665 Loans, advances and financing 315,259 303,044 247,690 240,576 Deposits from customers 339,160 319,259 258,878 245,332 Shareholders’ equity 40,973 37,365 35,280 32,641

FINANCIAL RATIOS (%) Profitability Ratios Net interest margin on average interest bearing assets 2.2 2.3 2.1 2.1 Net return on equity1 14.8 15.8 13.9 16.9 Return on average assets 1.7 1.8 1.7 2.0 Return on average risk-weighted assets 2.7 2.8 2.7 3.1

Capital Adequacy Ratios Common Equity Tier I capital ratio 13.6 12.8 12.7 12.1 Tier I capital ratio 14.3 13.5 13.4 13.1 Total capital ratio 16.8 16.5 16.0 15.6

Asset Quality Ratio Gross impaired loans ratio 0.5 0.5 0.5 0.4

1 Based on average equity attributable to equity holders of the Bank, adjusted for dividend declared subsequent to year end. THE WAY FORWARD 9 SIMPLIFIED GROUP BALANCE SHEET

ASSETS LIABILITIES & EQUITY

. . . . . . . 3.7% .  .

   

. 75.1%

. . .  .  . . . . . .

   

. .

Cash and balances with Portfolio of financial Deposits from customers Deposits from banks and reverse investments repurchase agreements Bills and acceptances Debt securities issued Statutory deposits with payable and other and other borrowed Loans, advances and Central Banks liabilities funds financing Share capital Reserves Other assets (including intangible assets) Non-controlling interests 10 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE INFORMATION AS AT 21 FEBRUARY 2019

BOARD OF DIRECTORS

TAN SRI DATO’ SRI DR. TEH HONG PIOW Founder, Chairman Emeritus, Director and Adviser PSM, SSAP, SPMJ, SIMP, SSIJ, DSAP, DPMJ, Datuk Kurnia Sentosa Pahang, JP Hon LLD (M’sia); EFMIM (M’sia); Fellow, AICB; FCIB (UK); FGIA (Aust); CCMI (UK); FICM (UK); FInstAM (UK); DUniv Sunway hc

LAI WAN TAN SRI DATO’ SRI TAY AH LEK Independent Non-Executive Chairman Managing Director/Chief Executive Officer BA (Econs Hons); Associate, AICB PSM, SSAP, PJN, DIMP, KMN MBA (Henley); EFMIM (M’sia); Fellow, Chartered Banker, AICB; FCPA (Aust); F Fin (Aust)

TANG WING CHEW LAI WAI KEEN Independent Non-Executive Director Independent Non-Executive Director BA (Hons) BEc (Hons); LLB

CHEAH KIM LING LEE CHIN GUAN Independent Non-Executive Director Non-Independent Non-Executive Director BAcc (Hons); CA (M’sia) (Appointed on 27 December 2018) BSc (Hons); BCL (Oxon); LLM (Cantab); JD (Chicago-Kent); Barrister-at-Law (Middle Temple)

DATO’ MOHD HANIF BIN SHER MOHAMED Independent Non-Executive Director (Appointed on 22 January 2019) DSM, DSPN, PKT MBA (UK) THE WAY FORWARD 11

COMPANY SECRETARY AUDITORS DATO’ CHIA LEE KEE MESSRS ERNST & YOUNG (AF 0039) DIMP Chartered Accountants MAICSA 7008270 Level 23A, Menara Milenium Telephone No. : 603-2176 6341 Jalan Damanlela E-mail : [email protected] Pusat Bandar Damansara 50490 Kuala Lumpur Malaysia REGISTERED OFFICE Telephone No. : 603-7495 8000 Facsimile No. : 603-2095 5332 27th Floor, Menara Public Bank 146 Jalan Ampang 50450 Kuala Lumpur HEAD OFFICE Malaysia Telephone No. : 603-2176 6341, 2163 8888 Menara Public Bank Facsimile No. : 603-2163 9917 146 Jalan Ampang 50450 Kuala Lumpur Malaysia SHARE REGISTRAR Telephone No. : 603-2176 6000, 2176 6666, 2163 8888, 2163 8899 TRICOR INVESTOR & ISSUING HOUSE SERVICES SDN BHD Facsimile No. : 603-2163 9917 Unit 32-01, Level 32 Tower A Vertical Business Suite Avenue 3 Bangsar South WEBSITE No. 8, Jalan Kerinchi 59200 Kuala Lumpur www.publicbankgroup.com Malaysia Telephone No. : 603-2783 9299 Facsimile No. : 603-2783 9222 INVESTOR RELATIONS E-mail : [email protected] Telephone No. : 603-2176 6293 Facsimile No. : 603-2163 9929 Tricor Customer Service Centre: E-mail : [email protected] Unit G-3, Ground Floor Vertical Podium Avenue 3 Bangsar South AGM HELP DESK No. 8, Jalan Kerinchi 59200 Kuala Lumpur Telephone No. : 603-2176 6458, 2176 6462 Malaysia Facsimile No. : 603-2163 9917 E-mail : [email protected]

STOCK EXCHANGE LISTING Listed on the Main Market of Bursa Malaysia Securities Berhad Listing Date : 6 April 1967 Stock Name : PBBANK Stock Code : 1295 12 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP CORPORATE STRUCTURE AS AT 21 FEBRUARY 2019

MALAYSIAN COMPANIES

100% Public Islamic Bank Bhd (Islamic Banking)

30% AIA PUBLIC Takaful Bhd (Family Takaful)*1

100% Public Investment Bank Bhd ()

100% Public Invest Nominees (Tempatan) Sdn Bhd (Nominee Services)

100% Public Invest Nominees (Asing) Sdn Bhd (Nominee Services)

100% Public Consolidated Holdings Sdn Bhd (Investment Holding)

100% Public Mutual Bhd (Sale & Management of Unit Trust Funds and Private Retirement Schemes)

100% Public Holdings Sdn Bhd (Property Holding)

100% Public Nominees (Tempatan) Sdn Bhd (Nominee Services)

100% Public Nominees (Asing) Sdn Bhd (Nominee Services)

100% PB Trustee Services Bhd (Trustee Services)*2

100% PB Venture Capital Sdn Bhd (Investment Holding)

100% Public Leasing & Factoring Sdn Bhd (Leasing & Factoring)

100% PB International Factors Sdn Bhd (Investment Holding)

100% PBFIN Bhd (Special purpose vehicle to issue subordinated notes under its holding company’s Stapled Securities Programme) THE WAY FORWARD 13

OVERSEAS AND OFFSHORE COMPANIES

73.2% Public Financial Holdings Ltd (Investment & Property Holding)

100% Public Bank () Ltd (Banking)

100% Public Financial Securities Ltd (Stock & Share Broking)

100% Public Bank (Nominees) Ltd (Nominee Services)

100% Public Finance Ltd (Deposit-Taking & Finance)

100% Public Securities (Nominees) Ltd (Nominee Services)

100% Public Financial Ltd (Investment Holding)

100% Public Securities Ltd (Stock & Share Broking)

100% Winton (B.V.I.) Ltd (Investment Holding)

100% Winton Financial Ltd (Provision of Financing)

100% Winton Motors, Ltd (Trading of taxi cabs and taxi licences, and leasing of taxis)

100% Cambodian Public Bank Plc (Banking)

100% Campu Securities Plc (Securities Dealing and Underwriting)

49% CPB Properties Company Ltd (Property Holding) 51% Campu Lonpac Insurance Plc (General Insurance) 4% 100% Public Bank Ltd (Banking) 100% Public Bank (L) Ltd (Offshore Banking)

100% PB Trust (L) Ltd (Offshore Trust Company)

Notes: *2 Held by: • The companies reflected are operating subsidiaries/associated companies. i. Public Bank Bhd; • The full list of companies under the Public Bank Group is set out in ii. Public Investment Bank Bhd; Notes 18 and 19 to the Financial Statements on pages 112 to 115 in the iii. Public Consolidated Holdings Sdn Bhd; Financial Statements section of this Annual Report. iv. Public Holdings Sdn Bhd; and v. PB International Factors Sdn Bhd *1 Held by: with direct shareholdings of 20% each. i. Public Bank Bhd; and ii. Public Islamic Bank Bhd with direct shareholdings of 15% each. 14 2018 ANNUAL REPORT PUBLIC BANK BERHAD

CORPORATE PROFILE Conceptualised as ‘a bank for the public’ by its Founder, Chairman Emeritus, Director and Adviser, Tan Sri Dato’ Sri Dr. Teh Hong Piow, Public Bank opened its doors to offer banking services in 1966 and has since grown into a premier banking group in Malaysia. As one of the largest banking players in South East Asia, the Public Bank Group serves about ten million customers across the region with a staff strength of over 18,500 employees.

3rd largest bank in Malaysia

A LARGE PREMIER BANK IN MALAYSIA

NET PROFIT MARKET ATTRIBUTABLE TO TOTAL ASSETS CAPITALISATION EQUITY HOLDERS

RM419.69 RM96.12 RM5.59 billion billion billion

THE BEST AMONG DOMESTIC BANKS

HIGHEST RETURN ON LOWEST COST TO LOWEST GROSS EQUITY INCOME RATIO IMPAIRED LOANS RATIO

14.8% 33.0% 0.5% THE WAY FORWARD 15

2ND largest company on Bursa Malaysia by Market Capitalisation LEADING MARKET SHARES

Residential Commercial Private Unit Property Property Trust Business Financing Financing Retail Market Share 19.8% 35.2% 37.2%

FOCUSED ORGANIC GROWTH country, the Group also fulfils its products. To serve customers better, STRATEGY responsibility as a corporate citizen by the Group has strengthened its digital The Group pursues a focused organic helping to improve the lives of people capabilities by optimising and growth strategy in retail banking through acts of volunteerism, charitable integrating facilities and processes. The business, particularly on retail donations and sponsorships focusing in Group’s digital channels - PBe internet consumers and small and medium areas of educational development, banking and PB engage mobile banking enterprises (“SMEs”). improvement of community healthcare app are flagship touch points to and well being, as well as preserving the spearhead the Bank’s digital LEADING MARKET SHARES environment. transformation. The Group sustained its leading market positions in consumer banking, retail REGIONAL NETWORK STRONG CREDIT RATINGS commercial lending to SMEs as well as Public Bank reaches out to its customers With consistent financial performance private unit trust business. through various channels, which includes and prudent management, the Group 265 well distributed branches and a continues to receive strong credit and AWARD-WINNING BANK comprehensive range of digital channels financial ratings from local and foreign comprising of over 2,100 self service rating agencies. Public Bank’s unwavering commitment terminals in Malaysia, PBe internet in its pursuit of banking excellence banking, PB engage mobile banking as continues to be recognised by well as social media. In addition, the Standard & Poor’s Rating Agency international and domestic awards. In • A- long-term rating Malaysia Group has an extensive branch network 2018, Public Bank was named as the • A-2 short-term • Long-term rating of in the region with a network of 77 counterparty credit AAA, the highest Strongest Bank by Balance Sheet in branches in Hong Kong, 4 branches in rating with stable rating accorded Malaysia 2018 by The Asian Banker, outlook by Rating Agency , 31 branches in , 18 and was also bestowed with many best Malaysia branches in Vietnam, 4 branches in Moody’s • Short-term rating bank awards, both domestically and and 3 branches in . • Long-term deposit of P1 with stable internationally. The Group will continue rating of A3 outlook to strive for greater performance • Short-term deposit DIVERSE RANGE OF PRODUCTS rating of P-2 with excellence. AND SERVICES stable outlook The Group provides a comprehensive CORPORATE SOCIAL range of financial products and services RESPONSIBILITY comprising of personal banking, As a key player in the financial industry, commercial banking, Islamic banking, the Group plays its role in generating investment banking, share broking, value and contributing to the nation’s trustee services, nominee services, sale economic growth. Apart from being a and management of unit trust funds, significant contributor of taxes to the bancassurance and general insurance 16 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE MILESTONES FROM 1966

1966 1990

Acquisition of Public Finance Limited (then known as JCG Finance Company, Limited) in Hong Kong.

1967

1978

1992

Establishment of Cambodian Public Bank Plc, presently a wholly-owned subsidiary in Cambodia, on 25 May 1992 and branches in 1966 Vientiane, Laos and Colombo, Sri Lanka. 1990 On 6 August 1966, Public Bank first opened its doors for business at No. 4 Jalan Gereja, 1992 Kuala Lumpur with 62 pioneer staff.

1996 2001 1967 1996 Official opening of Public Bank on 4 April 1967 by Malaysia’s first Prime Minister, the Public Bank moved to Menara Public Bank, late Y.T.M. Tunku Abdul Rahman. its present landmark Head Office building in the heart of Kuala Lumpur’s central business district. 1978 2001 Public Bank moved to Bangunan Public Bank, the first Head Office building owned by the Completed the acquisition of Hock Hua Bank 2004 Bank. Berhad on 31 March 2001. THE WAY FORWARD 17

2004 2010 2004

Completed the merger of the finance Public Bank and Public Islamic Bank Berhad jointly company business of Public Finance Berhad with ING Management Holdings (Malaysia) Sdn with the commercial banking business of Bhd, obtained a Family Takaful licence to carry Public Bank on 4 September 2004. out family takaful business.

2006 2014

Public Mutual Berhad, the largest private Paid-up capital of Public Bank exceeded sector unit trust management company in RM3.8 billion upon the issuance of 350,212,513 2006 Malaysia, became a wholly-owned subsidiary new ordinary shares of RM1.00 each pursuant to on 12 July 2006. the completion of the Public Bank Rights Issue. 2007

2007 2008

Establishment of Campu Lonpac Insurance 2010 Plc, a 55% subsidiary of Public Bank Group, 2016 to provide general insurance business in VID Public Bank (previously 50% held by Cambodia. Public Bank) became a wholly-owned subsidiary of Public Bank and changed its name to Public Bank Vietnam Limited with effect from 1 April 2016.

2014 2016

2008 2018

Public Islamic Bank Berhad, a wholly-owned Public Bank launched the all-in-one digital subsidiary, commenced business on payment terminals on 8 November 2018 in 1 November 2008 upon the completion of partnership with Revenue Group Berhad and was the transfer of the Islamic banking business the first bank to roll out such an integrated of Public Bank to Public Islamic Bank Berhad. payment terminal in Malaysia. 2018 18 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE MILESTONES FROM 1966

1966 • On 6 August 1966, Public Bank first opened its doors 1992 • Listing of Public Finance Berhad (the former finance for business at No. 4 Jalan Gereja, Kuala Lumpur with company subsidiary of Public Bank) on Bursa Malaysia 62 pioneer staff. Securities Berhad (then known as the Kuala Lumpur • Public Finance Berhad, then Public Bank’s wholly-owned Stock Exchange) on 15 July 1992. finance company subsidiary, commenced business on • VID Public Bank, Public Bank’s 50:50 joint venture 24 September 1966. bank with Bank for Investment and Development of • The start of an expanding network of Public Bank with Vietnam commenced business in , Vietnam on the opening of Public Bank’s Malacca Branch on 18 May 1992. 15 September 1966 and Ipoh Branch on 7 January 1967, • Establishment of Cambodian Public Bank Plc, presently a domestic network that stands at 263 branches today. a wholly-owned subsidiary in Cambodia, on • 1st five months of business yielded a profit of 25 May 1992 and branches in Vientiane, Laos and RM71,562, the start of an unbroken profitability track Colombo, Sri Lanka. record of 52 years. 1993 • Commencement of Islamic Banking service with the 1967 • Official opening of Public Bank on 4 April 1967 by launch of “Skim Perbankan Tanpa Faedah” and the Malaysia’s first Prime Minister, the late Y.T.M. Tunku setting-up of Public Bank’s Islamic Banking Unit. Abdul Rahman. • Acquisition of 55% interest in Public Mutual Berhad • On 6 April 1967, Public Bank was listed on Bursa (then known as Kuala Lumpur Mutual Fund Berhad) on Malaysia Securities Berhad (then known as the Kuala 26 May 1993. Lumpur Stock Exchange). 1996 • Public Bank moved to Menara Public Bank, its present 1969 • 1st RM1 million annual pre-tax profit. landmark Head Office building in the heart of Kuala Lumpur’s central business district. 1970 • Public Bank paid its 1st dividend of 3.5% per ordinary share of RM1.00 each, the start of an unbroken stream 1998 • Paid-up capital of Public Bank exceeded RM1 billion. of dividends paid by Public Bank for every financial year. 2000 • Acquisition of Public Merchant Bank Berhad (then 1978 • Public Bank moved to Bangunan Public Bank, the first known as Sime Merchant Bank Berhad) on 25 October Head Office building owned by the Bank. 2000 expanded the Group’s business into merchant banking. 1980 • 1st RM10 million annual pre-tax profit with • 1st RM1 billion annual pre-tax profit with RM21 million pre-tax profit achieved for the year. RM1.25 billion pre-tax profit in the year. • Total assets surpassed RM1 billion for the 1st time. 2001 • Completed the acquisition of Hock Hua Bank Berhad 1987 • Completed the acquisition of PB Securities Sdn Bhd on 31 March 2001. (then known as GP Securities Sdn Bhd) on 1 October 1987, marking the Public Bank Group’s entry into 2002 • Paid-up capital of Public Bank exceeded RM2 billion. stockbroking business. 2003 • Public Bank started buying back its own shares, the 1990 • Acquisition of Public Finance Limited (then known as first bank in Malaysia to do so. JCG Finance Company, Limited) in Hong Kong. • Completed the privatisation of Public Finance Berhad • Establishment of a wholly-owned off-shore banking on 13 June 2003. subsidiary, Public Bank (L) Ltd, in the Federal Territory • Paid-up capital of Public Bank exceeded RM3 billion. of Labuan. 2004 • 1st issue of subordinated debt of USD350 million. • 1st RM100 million annual pre-tax profit with RM128 million pre-tax profit in the year. • Completed the merger of the finance company business of Public Finance Berhad with the commercial banking 1991 • Listing of Public Financial Holdings Limited (then business of Public Bank on 4 September 2004. known as JCG Holdings Limited) on The Stock Exchange of Hong Kong Limited. 2005 • Pre-tax profit surpassed RM2 billion for the 1st time. • Total assets surpassed RM10 billion for the 1st time. • Total assets surpassed RM100 billion for the 1st time. THE WAY FORWARD 19

2006 • 1st Malaysian bank to issue innovative hybrid Tier-1 2011 • ING PUBLIC Takaful Ehsan Bhd, the joint venture capital securities in both the international market in Takaful company set up by Public Bank and Public US Dollars of USD200 million and in the domestic Islamic Bank Berhad jointly with ING Management market in Ringgit of RM1.2 billion. Holdings (Malaysia) Sdn Bhd, was launched on • Acquisition of Public Bank (Hong Kong) Limited 5 April 2011. (formerly known as Asia Commercial Bank Limited) in 2012 • Pre-tax profit surpassed RM5 billion for the 1st time. Hong Kong for HKD4.5 billion. • Public Mutual Berhad, the largest private sector unit 2013 • Public Bank entered into new regional strategic trust management company in Malaysia, became a alliance agreement on bancassurance with American wholly-owned subsidiary on 12 July 2006. International Assurance Company, Limited. • Public Investment Bank Berhad, a wholly-owned • ING PUBLIC Takaful Ehsan Bhd changed its name to subsidiary, was established on 18 December 2006 upon AIA PUBLIC Takaful Bhd following the completion of completion of the merger of the merchant banking the acquisition of ING Insurance Berhad by AIA Bhd in business of Public Merchant Bank Berhad with the Malaysia on 17 June 2013. stockbroking business of PB Securities Sdn Bhd. 2014 • Completed the merger of ordinary shares of RM1.00 2007 • Pre-tax profit surpassed RM3 billion for the 1st time. each in Public Bank (PBB Shares) listed and quoted as “Local” and PBB Shares listed and quoted as “Foreign” • Total loans, advances and financing exceeded on the Main Market of Bursa Malaysia Securities RM100 billion for the 1st time. Berhad on 16 April 2014. • Public Bank entered into an exclusive regional strategic • Paid-up capital of Public Bank exceeded RM3.8 billion alliance agreement with ING Asia/Pacific Limited for the upon the issuance of 350,212,513 new ordinary shares joint development of bancassurance business, Takaful of RM1.00 each pursuant to the completion of the business and various other services between Public Bank Public Bank Rights Issue. and ING in the Asia Pacific region for 10 years. • Establishment of Campu Lonpac Insurance Plc, a 55% 2015 • Pre-tax profit surpassed RM6 billion for the 1st time. subsidiary of Public Bank Group, to provide general 2016 • VID Public Bank (previously 50% held by Public Bank) insurance business in Cambodia. became a wholly-owned subsidiary of Public Bank and 2008 • Public Islamic Bank Berhad, a wholly-owned subsidiary, changed its name to Public Bank Vietnam Limited commenced business on 1 November 2008 upon the with effect from 1 April 2016. completion of the transfer of the Islamic banking • Public Bank Vietnam Limited received the licence from business of Public Bank to Public Islamic Bank Berhad. the for its establishment and • Public Bank became the largest banking group in operation as a 100% foreign-owned bank in Vietnam Malaysia by market capitalisation and the 2nd largest with effect from 1 April 2016. listed company on Bursa Malaysia Securities Berhad • Public Bank celebrated its 50th anniversary on on 18 July 2008 with a market capitalisation of 6 August 2016. RM36.03 billion. 2017 • Pre-tax profit surpassed RM7 billion for the 1st time. 2009 • Total assets surpassed RM200 billion for the 1st time. 2018 • Public Bank launched the all-in-one digital payment 2010 • Pre-tax profit surpassed RM4 billion for the 1st time. terminals on 8 November 2018 in partnership with • Profit after tax surpassed RM3 billion for the 1st time. Revenue Group Berhad and was the first bank to roll • Public Bank and Public Islamic Bank Berhad jointly out such an integrated payment terminal in Malaysia. with ING Management Holdings (Malaysia) Sdn Bhd, obtained a Family Takaful licence to carry out family takaful business. • Public Islamic Bank Berhad, a wholly-owned subsidiary, opened its first full-fledged Islamic branch offering Shariah-compliant products. 20 2018 ANNUAL REPORT PUBLIC BANK BERHAD MEDIA HIGHLIGHTS 2018 THE WAY FORWARD 21 22 2018 ANNUAL REPORT PUBLIC BANK BERHAD FIVE-YEAR GROUP FINANCIAL SUMMARY

YEAR ENDED 31 DECEMBER 2018 2017 2016 2015 2014

OPERATING RESULTS (RM’MILLION) Operating profit 7,270 7,319 6,745 6,631 6,067 Profit before tax expense and zakat 7,101 7,118 6,554 6,491 5,814 Net profit attributable to equity holders of the Bank 5,591 5,470 5,207 5,062 4,519

KEY BALANCE SHEET DATA (RM’MILLION) Total assets 419,693 395,276 380,053 363,758 345,722 Loans, advances and financing 315,259 303,044 292,429 271,814 243,222 Total liabilities 377,597 356,831 344,689 331,450 316,847 Deposits from customers 339,160 319,259 309,974 301,157 276,540 Core customer deposits 283,846 269,723 258,155 245,171 216,707 Share capital 9,418 9,4181 3,882 3,882 3,882 Shareholders’ equity 40,973 37,365 34,213 31,231 28,025 Commitments and contingencies 96,368 95,443 105,592 107,533 95,813

SHARE INFORMATION AND VALUATION Share Information Per share (sen) Basic/Diluted earnings 144.4 141.7 134.8 131.1 123.7 Dividend 69.0 61.0 58.0 56.0 54.0 Net assets 1,055.4 967.6 886.0 808.8 725.7 Share price as at 31 December (RM) 24.76 20.78 19.72 18.52 18.30 Market capitalisation (RM’Million) 96,122 80,671 76,556 71,897 71,043

Valuation Dividend yield (%) 2.8 2.9 2.9 3.0 3.0 Dividend payout ratio (%) 47.9 43.1 43.0 42.7 46.1 Price to earnings multiple (times) 17.2 14.7 14.6 14.1 14.8 Price to book multiple (times) 2.3 2.1 2.2 2.3 2.5

1 The Bank’s share premium account was transferred to form part of the Bank’s share capital pursuant to the Companies Act 2016 which came into force on 31 January 2017. THE WAY FORWARD 23

YEAR ENDED 31 DECEMBER 2018 2017 2016 2015 2014

FINANCIAL RATIOS (%) Profitability Ratios Net interest margin on average interest bearing assets 2.2 2.3 2.2 2.2 2.2 Net return on equity1 14.8 15.8 16.5 17.8 19.9# Return on average assets 1.7 1.8 1.8 1.8 1.8 Return on average risk-weighted assets 2.7 2.8 2.7 2.8 2.8 Cost/income ratio 33.0 31.9 32.3 30.5 30.0

Asset Quality Ratios Gross loans to fund ratio 88.4 90.0 90.8 86.8 84.4 Gross loans to fund and equity ratio 79.0 80.7 81.8 78.7 76.7 Gross impaired loans ratio 0.5 0.5 0.5 0.5 0.6 Loan loss coverage – Exclude regulatory reserve 126.0 95.5 102.7 120.8 122.4 – Include regulatory reserve 237.5 256.5 248.5 258.6 218.6

Capital Adequacy Ratios Common Equity Tier I (“CET I”) capital ratio 13.6 12.8 11.9 11.4 11.3 Tier I capital ratio 14.3 13.5 12.7 12.6 12.8 Total capital ratio 16.8 16.5 16.0 15.9 16.4 CET I capital (RM’Million) 36,541 32,834 29,856 27,329 24,775 Tier I capital (RM’Million) 38,261 34,841 32,007 30,118 27,942 Tier II capital (RM’Million) 6,892 7,606 8,198 8,092 7,891 Total capital (RM’Million) 45,153 42,447 40,205 38,210 35,833

PRODUCTIVITY RATIOS Number of employees 18,721 18,553 18,651 18,373 18,198 Gross loans per employee (RM’000) 16,949 16,410 15,761 14,883 13,465 Deposits per employee (RM’000) 18,117 17,208 16,620 16,391 15,196 Profit before tax per employee (RM’000) 379 384 351 353 320

MARKET SHARE (%) Domestic market share Loans, advances & financing 17.6 17.8 17.7 17.4 17.1 Deposits from customers 16.5 16.6 16.9 16.6 15.9 Core customer deposits 17.2 17.4 17.5 16.8 16.6

1 Based on equity attributable to equity holders of the Bank, adjusted for dividend declared subsequent to year end. # Average equity is adjusted with weighted average of net proceeds from rights issue. TO EQUITYHOLDERS NET PROFITATTRIBUTABLE PUBLIC BANK’SRANKINGBYMARKETCAPITALISATION ON BURSAMALAYSIASECURITIESBERHAD Sen DIVIDEND PERSHARE RM’Million 24 FIVE-YEAR GROUP GROWTH GROUP FIVE-YEAR OF SUMMARY Ranking YEAR

. , . 2018 ANNUAL REPORT . ,.

. ,.            . ,.     . ,. NET RETURNONEQUITY Percentage (%) RM SHARE PRICE

. .

. .

0421 0621 2018 2017 2016 2015 2014 . . r r r 3rd 3rd 3rd 3rd           . .     . . MARKET CAPITALISATION Sen EARNINGS PERSHARE RM’Billion

 . .

 .  .

. . PUBLIC BANK BERHAD           .  .     .  . 2nd * Percentage (%) GROSS IMPAIREDLOANSRATIO RM’Billion TOTAL ASSETS

Including regulatoryreserves

. .

.  .

. .   . .   . . Percentage (%) LOAN LOSSCOVERAGE* RM’Billion AND FINANCING GROSS LOANS,ADVANCES

. .

.  .

.  .   . .   . . RM’Billion CUSTOMER DEPOSITS Percentage (%) TOTAL CAPITALRATIO

. . THE WAY FORWARD . .

. .   . .   . . 25 26 2018 ANNUAL REPORT PUBLIC BANK BERHAD KEY INTEREST BEARING ASSETS & LIABILITIES

2018 2017

Average Average Average Average Balance rate Interest Balance rate Interest RM’Million (%) RM’Million RM’Million (%) RM’Million

Interest Earning Assets Loans, advances and financing 303,355 5.27 15,987 288,857 5.20 15,021 Balances with banks 10,042 2.91 292 11,188 2.81 314 Financial investments 67,643 3.71 2,506 58,921 3.64 2,147

Total 381,040 4.93 18,785 358,966 4.87 17,482

Interest Bearing Liabilities Deposits from customers 288,393 3.14 9,056 271,602 2.97 8,067 Deposits from banks 13,451 2.91 391 11,564 2.18 252 Recourse obligations on loans and financing sold to Cagamas 5,647 4.27 241 3,861 4.15 160 Debt securities issued and other borrowed funds 13,345 4.57 610 13,263 4.22 560 Total 320,836 3.21 10,298 300,290 3.01 9,039 THE WAY FORWARD 27 SEGMENTAL ANALYSIS

OPERATING REVENUE PROFIT BEFORE TAX TOTAL ASSETS

2018 2018 2018

2017 2017 2017

2018 2017 2018 2017 2018 2017 % % % % % % Hire purchase 11.6 12.6 Hire purchase 4.6 5.3 Hire purchase 10.3 10.7 Retail operations 50.3 49.2 Retail operations 51.4 53.0 Retail operations 55.4 54.6 Corporate lending 9.0 8.6 Corporate lending 7.9 7.6 Corporate lending 8.8 8.8 Treasury and capital Treasury and capital Treasury and capital market operations 6.3 6.5 market operations 9.9 9.8 market operations 16.6 17.2 Investment banking 0.8 0.9 Investment banking 0.7 0.6 Investment banking 0.5 0.5 Fund management 6.3 6.5 Fund management 9.4 9.3 Fund management 0.1 0.1 Others 7.6 7.0 Others 6.4 4.7 Others 0.2 0.2 Total domestic 91.9 91.3 Total domestic 90.3 90.3 Total domestic 91.9 92.1 Hong Kong SAR 4.9 5.3 Hong Kong SAR 4.5 4.8 Hong Kong SAR 4.9 5.0 Cambodia 1.9 2.1 Cambodia 4.2 3.6 Cambodia 2.2 1.9 Other countries 1.3 1.3 Other countries 1.0 1.3 Other countries 1.0 1.0 Total overseas 8.1 8.7 Total overseas 9.7 9.7 Total overseas 8.1 7.9 Total 100.0 100.0 Total 100.0 100.0 Total 100.0 100.0 28 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP QUARTERLY PERFORMANCE

2018

First Second Third Fourth Year Quarter Quarter Quarter Quarter 2018

FINANCIAL PERFORMANCE (RM’MILLION) Operating revenue 5,349.2 5,435.9 5,624.7 5,632.0 22,041.8 Net interest income and income from Islamic banking business 2,163.2 2,142.3 2,142.6 2,180.8 8,628.9 Operating profit 1,858.6 1,777.8 1,809.0 1,824.5 7,269.9 Profit before tax expense and zakat 1,794.0 1,757.7 1,759.8 1,789.7 7,101.2 Profit attributable to equity holders of the Bank 1,405.4 1,396.2 1,383.6 1,405.4 5,590.6 Earnings per share (sen) 36.4 36.1 35.7 36.2 144.4 Dividend per share (sen) – 32.0 – 37.0 69.0

2017

First Second Third Fourth Year Quarter Quarter Quarter Quarter 2017

FINANCIAL PERFORMANCE (RM’MILLION) Operating revenue 5,028.2 5,167.1 5,312.3 5,350.6 20,858.2 Net interest income and income from Islamic banking business 2,071.9 2,088.5 2,114.9 2,140.5 8,415.8 Operating profit 1,699.5 1,768.3 1,877.9 1,972.9 7,318.6 Profit before tax expense and zakat 1,631.5 1,736.0 1,793.0 1,957.2 7,117.7 Profit attributable to equity holders of the Bank 1,248.0 1,331.8 1,404.7 1,485.5 5,470.0 Earnings per share (sen) 32.3 34.5 36.4 38.5 141.7 Dividend per share (sen) – 27.0 – 34.0 61.0 THE WAY FORWARD 29 STATEMENT OF VALUE ADDED

Value added is a measure of wealth created by the Public Bank Group through various business activities. The statement of value added shows the total wealth created and how it was distributed to stakeholders, including the governments, as well as reinvestment for the replacement of assets and further expansion of the business of the Group.

2018 2017 RM’000 RM’000

VALUE ADDED Net interest income 7,562,967 7,417,119 Net income from Islamic banking business 1,065,885 998,717 Other operating income 2,214,578 2,330,970 Other operating expenses excluding staff costs and depreciation (818,285) (822,889) Allowance for impairment on loans, advances and financing (169,269) (203,292) (Allowance)/Writeback of allowance for impairment on other assets (4,760) 5,625 Share of results of equity accounted associated companies 5,250 (3,289)

Value added available for distribution 9,856,366 9,722,961

DISTRIBUTION OF VALUE ADDED To employees: Personnel costs 2,526,524 2,385,927

To the Governments: Taxation 1,436,253 1,570,693

To providers of capital: Dividends paid to shareholders 2,678,675 2,355,511 Non-controlling interests 74,301 76,944

To reinvest in the Group: Depreciation 228,677 219,362 Retained profits 2,911,936 3,114,524

Total distributed 9,856,366 9,722,961

. . . .

2018 2017

.  . Employees Governments Providers of capital . . Reinvestment in the Group 30 2018 ANNUAL REPORT PUBLIC BANK BERHAD 2018 AWARDS & ACHIEVEMENTS

ALPHA SOUTHEAST ASIA CORPORATE GOVERNANCE ASIA (a) Best Bank in Malaysia 2018 (a) Corporate Governance Asia Recognition 2018, 2017, 2016, 2015, 2014, 2013, 2012, Award 2017 for Malaysia (Icon on Corporate 2011, 2010, 2009, 2008, 2007 Governance) 2017, 2016, 2015, 2014, 2013, 2012, 2011, (b) Best Retail Bank 2010, 2009, 2008, 2007, 2006, 2005

AUSTRALIA AND NEW ZEALAND (b) 8th Asian Excellence Recognition Awards BANKING GROUP LTD 2018: Straight Through Processing Excellence Award Best Investor Relations Company for Malaysia 2018, 2011 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011 ASIA PACIFIC BRANDS FOUNDATION DEUTSCHE BANK (a) The BrandLaureate SMEs Strategic Business Partner Award 2017-2018 EUR Operational Excellence Award for achieving best-in-class straight-through processing rates in (b) The BrandLaureate BESTBRANDS Award for payment transfer operations Most Iconic Brand - Banking Award 2017- 2016, 2015, 2014, 2013, 2012, 2011, 2010 2018 EUROMONEY (c) The BrandLaureate Prominent Business Best Bank in Malaysia BestBrands Award 2018 in Banking & Finance 2018, 2016, 2015, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002, 1999, 1998, 1993 (d) The BrandLaureate Brand of the Year Award in Banking 2018 FROST & SULLIVAN 2018 Frost & Sullivan Excellence Award in Customer (e) The BrandLaureate Industry Champion Brand Experience for Online Experience in Retail Banking Icon Leadership Award 2018 INLAND REVENUE BOARD OF MALAYSIA (f) The BrandLaureate CSR Brand Leadership One of the 10 recipients of the Best Tax Payer Awards 2018 – Leadership in CSR Award 2017 2017, 2016 ASSOCIATION OF ACCREDITED ADVERTISING AGENTS MALAYSIA J.P. MORGAN CHASE BANK Putra Brand Awards – Silver Award for Banking, (a) J.P. Morgan Quality Recognition Award 2017 Investment and Insurance category for achieving outstanding best-in-class straight 2018, 2015, 2014, 2013, 2012, 2011, 2010 through processing rates in payment transfer operations: BANK OF AMERICA MERRILL LYNCH MT103 Elite Quality Recognition Award Bank of America Merrill Lynch Straight Through 2017, 2016, 2015, 2014, 2013, 2012, 2011, Processing Award 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002 BANK OF NEW YORK MELLON (b) MT202 Elite Quality Recognition Award Bank of New York Mellon Straight-Through 2017, 2016, 2015, 2014, 2013, 2012, 2011, Processing Award 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010 2003, 2002 CHULALONGKORN UNIVERSITY, THAILAND ASEAN’s Top Corporate Brand Value 2018 in Malaysia

* Please refer to the corporate website for the full list of awards THE WAY FORWARD 31

MALAYSIAN INVESTOR RELATIONS THE EDGE BILLION RINGGIT CLUB ASSOCIATION The Edge Billion Ringgit Club Corporate Awards Malaysia Investor Relations Awards 2018: 2018: Best Quality of One-on-One Meetings Highest Return on Equity Over Three Years in the 2018, 2012 Financial Services Sector for the category of RM10 Billion and Above Market Capitalisation NATIONAL ANNUAL CORPORATE REPORT AWARDS (NACRA) VISA Best Annual Report in Bahasa Malaysia – Global Service Quality Performance Award 2017 Silver Award Chargeback-to-Sales-Ratio: Non-Fraud Acquirer category PAYMENTS NETWORK MALAYSIA 2017, 2014 (PAYNET) formerly known as MyClear Malaysian e-Payments Excellence Awards 2018: (a) Best IBG Bank CHAIRMAN EMERITUS’ AWARDS 2018 2018 (b) Best MyDebit Bank ASIA PACIFIC BRANDS FOUNDATION 2018, 2017 (c) Outstanding Contribution to FPX 2018, 2017 (a) The Greatest Malaysian Banker (d) Outstanding Contribution to MyDebit of All Time 2018, 2017 (e) MyDebit Top Acquirer (b) The BrandLaureate Hall of 2018 Fame – Lifetime Achievement READER’S DIGEST Award 2018 – Man of the Year Reader’s Digest Trusted Brands 2018: Gold Award in the Bank category in Malaysia 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, (c) Grand Prix D’Excellence Brand 2010, 2009, 2008, 2007, 2006, 2005, 2004 Leadership Award in Banking THE ASSET (a) The Asset Platinum Award 2018 for Excellence in Environmental, Social and Corporate (d) The Best of Best in Brand Governance Leadership Award 2018 – 2018, 2017, 2016, 2015, 2014, 2013, 2012, Overall Championship 2011, 2010, 2009

(b) Best Domestic Bank in Malaysia 2018, 2017, 2016, 2015, 2014, 2013, 2012, CORPORATE GOVERNANCE ASIA 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002 (a) Asia’s Best CEO (Investor Relations) 2018 for Malaysia THE ASIAN BANKER 2018, 2017, 2016, 2015, 2014, The Strongest Bank by Balance Sheet in Malaysia 2018 2013, 2012, 2011 2018, 2017, 2016, 2015, 2012

(b) Asian Corporate Director Recognition Award 2018 for Malaysia 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010

LED BY GREAT AND PURPOSEFUL LEADERSHIP, WE CONTINUE TO REMAIN SUCCESSFUL BY MEETING DEMANDS AND EXPECTATIONS OF STAKEHOLDERS AND CUSTOMERS. OUR EFFECTIVE STRATEGIES AND PRUDENT MANAGEMENT HAS HELPED US DECISIVELY MOVE FORWARD AND RESPOND TO CHANGES IN THE BANKING INDUSTRY.

THE WAY FORWARD STATEMENT BY TAN SRI DATO’ SRI DR. TEH HONG PIOW FOUNDER, CHAIRMAN EMERITUS, DIRECTOR AND ADVISER

The operating environment in 2018 was a challenging one, characterised by moderate growth, unfavourable headwinds and escalated volatilities. While these conditions posed downside pressure on the banking environment, the Public Bank Group had once again, navigated through the challenges and achieved stable profitability and continued balance sheet strength during the year.

In 2018, the Group achieved pre-tax profit of RM7.10 billion. Net profit attributable to shareholders was higher at RM5.59 billion in 2018 as compared to RM5.47 billion achieved in 2017, leading to a net return-on-equity of 14.8% for 2018. With the stable profit performance, the Board of Directors declared a total dividend of 69 sen per share, equivalent to a total dividend payout of RM2.68 billion, representing 47.9% of the Group’s net profit for the year.

I founded Public Bank way back in 1966 with the vision to grow the Bank as “the bank for the people” serving the banking needs of the public. Along with the progress of the country, the Bank pursues its direction by contributing to the nation and serving the people as an efficient, effective and respected financial institution in Malaysia. Caring for and delivering value to the stakeholders of the Public Bank Group with integrity has long been embedded and embraced as the corporate philosophy of the Group.

The Group has been helping many individuals, households, small and medium enterprises and corporations in realising their financial goals. In particular, the Group devotes much of its efforts, through responsible lending, to facilitate its customers in owning their homes, motor vehicles, business assets, expansion of businesses, and thus contributes to the growth of the well-being of the country. The Group also effectively deploys excess funds of its customers and provides them with financial returns. The commitment to delivering value to its customers has enabled the Group to grow steadily to become the third largest banking group by asset size in Malaysia today with about ten million customers. TAN SRI DATO’ SRI DR. TEH HONG PIOW FOUNDER, CHAIRMAN EMERITUS, DIRECTOR AND ADVISER 36 2018 ANNUAL REPORT PUBLIC BANK BERHAD STATEMENT BY TAN SRI DATO’ SRI DR. TEH HONG PIOW FOUNDER, CHAIRMAN EMERITUS, DIRECTOR AND ADVISER

The Public Bank Group will continue to live its mission to sustain the position of being the most efficient, profitable and respected premier financial institution in Malaysia. The Group will strive to create better value for its shareholders, customers, staff and the community. THE WAY FORWARD 37

Another tenet of caring for stakeholders relates to the Being the Founder, and as the Chairman Emeritus, Director and employees of the Group. In addition to providing long term Adviser to the Public Bank Group, I continue to hold the stable employment opportunity, the Group takes conscientious principle of creating long term and shared values with the efforts to enhance the well-being of its staff through stakeholders of the Group, and I am ever confident that the meritocracy-based remuneration, investment in training and Public Bank Group will continue to pursue this direction for the development, as well as providing opportunities for career benefit of all stakeholders. advancement. Today, the Group has a staff force of over 18,000, and about half of them have been serving the Group In further strengthening the corporate governance and the for over 15 years. diversity of skill and experience of the Board of Public Bank, the Board appointed two new directors, Mr. Lee Chin Guan The stable business and financial performance of the Group has who joined the Board as Non-Independent Non-Executive enabled Public Bank to deliver long term shareholder value to Director, and Dato’ Mohd Hanif bin Sher Mohamed as about 70,000 shareholders, both retail and established Independent Non-Executive Director. institutional funds, of which many are long-time shareholders. This is reflected in the continued appreciation of Public Bank’s We would like to express our gratitude to the shareholders and share price and the consistent payout of dividend to its customers, who continuously trust and support the Group even shareholders. in challenging times. Our appreciation to the management and staff as every achievement of the Group cannot be made In 2018, despite volatility in the equity market, Public Bank’s without their hard work and dedication. We would like to thank share price appreciated by 19.2% which resulted in the increase Bank Negara Malaysia and the relevant authorities for their in the market capitalisation of Public Bank from continued support and guidance. RM80.67 billion to RM96.12 billion. This appreciation in the share price together with the total dividend received by the The Public Bank Group will continue to live its mission to shareholders in 2018 translated to a commendable return of sustain the position of being the most efficient, profitable and 22.3% for the year 2018. respected premier financial institution in Malaysia. The Group will strive to create better value for its shareholders, customers, Given the role of the Group as intermediary and guardian of staff and the community. public funds, the Board sees responsible business conduct, adherence to laws and regulations and ultimately public trust as key pillars to the sustainable success of the Group and the Tan Sri Dato’ Sri Dr. Teh Hong Piow overall stability of the financial system. In this respect, the Founder, Chairman Emeritus, Director and Adviser Group will continue to uphold sound corporate governance, 20 February 2019 prudent risk management and stringent compliance policies and practices to safeguard its stability, and to guard against risks arising from future challenges. 38 2018 ANNUAL REPORT PUBLIC BANK BERHAD JOINT STATEMENT BY CHAIRMAN AND MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER

LAI WAN TAN SRI DATO’ SRI TAY AH LEK INDEPENDENT NON-EXECUTIVE CHAIRMAN MANAGING DIRECTOR / CHIEF EXECUTIVE OFFICER THE WAY FORWARD 39

Against the backdrop of the challenging operating environment In line with industry trend and to strengthen the service in 2018, the Public Bank Group achieved stable profitability by offerings and customer experience, the Group implemented anchoring on the Group’s time-tested business model in its several digital initiatives which are centred in the areas of business growth strategies. internet and mobile banking, cashless and digital payments. Going forward, the Group will continue to explore, collaborate During the year, the Group’s lending strategy remained focused and invest in banking technologies that are appropriate to the on consumer financing for the purchase of residential properties evolving needs of its customers, and to enhance its competitive and passenger vehicles, as well as on financing to small and advantage in the era of digital banking. medium enterprises for the purchase of commercial properties and working capital. Accordingly, the Group continued to The Board would like to express our utmost gratitude to Tan maintain strong market share positions in these core lending Sri Dato’ Sri Dr. Teh Hong Piow, for his astute leadership and segments. sterling contribution to the Board. The Group is certainly privileged to have the Founder, Tan Sri Teh to continue as the With the Group’s unwavering commitment to prudent lending Chairman Emeritus, Director and Adviser to the Group and its practices, the Group continued to sustain its superior asset stakeholders will definitely continue to benefit from Tan Sri quality with the lowest gross impaired loans ratio of 0.5%, Teh’s invaluable advice and guidance going forward. compared to 1.5% for the domestic banking system. In 2019, the operating environment is expected to be more On the deposit franchise, the Group continued to expand its challenging and intense. Nevertheless, delivering long term stable and resilient funding base from retail individuals, small value to stakeholders remains as the core focus of the Group’s and medium enterprises and corporations. strategic business direction. The Board, together with the management and its dedicated staff force, will continue to In 2018, the Group’s unit trust management business focus on its organic growth strategy, and stay agile in its undertaken by Public Mutual continued to generate positive operating strategy to navigate through the challenges and growth to the fee income of the Group. Public Mutual sustained intense market competition. The Group will continue to strive its leadership position in the domestic private unit trust market for sustained performance in business growth and profitability, with retail market share of 37.2% and net asset value under superior asset quality, high productivity, efficient operating management of RM78.75 billion. cost and strong capital position.

Even as the Group continued to commit to on-going investments in customer service, staff well-being and development, technology infrastructure, and capabilities in risk management Lai Wan Tan Sri Dato’ Sri Tay Ah Lek and compliance, the Group was disciplined in managing costs. Chairman Managing Director/ As a result, the Group maintained the most efficient cost-to- Chief Executive Officer income ratio at 33.0%, as compared to the domestic banking system’s cost-to-income ratio of 44.8%. 20 February 2019 40 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS THE WAY FORWARD 41

• Tan Sri Dato’ Sri Dr. Teh Hong Piow (4th from left, sitting) flanked from left to right • Lee Chin Guan • Lai Wai Keen • Tan Sri Dato’ Sri Tay Ah Lek • Lai Wan • Cheah Kim Ling • Tang Wing Chew • Dato’ Mohd Hanif Bin Sher Mohamed • Dato’ Chia Lee Kee (Company Secretary) 42 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS’ PROFILE AS AT 21 FEBRUARY 2019

commencement of business operations • Malaysia’s Business Achiever of the TAN SRI DATO’ SRI DR. in August 1966. He was re-designated Year 1997 TEH HONG PIOW as Chairman of Public Bank with effect • Malaysia’s CEO of the Year 1998 from 1 July 2002. He retired as Chairman • Best CEO in Malaysia 2004 FOUNDER, CHAIRMAN EMERITUS, of Public Bank on 31 December 2018. • The Most PR Savvy CEO 2004 DIRECTOR AND ADVISER He was conferred the position of • The Asian Banker Leadership Chairman Emeritus and Adviser of Public Achievement Award 2005 for Malaysia Bank with effect from 1 January 2019. • Award for Outstanding Contribution Tan Sri Dato’ Sri Dr. Teh Hong Piow, to the Development of Financial aged 88, male, began his banking career Tan Sri Teh had won both domestic and Services in Asia 2006 in 1950 and has 69 years’ experience in international acclaim for his outstanding • Lifetime Achievement Award 2006 the banking and finance industry. achievements as a banker and the Chief • Award for Lifetime Achievement in Executive Officer of a leading financial Corporate Excellence, Dedication and He founded Public Bank in 1965 at the services group. Awards and accolades Industry 2006 age of 35. He was appointed as a that he had received include: • Asia’s Banker of High Distinction Director of Public Bank on 30 December • Asia’s Commercial Banker of the Year Award 2006 1965 and had been the Chief Executive 1991 • The BrandLaureate Brand Personality Officer of Public Bank since its • The ASEAN Businessman of the Year Award 2007 1994 THE WAY FORWARD 43

• ASEAN Most Astute Banker Award • Asian Corporate Director Recognition Tan Sri Teh was conferred The Honorary 2007 Award 2017 for Malaysia Doctor of The University by The Board • Lifetime Entrepreneurship • The Greatest Malaysian Banker of All of Directors and The Academic Senate of Achievement Award 2007 Time Sunway University on 28 January 2019, • The Pila Recognition Award 2007 • Asia’s Best CEO (Investor Relations) in recognition of his distinction as one • Asian Banker Par Excellence Award 2018 for Malaysia of the leading bankers of Malaysia, 2008 • The BrandLaureate Hall of Fame - having founded and overseen the • Best CEO in Malaysia 2009 Lifetime Achievement Award 2018 - evolution of Public Bank into a modern • Asia’s Banking Grandmaster 2010 Man of the Year and integrated financial institution, and • Asian Corporate Director Recognition • Grand Prix D’Excellence Brand for his outstanding contribution to the Award 2010 for Malaysia Leadership Award in Banking growth of the financial services industry • Value Creator: Malaysia’s Outstanding • The Best of Best in Brand Leadership of Malaysia. CEO 2010 Award 2018 - Overall Championship • The BrandLaureate - Tun Dr. Mahathir • Asian Corporate Director Recognition He had served in various capacities in Mohamad Man of the Year Award Award 2018 for Malaysia public service bodies in Malaysia; he was 2010 - 2011 a member of the Malaysian Business • Best CEO (Investor Relations) 2011 Tan Sri Teh was awarded the Medal “For Council from 1991 to 1993; a member for Malaysia the Course of Vietnamese Banking” by of the National Trust Fund from 1988 to • Asian Corporate Director Recognition the State Bank of Vietnam in 2002 for 2001; a founder member of the Advisory Award 2011 for Malaysia his contributions to the Vietnamese Business Council since 2003; and is a • The BrandLaureate Premier Brand Icon banking industry over the past years. member of the IPRM Accreditation Privy Leadership Award 2011 Tan Sri Teh was conferred the Council. • Best CEO (Investor Relations) 2012 Recognition Award 2007 by the National for Malaysia Bank of Cambodia in appreciation of his He is an Emeritus Fellow of the • Asian Corporate Director Recognition excellent achievement and significant Malaysian Institute of Management and Award 2012 for Malaysia contribution to the banking industry in is a Fellow of the Asian Institute of • Best CEO (Investor Relations) 2013 Cambodia. Chartered Bankers; the Chartered for Malaysia Institute of Bankers, United Kingdom; • Asian Corporate Director Recognition Tan Sri Teh was conferred the Royal the Institute of Administrative Award 2013 for Malaysia Order of Monisaraphon, Commander by Management, United Kingdom; and the • BrandLaureate Banker of the Year The Royal Government of The Kingdom Governance Institute of Australia. Award 2012 - 2013 of Cambodia in 2016, in recognition of • Best CEO (Investor Relations) 2014 his outstanding leadership and immense His directorships in other public for Malaysia social economic contributions towards companies within the Public Bank Group • Asian Corporate Director Recognition the progress and development of are as Chairman of Public Mutual Bhd, Award 2014 for Malaysia Cambodia over the last 24 years. He is Public Financial Holdings Ltd, Public • Banker Extraordinaire 2015 the first Malaysian banker ever to Bank (Hong Kong) Ltd, Cambodian • Global Chinese Entrepreneur Lifetime receive the Royal Order. Public Bank Plc and several other Achievement Award 2015 subsidiaries of Public Bank, and as • BrandLaureate “Icon of Icons - The Tan Sri Teh was awarded the “Medal for Director of Public Investment Bank Bhd King of Banking” the Development of Vietnam Banking and Public Islamic Bank Bhd. His • Asia’s Best CEO (Investor Relations) Industry” in 2017 by the State Bank of directorship in other public company is 2015 for Malaysia Vietnam in recognition for his manifold as Chairman of LPI Capital Bhd. • William “Bill” Seidman Lifetime contribution to the construction and Leadership Achievement in Financial development of Vietnam’s banking Tan Sri Teh attended all the 19 Board Service Industry Award 2015 industry. Tan Sri Teh is the first foreign meetings which were held in the financial • Asian Corporate Director Recognition banker in Vietnam to be awarded this year ended 31 December 2018. Award 2015 for Malaysia medal. • Asia’s Best CEO (Investor Relations) 2016 for Malaysia In recognition of his contributions to • Asian Corporate Director Recognition society and the economy, he was Award 2016 for Malaysia conferred the Doctor of Laws (Honorary) • Asia’s Best CEO (Investor Relations) from University of Malaya in 1989. 2017 for Malaysia 44 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS’ PROFILE AS AT 21 FEBRUARY 2019

He graduated with a Bachelor of Arts Upon retirement from full time LAI WAN (Honours) degree in Economics from the employment, Mr Lai continued to be INDEPENDENT NON-EXECUTIVE University of Malaya. He is an Associate of engaged in finance related industries CHAIRMAN the Asian Institute of Chartered Bankers. through his directorships in various companies. Mr Lai has 45 years of experience in the Lai Wan, aged 75, male, was appointed banking and finance related industries. His directorships in other public as a Director of Public Bank on 26 April He had served Bank Negara Malaysia for companies within the Public Bank Group 2012. He was appointed as an 20 years and the last position held are as Co-Chairman of Public Financial Independent Non-Executive Deputy before his resignation in 1985 was as Holdings Ltd and Public Bank (Hong Chairman of Public Bank on the Deputy Manager, Bank Examination Kong) Ltd and as Director of Public Bank 26 September 2017. He was re-designated and Internal Audit Department. (L) Ltd. as Independent Non-Executive Chairman of Public Bank with effect from Mr Lai had working experience in three Mr Lai attended all the 19 Board 1 January 2019. He is a member of the finance companies from 1985 to 1994 meetings which were held in the financial Audit Committee, the Nomination and where he had held senior management year ended 31 December 2018. Remuneration Committee, the Risk positions. Management Committee, the Compliance Committee and the Credit Risk Mr Lai was appointed the President/ Management Committee. Chief Executive Officer of a Malaysian bank in 1997 until his retirement on 31 December 2000. THE WAY FORWARD 45

Liabilities Management Committee, the He is presently the Chairman of the TAN SRI DATO’ SRI TAY AH LEK Share Investment Committee, the Association of Hire Purchase Companies MANAGING DIRECTOR / Operational Risk Management Malaysia and is a Member of the CHIEF EXECUTIVE OFFICER Committee, the Business Continuity Steering Committee and the Service Management Committee, and the Losses Provider Consultative Group of the and Claims Committee, and is a member National Payments Advisory Council and Tan Sri Dato’ Sri Tay Ah Lek, aged 76, of the Group Human Resource the Economic Action Council. male, has 58 years’ experience in the Committee. banking and finance industry. He was His directorships in other public appointed as an Executive Director of He holds a Master’s degree in Business companies in the Public Bank Group Public Bank on 18 June 1997 and was Administration from Henley, United include as Director of Public Investment re-designated as Managing Director/ Kingdom and attended the Advanced Bank Bhd, Public Mutual Bhd, Public Chief Executive Officer with effect from Management Program at Harvard Islamic Bank Bhd and Public Bank (Hong 1 July 2002. He joined the Public Bank Business School. He is an Emeritus Kong) Ltd. His directorships in other Group as a pioneer staff in 1966. He Fellow of the Malaysian Institute of public companies are in Cagamas was the Executive Vice-President of Management, a Fellow, Chartered Holdings Bhd and Ombudsman for Public Bank from 1995 to 1997 and Banker, of the Asian Institute of Financial Services. prior to this appointment, he was the Chartered Bankers, and is a Fellow of Executive Vice-President of the former CPA Australia and the Financial Services Tan Sri Tay attended all the 19 Board Public Finance Berhad. He is a member Institute of Australasia. meetings which were held in the financial of the Board Executive Committee. He is year ended 31 December 2018. the Chairman of the Credit Committee, the IT Steering Committee, the Assets & 46 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS’ PROFILE AS AT 21 FEBRUARY 2019

He has 52 years’ experience in the At Board level, he also served as an TANG WING CHEW financial services industry, ranging from Independent Non-Executive Director in INDEPENDENT NON-EXECUTIVE research, management and project two general insurance companies and in DIRECTOR studies, training, mergers and integration, a leasing and credit company. and stewardship of financial institutions. He joined Bank Negara Malaysia (BNM) His directorships in other public Tang Wing Chew, aged 74, male, was in 1966 as an Assistant Economist in the companies within the Public Bank Group appointed as a Director of Public Bank Economic Research Department. During are as Director of Public Bank (L) Ltd, on 29 March 2011. He serves as the his 18 years of service with BNM, he Public Financial Holdings Ltd and Public Chairman of the Audit Committee and also served as Manager (Penang Branch), Bank (Hong Kong) Ltd. the Nomination and Remuneration Principal (BNM Staff Training Centre) Committee. He is a member of the Risk and Manager (Operational Planning Mr Tang attended all the 19 Board Management Committee and the Division). meetings which were held in the financial Compliance Committee. year ended 31 December 2018. He had working experience in two He graduated with a Bachelor of Arts finance companies, where he was the (Honours) degree from the University of Chief Executive Officer and General Malaya. Manager (Operations). Mr Tang had also served as an Executive Adviser and the Chief Executive Officer of an insurance company. THE WAY FORWARD 47

She possesses extensive experience with Ms Lai attended all the 19 Board LAI WAI KEEN Bank Negara Malaysia (BNM) and meetings which were held in the financial INDEPENDENT NON-EXECUTIVE Perbadanan Insurans Deposit Malaysia year ended 31 December 2018. DIRECTOR (PIDM), concentrated in senior management and project leader positions, including significant central Lai Wai Keen, aged 64, female, was banking assignments. appointed as a Director of Public Bank on 29 May 2012. She serves as the Ms Lai has over 20 years of banking Chairperson of the Risk Management regulatory experience with BNM, Committee and is a member of the including in bank regulation, corporate Audit Committee, the Nomination and communications, international Remuneration Committee and the negotiations and relations, deposit Compliance Committee. insurance systems and protection scheme for insurance policy holder. Ms Lai holds a Bachelor of Economics (Honours) degree in Business She was seconded to PIDM as General Administration from the University of Manager, Policy and International in Malaya and a LLB degree from the 2005 until her retirement in January University of London. 2011. 48 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS’ PROFILE AS AT 21 FEBRUARY 2019

She had served Bank Negara Malaysia Ms Cheah attended 18 out of 19 Board CHEAH KIM LING for 32 years whereby she was involved meetings which were held in the INDEPENDENT NON-EXECUTIVE in all aspects of banking regulation financial year ended 31 December DIRECTOR from formulation of policies/ 2018. regulations/guidelines to the administration of different legislations Cheah Kim Ling, aged 61, female, was governing financial institutions. appointed as a Director of Public Bank on 29 April 2014. She serves as the Ms Cheah was also involved in Chairperson of the Compliance formulating and executing strategies Committee and is a member of the and policies for payment systems, Audit Committee, the Nomination and administering the legislations, oversight Remuneration Committee, the Risk of the payment systems and payment Management Committee and the Credit instruments, development of the Risk Management Committee. payment infrastructure to support developments in the financial system Ms Cheah holds a Bachelor of and promoted the migration to Accounting (Honours) degree from the electronic payments. University of Malaya and is also a Chartered Accountant of the Malaysian Institute of Accountants. THE WAY FORWARD 49

Mr Lee has 25 years of experience in LEE CHIN GUAN legal matters, and 13 years of experience NON-INDEPENDENT NON-EXECUTIVE in legal practice, principally in commercial DIRECTOR and corporate matters.

His directorships in other public Lee Chin Guan, aged 60, male, was companies within the Public Bank Group appointed as a Director of Public Bank are as Director of Public Financial on 27 December 2018. He is a member Holdings Ltd and Public Bank (Hong of the Nomination and Remuneration Kong) Ltd. His directorships in other Committee, the Risk Management public companies are as Director of LPI Committee and the Compliance Capital Bhd and Lonpac Insurance Bhd. Committee. Mr Lee attended the Board meeting held Mr Lee qualified as a Barrister-at-Law in December 2018 following his from the Middle Temple, United appointment on 27 December 2018. Kingdom in 1982. He also holds a Bachelor’s Degree in Science (Hons) from the University of Manchester Institute of Science & Technology, England and Degrees in Law from Cambridge University, Oxford University and Chicago-Kent College of Law. 50 2018 ANNUAL REPORT PUBLIC BANK BERHAD BOARD OF DIRECTORS’ PROFILE AS AT 21 FEBRUARY 2019

Dato’ Mohd Hanif has vast experience in He is presently the Chairman of Sivash DATO’ MOHD HANIF BIN Holdings Bhd and BRDB International Ltd. SHER MOHAMED corporate finance and consumer banking including strategic planning, risk INDEPENDENT NON-EXECUTIVE management, rehabilitation and His directorship in other public company DIRECTOR restructuring debts, property development, within the Public Bank Group is as property investment and manufacturing Director of Public Mutual Bhd. and road maintenance including experience Dato’ Mohd Hanif bin Sher Mohamed, in Australia, United Kingdom, Pakistan and aged 67, male, was appointed as a Oman. Director of Public Bank on 22 January 2019. He is the Chairman of the Credit He was the former Chief Executive None of the Directors has: Risk Management Committee and is a Officer of Credit Corporation (Malaysia) • Any family relationship with any member of the Audit Committee, the Berhad, where he had served for over 26 Director and/or major shareholder of Risk Management Committee and the years, and he had held various senior Public Bank. Compliance Committee. management positions including • Any conflict of interest with Public managing associate companies in Bank. Dato’ Mohd Hanif holds a Master’s Singapore (Credit Corporation Singapore • Any conviction for offences within the past 5 years other than traffic degree in Business Administration from Ltd) and Brunei (Credit Corporation offences, public sanction or penalty Northland Open University, United Brunei Ltd). imposed by the relevant regulatory Kingdom. bodies during the financial year.

All of the Directors are Malaysians. THE WAY FORWARD 51

She heads the Public Bank’s Secretariat DATO’ CHIA LEE KEE Division. COMPANY SECRETARY She is a Chartered Secretary (ICSA) and is a Fellow of The Malaysian Institute of Dato’ Chia Lee Kee was appointed as the Chartered Secretaries and Administrators. Company Secretary of Public Bank on 2 September 1996. She is also the Company Secretary of several Malaysian and overseas subsidiaries, and she oversees the Public Bank Group’s company secretarial matters. She is the Secretary of various Board Committees of Public Bank Group.

WE WILL CONTINUE TO MOVE FORWARD IN LINE WITH TECHNOLOGICAL ADVANCEMENT. FOR THE CONVENIENCE OF OUR CUSTOMERS, WE WILL ENSURE EASY AND SIMPLIFIED ACCESS TO ONLINE BANKING, ENABLING THEM TO BANK ANYWHERE AND AT ANY TIME.

THE WAY FORWARD 54 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

This statement provides an overview by the Public Bank Board including by ensuring that all strategic and critical issues are of Public Bank’s application of the 3 key principles of good considered by the Board, and that Directors receive the relevant corporate governance as set out in the Malaysian Code on information on a timely basis. Corporate Governance 2017 (MCCG 2017). Public Bank’s application of each practice set out in the MCCG 2017 during The Managing Director/CEO is primarily responsible for the the financial year 2018 is disclosed in the Public Bank’s day-to-day management of the Bank. He is responsible for Corporate Governance Report for the financial year ended developing the business direction of the Bank and also to 31 December 2018 which can be downloaded from ensure that the Bank’s business strategies and policies are Public Bank’s corporate website at www.publicbankgroup.com. effectively implemented.

The Non-Executive Directors scrutinise the performance of MCCG 2017 PRINCIPLE A: BOARD LEADERSHIP AND Management in meeting key performance targets and monitor EFFECTIVENESS the reporting of performance. The Non-Executive Directors are responsible to satisfy themselves on the integrity of financial Board Responsibilities information and that financial controls and system of risk The Board is responsible for formulating and reviewing the management are robust and defensible. Their role is to Bank’s strategic plans and key policies, and charting the course constructively challenge the Management and monitor the of the Bank’s business operations. The Board, through the success of Management in delivering the approved targets and Audit Committee, Risk Management Committee and Compliance business plans within the risk appetite set by the Board. They Committee, provides effective oversight of the Management’s have free and open contact with the Management at all levels. performance, risk assessment and controls over business The Independent Non-Executive Directors engage with the operations, and compliance with regulatory requirements. The external and internal auditors to address matters concerning Board is responsible for determining the nature and extent of the management and oversight of the Bank’s business and the principal risks it is willing to take in achieving its strategic operations. objectives. The Directors are at liberty to seek independent professional The key responsibilities of the Board are disclosed in the Public advice on matters relating to the fulfilment of their roles and Bank’s Corporate Governance Report for the financial year responsibilities. The cost of procuring these professional ended 31 December 2018 which can be downloaded from services will be borne by the Bank. Public Bank’s corporate website at www.publicbankgroup.com. Company Secretary Roles of Chairman, Managing Director and Non-Executive The Board is supported by the Company Secretary who is very Directors experienced, competent and knowledgeable on new statutes The Board has established the roles and responsibilities of the and directives issued by the regulatory authorities. She gives Non-Executive Chairman which are distinct and separate from clear and sound advice on the measures to be taken and the duties and responsibilities of the Managing Director/Chief requirements to be observed by the Company and the Directors Executive Officer (CEO). This segregation between the duties arising from new statutes and guidelines issued by the of the Non-Executive Chairman and the Managing Director/ regulatory authorities. CEO ensures an appropriate balance of role, responsibility and accountability at Board level. Board Meetings and Access to Information Board meetings for the ensuing financial year are scheduled in The Non-Executive Chairman provides leadership to the Board. advance before the end of the current financial year so that the He ensures the smooth functioning of the Board and that the Directors are able to plan ahead and ensure their full attendance procedures and processes are in place to facilitate effective at Board meetings. conduct of business of the Board. The Chairman also ensures that decisions are taken on a sound and well-informed basis, THE WAY FORWARD 55

The Board holds regular meetings of no less than 16 times a The Board Members come well prepared for Board meetings year. In addition to monthly Board meetings, the Board also and engage in robust discussions on key matters in the agenda. meets as soon as the Bank’s quarterly and annual results are The Managing Director/CEO provides comprehensive monthly finalised in order to review and approve the results for updates to the Board on the Bank’s and the Group’s business submission to Bank Negara Malaysia (BNM). Special Board operations. meetings may be convened as and when necessary to consider urgent proposals or matters that require the Board’s expeditious A Director is required to abstain from deliberations and review or consideration. decisions of the Board on matters where he/she is the interested party, and he/she does not exercise any influence At the monthly Board meetings, the Board reviews management over the Board in respect of the matter. In the event a corporate reports on the business performance of the Bank as well as the proposal is required to be approved by shareholders, interested Group and major subsidiaries, and reviews, inter-alia, the Directors are required to abstain from voting on their shares results compared to the preceding month and year-to-date, and held in Public Bank on the shareholders’ resolutions pertaining also the comparison against pro-rated business targets and to the corporate proposal, and will further undertake to ensure against the industry. As part of the integrated risk management that persons connected to them similarly abstain from voting initiatives, the Board is informed of the decisions and salient on the relevant shareholders’ resolutions. issues deliberated by the Audit Committee, Risk Management Committee, Compliance Committee, Credit Risk Management The minutes of Board meetings are circulated to all Directors Committee and Management Working Committees through for their perusal prior to confirmation of the minutes to be minutes of these committees. The Board Members deliberate, done at the commencement of the following Board meeting. and in the process, assess the viability of business propositions and corporate proposals, and the principal risks that may have The Deputy CEO attends all Board meetings by invitation, significant impact on the Bank’s business or on its financial while the Chief Operating Officers and Senior Management position, and the mitigating factors. The Board also assesses Officers are invited to attend Board meetings to report to the various types of credit propositions and matters that are Board on matters pertaining to their respective areas of required to be submitted to the Board for concurrence or responsibility, and also to brief and provide details to the approval, in accordance with the policy documents issued by Directors on recommendations or reports submitted to the BNM. Board. The Chief Financial Officer also attends Board meetings by invitation to update the Board on financial guidelines issued The Chairman of the Audit Committee would inform the by BNM and new accounting standards, and to brief the Board Directors at Board meetings, of salient views and on matters relating to the finance portfolio, such as guidelines recommendations of the Audit Committee upon its members’ and policies to be implemented by the Bank pursuant to BNM deliberations at Audit Committee meetings. policy documents or new accounting standards.

The Chairman of the Risk Management Committee would Some Directors also sit on the Boards of Public Bank’s inform the Directors at Board meetings, of salient risk issues subsidiaries, and this gives the Board access to direct insight of discussed at the Risk Management Committee meetings which the performance and operations of the subsidiaries. require the Board’s notice or direction to be given to the Management.

To facilitate productive and meaningful deliberations, the proceedings of the Board meetings are conducted in accordance with a structured agenda. The agenda together with comprehensive management reports and proposal papers are furnished to the Directors at least 7 days before the Board meeting. 56 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

Board Charter The Board had 33% women Directors ie. 2 out of 6 Directors, The Board Charter sets out the roles and responsibilities of the until the recent appointments of new Directors as follows: Board, Board Committees, individual Directors and Management • Appointment of Mr Lee Chin Guan as Director with effect in upholding sound corporate governance standards and from 27 December 2018, whereby the proportion of women practices. The Board Charter reflects the matters reserved for Directors became 29% (ie. 2 out of 7 Directors). the Board’s consideration and approval. The Board Charter is available on Public Bank’s corporate website at • Appointment of Dato’ Mohd Hanif bin Sher Mohamed as www.publicbankgroup.com. Director with effect from 22 January 2019, whereby the proportion of women Directors became 25% (ie. 2 out of 8 Board Composition Directors).

The Board as at 21 March 2019 comprises 8 Members following The 2 women members on the Board provide the Board with the appointment of 2 new Directors ie. Mr Lee Chin Guan as gender diversity that serves to bring value to Board discussions Non-Independent Non-Executive Director with effect from from the different perspectives and approaches of the women 27 December 2018 and Dato’ Mohd Hanif bin Sher Mohamed Directors. as Independent Non-Executive Director with effect from 22 January 2019. The size and composition of the Board are Tenure of Independent Directors adequate to provide for a diversity of views, facilitate effective decision making, and appropriate balance of executive, The maximum tenure of an Independent Non-Executive Director independent and non-independent directors. shall be a cumulative term of 9 years. Upon reaching such maximum tenure, the Independent Non-Executive Director may The 8 Members of the Board are persons of high calibre and continue to serve on the Board but shall be re-designated as integrity, and they have a sound understanding of the Bank’s Non-Independent Non-Executive Director. business as well as deep industry expertise. They possess the skills, knowledge, experience and competencies to address key New Appointment and Re-Appointment of Director risks and major issues relating to the Bank’s business and its Pursuant to provisions of the FSA and policy documents and policies and strategies. The Directors more than adequately guidelines issued by BNM, the proposed appointment of a new fulfill the fit and proper criteria as specified in the Financial Director is subject to the prior approval of BNM, and the term Services Act 2013 (FSA) and the BNM Policy Document on Fit of appointment shall be as specified by BNM in its approval. and Proper Criteria. The Nomination and Remuneration Committee is responsible The profile of each of the Member of the Board is as presented for assessing the candidate for proposed directorship and on pages 42 to 50 of this annual report. thereupon submitting their recommendation to the Board for decision. The Nomination and Remuneration Committee’s Board Balance and Independence recommendation is made after due consideration of the Board’s The Board comprises only 1 Executive Director and a strong composition and requirements, and the candidate’s fitness and presence of 7 Non-Executive Directors, of whom 5 ie. more propriety to be considered for appointment based on the than half of the Board Members are Independent Non-Executive factors specified in the Bank’s Fit and Proper Policy and the Directors. The presence of a majority of Independent BNM Policy Document on Fit and Proper Criteria. Non-Executive Directors provides effective check and balance in the functioning of the Board to safeguard the interests of The proposed re-appointment of a Director, upon expiry of the Bank and all stakeholders. his/her current term of appointment as approved by BNM, is also subject to the approval of BNM. THE WAY FORWARD 57

The Nomination and Remuneration Committee is responsible • The total number of directorships held by each Director are for assessing the performance of Directors whose current term well below the maximum number set by the Board. of appointment as approved by BNM is due to expire, and for submitting their recommendation to the Board for decision to Directors’ Training submit the application to BNM for the proposed re-appointment During financial year 2018, the Members of the Public Bank of the Director concerned. Board had received training on areas relevant to their duties and responsibilities as Directors by attending external seminars/ Re-Election of Directors talks and internally facilitated sessions. The Directors had The Articles of Association (Constitution) of Public Bank attended talks, dialogue sessions and focus group sessions provide that at every annual general meeting of Public Bank, organised by FIDE Forum, an initiative of the alumni members one-third of the Directors for the time being or the number of the Financial Institutions Directors’ Education (FIDE) nearest to one-third, and those Directors newly appointed Programme, which is set up to enhance corporate governance subsequent to the preceding annual general meeting, shall practices in the boards of financial institutions and to develop retire from office and shall be eligible for re-election. The world class directors who are advocates of best practices and Constitution further provide that all Directors shall retire from excellence in corporate governance. The Directors had also office once at least in each 3 years but shall be eligible for kept up-to-date with market developments and related issues re-election. through Board discussion meetings with the Deputy CEO, Chief Operating Officers, Chief Financial Officer and other Senior The performance of those Directors who are subject to Management Officers. re-election at the annual general meeting of Public Bank will be assessed by the Nomination and Remuneration Committee The Company Secretary and the Bank’s Knowledge & Learning whereupon recommendation will be submitted to the Board for Centre undertake the role as the co-ordinator to manage and decision to table the resolution on the re-election of the co-ordinate the Directors’ training requirements, which include Director concerned for shareholders’ approval at the next the following: annual general meeting. • Mandatory Time Commitment – Pursuant to the Bursa Malaysia Main Market Listing To ensure that Directors do not have competing time Requirements, a newly appointed Director is required to commitments that impair their ability to discharge their duties attend the Mandatory Accreditation Programme within 4 effectively, the Board has established a policy on the maximum months of his/her appointment. number of directorships/positions in non-public listed – New Directors are to participate in induction programmes companies and non-profit organisations that a Director can which allow the new Directors to meet with the CEO/ hold in Malaysia and offshore/overseas, which is as follows: Senior Management staff and be accustomed with the • Maximum 5 directorships held in public listed companies. Company’s governance framework, financial management and business operations. • Maximum 15 directorships/positions held in non-public listed – FIDE Core Programme shall be the core training for companies and non-profit organisations. Directors. The Directors remain fully committed in carrying out their • Electives duties and responsibilities and are able to give sufficient time commitment to their duties and responsibilities as reflected by Upon completion of the FIDE Core Programme, Directors are inter-alia, the following: eligible to attend FIDE Elective programmes that focus on Board Committee, technical and advanced governance issues. • Their full attendance at the Board meetings held during the financial year ended 31 December 2018 (except for one Director who did not attend one Board meeting as she was overseas). 58 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

• Enrichment • Talk on Professionalism and Ethics for Board of Directors and To keep abreast with the current developments in the Senior Management. marketplace, Directors will be provided with opportunities to • Talk on Hostage at the Table – The Art of Leadership & attend public programmes or seminars on the areas related Negotiations. to their functions/roles and for continuous development.

Directors may request that training programmes on specific Risk/Compliance/Regulatory subjects be arranged in order to facilitate them to discharge • FIDE Forum: Managing Cyber Risks in Financial Institutions. their duties effectively. • FIDE Elective Programme: Emerging Risks, the Future Board and Return on Compliance. The Company Secretary and Secretaries of Audit Committee, Compliance Committee and Risk Management Committee • FIDE Elective Programme: Anti-Money Laundering/Counter regularly update and apprise the Directors on new statutes, Financing of Terrorism. policy documents and guidelines issued by the regulatory • Talk on Updates on Anti-Money Laundering/Counter authorities, and the requirements to be observed by the Financing of Terrorism. Company and Directors thereupon.

The Nomination and Remuneration Committee conducts annual Banking, Finance & Economy review of training attended by the Directors during each • Overview of MFRS 9 Financial Instruments. financial year. • Talk on 2018 Global Macroeconomic Outlook – The Calm Conferences, seminars and training programmes attended by before the Storm. Directors in 2018 included the following: • Talk on Economic Outlook.

Corporate Governance FinTech and Technology Based Innovations • Corporate Governance Briefing Sessions: Malaysian Code on Corporate Governance & Corporate Governance Guide. • FIDE Forum: Blockchain in Financial Services Industry.

• FIDE Forum 1st Distinguished Board Leadership Series: • FIDE Forum: IBM THINK Malaysia. Navigating the VUCA World by Professor Tan Sri Dato’ Dr. • Talk on Clearing the Digital Blur. Lin See-Yan.

• FIDE Forum Board Conversation – Dialogue with Senior Remuneration Officials of BNM. The Nomination and Remuneration Committee recommends • FIDE Forum Dinner Talk: The Director as Coach – An Exclusive the level and structure of Directors’ fees which comprise an Dialogue with Dr. Marshall Goldsmith. annual fee for service on the Board. In making its • Launch of FIDE Forum’s “DNA of a Board Leader”. recommendation, the Nomination and Remuneration Committee considers the responsibilities of the Directors and also • Corporate Directors Conference 2018. benchmarking against the Directors’ fees of peer banks. • Conference for Independent Non-Executive Directors. The Board as a whole determines the remuneration of • Independent Directors’ Programme: The Essence of Non-Executive Directors. Independence.

• Talk on Open Source Leadership. THE WAY FORWARD 59

Details of the Directors’ remuneration (including benefits-in-kind) of each Director during the financial year 2018 are as follows:

Remuneration Received from Remuneration Received from the Bank Subsidiary Companies

Other Benefits- Bank Other Group Salary Fees Bonus Emoluments in-kind Total Fees Emoluments Total 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Executive Director Tan Sri Dato’ Sri Tay Ah Lek 7,200 316 19,968 6,191 30 33,705 518 435 34,658 Non-Executive Directors Tan Sri Dato’ Sri Dr. Teh Hong Piow – 428 – 40,875 34 41,337 974 78 42,389 Lai Wan – 365 – 420 – 785 223 – 1,008 Tang Wing Chew – 316 – 374 – 690 223 – 913 Lai Wai Keen – 316 – 323 – 639 – – 639 Cheah Kim Ling – 316 – 388 – 704 – – 704 Lee Chin Guan* – 26 – 14 – 40 209 – 249

– 1,767 – 42,394 34 44,195 1,629 78 45,902

Total Directors’ remuneration 7,200 2,083 19,968 48,585 64 77,900 2,147 513 80,560

* Newly appointed on 27 December 2018.

Senior Management Senior Management Appointment and Removal The CEO together with the Senior Management are responsible The Bank’s Fit and Proper Policy has established procedures for the Bank’s operations and risk management including the and processes for the appointment and removal of the relevant development, coordination, implementation and control of the Key Responsible Persons (KRPs) as well as the stringent business and corporate strategies in accordance with the assessment of candidates against the minimum requirements. directions set out by the Board. There is a clear segregation of All KRPs are assessed to have met all the fit and proper criteria responsibilities among the Senior Management team which based on the following factors: promotes accountability and transparency as well as serving as 1. Probity, Personal Integrity and Reputation an embedded check and balance system for its day-to-day business and operations. 2. Competence and Capability 3. Financial Integrity The internal control mechanisms which include compliance with regulatory requirements and internal policies are constantly 4. They do not hold an aggregate interest of 5% or more in being monitored and reviewed by the Bank’s control functions the shares of Public Bank. namely Risk Management Division, Compliance Division and Internal Audit Division, in order to enforce good corporate governance and robust risk management across the Group. The control functions are independent and report directly to the respective Board Committees ie. Risk Management Committee, Compliance Committee and Audit Committee. 60 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

Succession Planning respective control function and differentiated from that of the The Bank has in place a robust succession planning process to business units they oversee. ensure the continuity of leadership and long term business sustainability in particular covering all the key leadership The remuneration framework outlines the total compensation positions. The framework encompasses the determination of packages of fixed remuneration and variable remuneration criticality of positions, identification and selection of talents payable to staff. Fixed remuneration refers to basic salary and based on a pre-defined competency profiles, drawing up other fixed income which commensurate with the role and individual development plan to bridge the competency gap and position of an individual staff, including professional experience, monitoring and reviewing the progress and leadership readiness qualifications, responsibilities, job complexity and local market of talents. condition etc.

The Bank emphasises on the “look within” policy in the The variable remuneration refers to the discretionary bonus identification of talents to retain corporate knowledge and which is cash based and does not consist of shares or non-cash ensure the perpetuating of corporate culture. This further instruments as the Group does not have such instruments in upholds the Bank’s philosophy in providing staff with rewarding place. The pool for the variable remuneration is determined by career advancement. financial matrices such as the Group’s overall performance, achievement of selected financial ratios, market trends and The Bank’s succession planning policy and programme is subject economic outlook. to the review and approval of the Board assisted by the Nomination and Remuneration Committee and collectively The following depicts the total value of cash based remuneration implemented by the Senior Management team. paid out to Senior Management staff of Public Bank for financial year 2018: Remuneration Policy & Practice The Public Bank Group Remuneration Policy is established to No. of Senior put in place a framework to ensure a robust balance between Management Non-Deferred Deferred attracting, retaining, motivating staff and prudent risk Remuneration Staff (RM) (RM) management within the organisation to be in line with its risk Fixed 17,990,331 – culture. 23 Variable 2,780,850 12,702,000 The Policy has been reviewed by the Nomination and Remuneration Committee and approved by the Board for Note: The above excludes the remuneration of Managing Director/CEO implementation at all levels of staff including Senior which has been declared under the Directors’ Remuneration. Management and other staff not governed by any collective agreement in Public Bank, Public Islamic Bank Berhad and Public Investment Bank Berhad. Senior Management in this context refers to the Chief Executive Officers and Senior Officers of the abovementioned companies in the Group.

The remuneration framework is designed to ensure that reward is measurably linked to achievement of business and performance objectives. However, to prevent any conflict of interest, the framework stipulates that staff of the control functions are to be assessed independently from the business units that they oversee. For effective segregation, these staff will be appraised principally based on achievement of their control objectives set out by the Board Committees of their THE WAY FORWARD 61

Strengthening Corporate Governance Culture The Policy also articulates the Group’s ultimate objective in The Public Bank Group has in place the following policies to eliminating any form of fraud from all its business activities, further inculcate ethical values and compliance culture in the hence, the Group has zero-tolerance towards any form of Group: fraud.

• Public Bank Group Code of Ethics The definition/scope of “FRAUD” in the Anti-Fraud Policy has been expanded to cover the following: The Public Bank Group Code of Ethics is aligned to the Professional Code established by the Financial Services 1. Asset Misappropriation Professional Board and it is encapsulated in Five (5) 2. Fraudulent Statement/Representation Fundamental Ethical Principles which the Bank and each employee must adhere to, both in letter and in spirit. The 3. Corruption Five (5) Fundamental Ethical Principles are as follows: 4. Fraudulent acts or attempted fraudulent acts committed 1. Competence on but is not limited to assets, data, records, documents or other information etc. belonging to a shareholder, 2. Integrity customer, staff, supplier, vendor, agent or any persons 3. Fairness who has dealings with the Bank.

4. Confidentiality Further details of the Anti-Fraud Policy are set out on page 5. Objectivity 79 of this annual report.

Further details of the Public Bank Group Code of Ethics are Board Committees set out on page 78 of this annual report. The Board has established the following Board Committees which are made up of majority Independent Non-Executive • Whistleblowing Policy and Procedures Directors to support the Board in carrying out its functions: The scope of the Whistleblowing Policy and Procedures • Nomination Committee covers all employees and third parties in making disclosure • Remuneration Committee of any improper conduct or irregularities without any risk • Audit Committee of reprisals. The platform, accessibility and channels of reporting are user-friendly to facilitate the submission of • Risk Management Committee disclosure. • Compliance Committee • Credit Risk Management Committee A Board member has also been appointed and designated as the Non-Executive Director responsible for the effective The Nomination Committee and Remuneration Committee had implementation of this Policy. been combined into a single committee named as “Nomination and Remuneration Committee” with effect from 1 January 2019. Further details of the Whistleblowing Policy and Procedures are set out on page 80 of this annual report. The roles and responsibilities of Board Committees as well as authority delegated by the Board to these Committees, are • Anti-Fraud Policy reviewed from time to time to ensure that they remain relevant The Anti-Fraud Policy sets out the Bank’s expectations on and are up-to-date. all its staff and the requirements relating to the prohibition, recognition, reporting and investigation of suspected fraud, corruption, misappropriation and other similar irregularities. 62 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

The roles and responsibilities of the Board Committees and The Composition, Authority as well as the Roles and attendance of each Director at the Board Committee meetings Responsibilities of the Audit Committee are set out in its are disclosed in the Public Bank’s Corporate Governance Report Terms of Reference. The Terms of Reference are approved by for the financial year ended 31 December 2018 which can be the Board and published in the Public Bank’s corporate website. downloaded from Public Bank’s corporate website at www.publicbankgroup.com. The Audit Committee has a policy that requires a former key audit partner to observe a cooling-off period of at least 2 years The main activities of the Nomination Committee in 2018 before being appointed as a Member of the Audit Committee. included the following: The said policy was incorporated in the Audit Committee’s • Annual review of size and composition of Board, Board Terms of Reference. balance and independence of Directors and skills of Directors. Collectively, the Audit Committee Members have a wide range • Annual evaluation of performance and effectiveness of the of relevant accounting or related financial management skills, Board as a whole and annual evaluation of performance of knowledge and experience in discharging their duties. In each individual Director. addition, one (1) of the Audit Committee Members is a • Annual review of compositions, functions and terms of Chartered Accountant of the Malaysian Institute of Accountants. reference of Board Committees. With the relevant skill sets, knowledge and experience, the • Annual evaluation of Board Committees and individual Audit Audit Committee Members are financially literate and are able Committee members. to understand, analyse and challenge matters under the purview • Assessment of fitness and propriety of Directors for of the Audit Committee including the financial reporting re-appointment/re-election. process. • Assessment of fitness and propriety of candidates for In 2018, the Audit Committee Members have attended training proposed appointment as Directors of Public Bank. courses, conferences, seminars and talks to keep themselves • Annual fit and proper assessment of Senior Management abreast of relevant developments in the banking industry who are key responsible persons. including relevant regulatory requirements as well as effective • Annual assessment of fitness and propriety of Company governance practices. Secretary to remain appointed. • Recommendation to the Board on promotion and appointment The Audit Committee assists the Board to oversee the financial of key responsible persons. reporting process and assesses the reliability of the financial reporting of Public Bank and the Public Bank Group. The Audit • Recommendation to the Board on renewal of contracts of Committee also seeks explanations and additional information employment of the Managing Director/CEO, Senior from the Senior Management including the Chief Financial Management staff and Company Secretary. Officer and the Chief Internal Auditor in regard to the financial performance and preparation of the financial statements of Public Bank and the Public Bank Group. In addition, the Audit MCCG 2017 PRINCIPLE B: EFFECTIVE AUDIT AND Committee also reviews and discusses with the external auditor RISK MANAGEMENT on their observations of Public Bank’s and the Public Bank Audit Committee Group’s annual and interim financial results.

The Audit Committee is established by the Board and comprises The details of the duties and responsibilities of the Audit five (5) Members as at 21 March 2019, all of whom are Committee are set out under the Audit Committee Report on Independent Non-Executive Directors. The Chairman of Audit pages 88 to 95 of this annual report. Committee is appointed by the Board and is not the Chairman of the Board. THE WAY FORWARD 63

Relationship with External Auditors auditors have the authority to carry out their work objectively The Audit Committee has put in place policies and procedures and independently, free from any relationship or conflicts of to assess the suitability, objectivity and independence as well interest. as the performance of the external auditor. In this regard, the Audit Committee reviews and assesses annually the appointment Public Bank’s Internal Audit Division is staffed by 200 individuals or re-appointment of external auditor in accordance with the with relevant experience and qualifications, and comprised nine criteria set out in the Public Bank Group’s Policies and sections specialising in various auditing/business areas. Procedures for Appointment/Re-appointment of External Auditors for Audit and Non-Audit Services (Group Policies and The Group Chief Internal Auditor (GCIA), Mr Lim Then Fui Procedures) to ensure that the independence and objectivity of oversees the Internal Audit function of Public Bank and the the external auditor as statutory auditor are not compromised. Public Bank Group. He is a qualified accountant, a Member of the Malaysian Institute of Accountants (MIA) and a Member of The assessments of the external auditor for audit and non-audit the Malaysian Institute of Certified Public Accountants (MICPA). services are carried out via an assessment checklist in Mr Lim has a total of 39 years of working experience in accordance with the assessment criteria set out in the Group auditing, risk management, compliance and commercial banking. Policies and Procedures. This assessment checklist covers regulatory requirements, the competency, audit quality and The Internal Audit Charter sets out the purpose, objectives, resources of the external auditor in relation to the audit as well authority, scope of work and responsibilities of the Internal as the independence and objectivity of the external auditor. Audit function in Public Bank and the Public Bank Group. The Internal Audit Charter, which were drawn up with reference to For engagement of external auditor to perform non-audit the relevant guidelines and policy document issued by BNM services, the Audit Committee has to be satisfied that the and the Basel Committee on Banking Supervision, is subject to external auditor is suitable, independent and objective in the review annually to ensure that it remains relevant. provision of such services, no element of conflict of interest and the fees chargeable are within the allowable threshold set To reflect the independence of Internal Audit, Internal Audit before Management engages the external auditor to provide staff report directly to the GCIA, who in turn reports functionally non-audit services to Public Bank and/or the Public Bank to the Board through the Audit Committee. In this regard, the Group. Audit Committee approves the appointment, replacement and dismissal of the GCIA as well as to evaluate the GCIA’s The details of the fees paid/payable to the external auditor for performance and review the remuneration and/or bonus, if any, its provision of statutory audit, audit related and non-audit payable to the GCIA and the Senior Management staff of related services in 2018 are set out in Practice 8.3 of the Internal Audit Division. Public Bank’s Corporate Governance Report for the financial year ended 31 December 2018 which can be downloaded from The Internal Audit function performs ongoing periodic reviews Public Bank’s corporate website at www.publicbankgroup.com. and assessments on the Bank’s risk management systems, internal controls and governance processes in accordance with Internal Audit Function and conforms to the requirements set out in the BNM’s Guidelines on Internal Audit Function of Licensed Institutions. Public Bank has an in-house Internal Audit function which is carried out by the Internal Audit Division. The Audit Committee As part of the measures to ensure that internal audit personnel oversees the performance and effectiveness of the Internal are free from any relationships or conflicts of interest which Audit function based on the approved key performance could impair their objectivity and independence, Internal Audit indicators, assesses the competency and experience of the staff recruited from other divisions within the Bank are not Internal Audit staff as well as the adequacy of resources in allowed to conduct audit on areas in which they were previously order for the Internal Audit function to carry out its work engaged immediately preceding their current internal audit effectively. The Audit Committee also ensures that internal appointment until after the “cooling off” period or until an independent audit has been conducted during the intervening 64 2018 ANNUAL REPORT PUBLIC BANK BERHAD CORPORATE GOVERNANCE OVERVIEW STATEMENT

period, whichever is earlier. For this purpose, the “cooling off” The details of the key functions and processes that the Board period shall not be less than six months from the date they has established in reviewing the adequacy and effectiveness of joined Internal Audit or such longer period as may be the risk management and internal control system are set out determined by the GCIA. under the Public Bank Group’s Statement on Risk Management and Internal Control on pages 82 to 87 of this annual report. The details of the Audit Committee’s oversight over the activities carried out by the Internal Audit function are set out Risk Management Committee under the Audit Committee Report on pages 88 to 95 of this The Risk Management Committee is established by the Board annual report. and supports the Board in carrying out its risk management roles and responsibilities as delegated and authorised by the Risk Management and Internal Control Framework Board. It comprises 6 members as at 21 March 2019, of whom The Board has established a risk management and internal 5 members including the Chairman of the Risk Management control system that enables the identification, measurement, Committee are Independent Directors. All members are continuous monitoring and reporting of all relevant and Non-Executive Directors. The Chairman of the Risk Management material risks on a group and entity-wide basis, including new Committee is appointed by the Board and is not the Chairman and emerging risks. The Board ensures that the risk management of the Board. The Risk Management Committee assists the and internal control system manages the Public Bank Group’s Board in meeting the expectations on risk management relevant and material risks within its risk appetite in the including ensuring the effective implementation of the risk Group’s pursuit of its strategies and business objectives. management framework.

The establishment of the risk management and internal control system is driven by the Public Bank Group’s Risk Management MCCG 2017 PRINCIPLE C: INTEGRITY IN CORPORATE Framework which is approved by the Board and developed REPORTING AND MEANINGFUL RELATIONSHIP based on the BNM’s Policy Document on Risk Governance. The WITH STAKEHOLDERS key principles and components of the Group’s Risk Management Framework outlining the requirements for effective risk Effective Stakeholder Communication management are risk governance, risk appetite, risk management Public Bank’s investor relations activities promote effective, processes and risk culture. comprehensive and timely communication with stakeholders in order to enhance their understanding and appreciation of the The adequacy and effectiveness of the risk management and overall affairs of the Public Bank Group. This includes keeping internal control system as well as the level of compliance with its stakeholders informed of its growth strategies, business the relevant laws, regulations, policies and procedures are activities, business and financial performance, including the subject to ongoing assessment by the Risk Management sustainability performance. This facilitates the stakeholders in Function, Compliance Function and Internal Audit Function. making informed decisions and also fulfilling the Bank’s These independent control functions, as well as the Risk obligations to the broader market for continuous disclosure. Management Committee, the Compliance Committee and the Audit Committee assist the Board in discharging its oversight Several communication channels are used to promote effective responsibilities on the adequacy and effectiveness of the risk communication between the Bank and its stakeholders. These management and internal control system. include results announcements, annual general meeting, analyst briefings, issuance of annual report and investor meetings in The Board receives assurance from the Chief Executive Officer Malaysia and overseas. Public Bank makes announcements of and the Chief Financial Officer on the adequacy and its quarterly group financial results to Bursa Malaysia, followed effectiveness of the Public Bank Group’s risk management and by an issuance of press release. In addition, the Bank conducts internal control system on an annual basis. briefings to the analysts covering the Bank’s half-year and annual group financial results. For the analysts who could not THE WAY FORWARD 65

be present at the briefings, subsequent conference calls with them are arranged. During the year, the Management has engaged more than 270 investors/shareholders through investor meetings, overseas investor conferences and conference calls.

The extensive information about Public Bank and its activities is also provided to stakeholders in its Annual Report and Financial Statements, Corporate Governance Report as well as at the Bank’s corporate website at www.publicbankgroup.com. In addition, the corporate website has a dedicated Investor Relations section that provides relevant investor-related information and also a section on Corporate Governance which consists of various materials including the Board Charter, Code of Ethics and Whistleblowing Policy and Procedures.

The Bank’s Investor Relations unit is dedicated to maintaining a close and active dialogue with the broad investment community, both in Malaysia and international. Shareholders and investors can make inquiries about investor relations matters with the dedicated investor relations team as follows:

PUBLIC BANK Tan Sri Dato’ Sri Tay Ah Lek Chang Siew Yen Managing Director/Chief Executive Officer Chief Operating Officer Telephone number: +603-21766000 Telephone number: +603-21767460 E-mail: [email protected] E-mail: [email protected]

Yik Sook Ling Ng Seiw Kuan Chief Financial Officer General Manager, Corporate Planning, Strategy & Economics Telephone number: +603-21773310 Telephone number: +603-21773170 E-mail: [email protected] E-mail: [email protected]

PUBLIC FINANCIAL HOLDINGS LIMITED INVESTOR RELATIONS UNIT

Tan Yoke Kong Denise Fong Po Yen Executive Director Corporate Planning, Strategy & Economics Telephone number: +852-25419200 Telephone number: +603-21766293 E-mail: [email protected] E-mail: [email protected]

Annual General Meeting The annual general meeting of Public Bank is a primary platform which enables shareholders of the Bank to engage directly with the Bank’s Directors and Senior Management. At the annual general meeting, the Chairman of the meeting presents a comprehensive review of the Public Bank Group’s financial performance and value created for the shareholders. During the annual general meeting, queries from the shareholders are addressed, while feedbacks and suggestions are taken note of by the Directors and Senior Management. The turnout of shareholders at the annual general meetings has always been high and this would support a meaningful and effective engagement with shareholders. In addition, a summary of the proceedings of the annual general meetings is made available at the corporate website of the Bank.

This Corporate Governance Overview Statement is made in accordance with the resolution of the Board of Directors dated 29 January 2019. 66 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

“The Public Bank Group believes that an effective risk management system is key to creating value to its shareholders, customers, counterparties, employees, investors and the community it serves at large. With the evolving risks, the Group continues to enhance its integrated risk management approach and processes to ensure effectiveness of its risk management processes.”

INTRODUCTION 2018 was a year marked by discomfiting developments in economic and financial landscape which include US-China trade conflict, slowing growth of world economy and challenging domestic operating environment arising from weak ringgit and subdued property market due to oversupply and mismatch. The economic headwinds are accompanied by threats from the advent of digitalisation which has transformed the banking business landscape.

Amidst such developments, the Public Bank Group continues to commit significant resources to elevate its risk management as a robust and effective risk management system is key in managing the new risks. The risk management policies, systems and processes are continuously reviewed, enhanced and refined to ensure the practices remained effective. In addition, risk professionals especially from the cyber/information technology (“IT”) space are employed to assess the susceptibility of the Group’s systems to cyber-attacks and to strengthen the resilience of its IT infrastructure.

Risk Management Framework The key principles and components of the Risk Management Framework of the Public Bank Group are as follows:

• Risk Governance Structure • Risk Appetite • Risk Management and Internal Controls • Risk Management Culture

RISK GOVERNANCE STRUCTURE The Public Bank Group’s risk governance structure sets out the roles and responsibilities of the parties involved in the Group’s risk management and internal control system as follows: THE WAY FORWARD 67

ESTABLISH RISK 1. Board of Directors APPETITE & POLICY 2. Risk Management Committee

3. Credit Risk Management Committee

4. Shariah Committee

ENSURE IMPLEMENTATION 5. Dedicated Risk Committees OF RISK AND COMPLIANCE Assets & Liabilities Management Committee POLICY Operational Risk Management Committee Internal Capital Adequacy Assessment Process Working Group

6. Credit Committee

7. Risk Management and Control Functions

Risk Management Function Compliance Function Shariah Compliance Function

IMPLEMENT AND COMPLY 8. Support Functions WITH RISK POLICY Human Resource Information Technology 11. AUDIT COMMITTEE Finance Banking Operations 10. COMPLIANCE COMMITTEE (supported by Compliance Function)

Credit Control, Administration & Supervision (supported by Internal Audit Function) Property Security

9. Business Functions

Corporate Lending Investment Banking Islamic Banking Retail Banking and Financing Operations Share Broking Fund Management Treasury and Capital Market Operations 68 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

Board of Directors Audit Committee The Board of Directors (“Board”) has overall responsibility for The Audit Committee reviews the internal control issues the Public Bank Group’s risk management and internal control identified by the Internal Audit Division, the external auditors, system. For this purpose, the Board: the regulatory authorities and the Senior Management, including the timeliness of the remedial actions taken to • Ensures that the corporate objectives are supported by address and resolve the audit issues identified, and evaluates sound risk strategies and an effective risk management the adequacy and effectiveness of the risk management and framework that is appropriate to the nature, scale and internal control systems put in place. The Audit Committee complexity of its activities also reviews the effectiveness of the internal audit function with particular emphasis on the audit methodology applied, • Provides overall oversight on the soundness of the risk audit scope of coverage, audit cycle, adequacy of the manpower management processes and internal controls resources, knowledge and competency of the internal audit personnel. • Responsible for the remuneration of the Senior Management and that the remuneration is aligned with prudent Shariah Committee risk taking The Shariah Committee advises the Board on Shariah related • Provides direction and guidance to the Senior Management matters. It provides objective and sound advice to ensure that on action plans to be taken to address the material risks the Islamic operations, business and activities are in compliance identified with Shariah. The Shariah Committee deliberates and endorses all Shariah matters governing the Islamic operations, the Risk Management Committee Islamic products and the documents used in the Islamic business operations. It also deliberates on Shariah related The Risk Management Committee (“RMC”) assists the Board to findings and endorses rectification measures to address the oversee the management of all identified material risks including findings. The Shariah Committee is supported by the Shariah inter-alia reviewing risk management frameworks and policies, compliance and research functions. reviewing risk management limits, risk exposures and portfolio composition and ensuring risk infrastructure, resources and Dedicated Risk Committees systems are put in place for effective risk management oversight. The dedicated risk committees assist the RMC in the Credit Risk Management Committee management of all identified material risks. These committees are responsible for the effective implementation of the risk The Credit Risk Management Committee assists the Board in management strategies and policies as approved by the Board discharging its oversight role over the management of credit or by the RMC. The key responsibilities of the dedicated risk risk including inter-alia in ensuring the risk infrastructures and committees are as follows: systems are able to manage and control the risk taking activities within the credit risk strategy and risk appetite. • Ensuring all relevant and material risks associated with the Public Bank Group have been identified and assessed and Compliance Committee are operating within the Group’s risk appetite

The Compliance Committee reviews the compliance issues • Implementing, assessing and monitoring the risk identified by the Compliance Division, the regulatory authorities management and internal control system in accordance and the Senior Management, including the timeliness of the with the Group’s risk management strategies and overall remedial actions taken to address and resolve the compliance risk appetite issues identified, and evaluates and ensures controls to manage compliance risk are adequate and operating as intended. • Identifying changes in the operating environment which may give rise to risks and taking the appropriate actions followed by the prompt escalation of the identified risks and actions to the Board THE WAY FORWARD 69

RISK APPETITE The Public Bank Group’s risk appetite defines the amount and the types of risk that the Group is able and willing to accept in pursuit of its business objectives. It also sets out the level of risk tolerance and limits to govern, manage and control the Group’s risk taking activities. The strategic objectives, business plans, desired risk profile and capital plans are aligned to the risk appetite.

RISK MANAGEMENT AND INTERNAL CONTROLS The principal risks faced by the Public Bank Group together with the key risk management and internal controls are outlined below.

Principal Risks Definition Risk Management and Internal Controls

Credit Risk Credit risk is the potential loss of • Credit policy incorporating prudent lending criteria and (including revenue as a result of defaults by the guidelines to manage credit risk counterparty borrowers/customers or counterparties • Clearly defined levels of authority to ensure the role of credit risk and through lending/financing, hedging, approving authorities commensurate with the level of country risk) trading and investing activities credit experience and clear segregation of duties between parties originating and approving credits • Periodic review and validation of the credit risk measurement methodology to ensure their relevance • Strong credit controls and close monitoring are in place to identify potential distressed and impaired loans followed by prompt collection and recovery actions • Independent credit review by Risk Management Division (“RMD”) prior to the approval of large credits and post credit reviews to assess the quality of the loans approved

Residual Residual credit risk is the risk of loss • Policies to determine the eligibility of collateral/guarantee Credit Risk or increase of other risk such as legal, for credit risk mitigation, which include requiring operational, liquidity and market risk collateral/guarantee to meet specific operational and as a result of the acceptance of legal requirements collateral and guarantees which are • Depending on the type of collateral, the valuation of not properly executed and managed collateral is carried out regularly based on the Group’s valuation and review guidelines • Processes to ensure proper documentation of the collateral and guarantee accepted

Model Risk The risk of the potential adverse • Framework and policies to manage the model risk consequences from model misused • Credit risk models are subject to periodic monitoring and and poorly designed/implemented validation which are independently performed models. Model risk can lead to financial loss, poor business or strategic decision making, or reputation loss 70 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

Principal Risks Definition Risk Management and Internal Controls

Credit Concentration to any single exposure • Policies and limits are periodically reviewed to ensure Concentration or group of exposure or sector that their relevance in managing credit concentration risk Risk has the potential to result in losses • Processes and methodologies to identify, measure, control large enough to undermine the health and monitor the credit concentration risk of the Group

Market Risk Market risk is the risk of loss arising • Regular review of the market and economic conditions to from adverse movements in market identify areas which may give rise to market risk variables, such as interest rates, credit • Market risk policies, procedures and internal control spreads, commodity prices, equity measures are periodically reviewed to ensure relevance in prices and foreign exchange rates managing market risk • Derivative activities for trading are strictly prohibited. Approval from the Board is required • Hedging interest rate/rate of return risk and foreign exchange risk in the event the exposures exceed the risk appetite

Liquidity and Liquidity risk is the risk that the • Pursuing growth in stable customer deposits is core Funding Risk Group is unable to maintain sufficient • Maintaining a diversified and balanced funding portfolio liquid assets to meet its financial comprising of customer deposits, shareholders’ funds, commitments and obligations when debt and capital funds they fall due or securing the funding • Hold sufficient liquidity cushion in line with the liquidity requirements at excessive cost. exposures undertaken Funding risk is the risk that the Group does not have sufficiently stable and • Debt issuance programme to facilitate immediate access diverse sources of funding or the to wholesale funding funding structure is inefficient • Subsidiaries are to attain self-funding position • Contingency funding plan to enable the management to act effectively and efficiently during period of stress • Liquidity stress test to anticipate potential impact from severe liquidity stress event

Operational Risk Operational risk is the risk of loss • Day-to-day management of operational risk through resulting from inadequate or failed system of internal controls and risk management internal processes, people and processes to ensure compliance with internal policies, systems or from external events guidelines, controls and limits • Use of operational risk management tools such as loss incident management, Risk and Control Self-Assessment, Key Risk Indicators and Scenario Analysis for monitoring of operational risk exposures and effectiveness of controls THE WAY FORWARD 71

Principal Risks Definition Risk Management and Internal Controls

Operational Risk • New products or services introduced and variations are (continued) subject to a vigorous product evaluation process which assesses the potential risk as well as the readiness to introduce the said products or services • Risk assessment is conducted for electronic banking (e-banking) services in ensuring risk management and security controls are in place to mitigate risks prior to implementing the e-banking services or any material enhancement to the e-banking services • Conduct regular IT risk assessment to enhance and ensure that IT systems are resilient, readily available for the customers and secure from cyber-attacks • Disaster recovery and business continuity plans covering all critical business operations are regularly tested and updated to ensure continuity of key business services during unforeseen events

Capital Risk Capital Risk is the risk of insufficient • Close monitoring of capital positions to ensure the Group capital to meet the capital required to complies with current regulatory requirements and is well support the Group’s business growth positioned to meet future requirements strategies and to satisfy regulatory • Conduct bi-annual enterprise stress test to assess the capital adequacy requirements adequacy of capital levels under various stress scenarios • Ability to raise additional capital in a variety of ways including raising equity via rights issue or debt instruments • Internal Capital Targets factoring capital to meet regulatory requirements, regulatory capital buffers, capital required under period of stress and Pillar 2 risk • Capital contingency plan setting out the governance, escalation process and monitoring of capital position as well as actions to be taken in the event of a capital deficiency

Reputation Risk Reputation risk is the risk arising from • Periodic identification, assessment and monitoring of key negative perception on the part of risk/performance factors associated with reputation risk customers, counterparties, shareholders, through a set of Key Risk/Performance Indicators and investors, debt-holders, market analysts, ongoing enhancement of the control measures staff, community, other relevant parties implemented to manage reputation risk or regulators (collectively known as • Procedures on the escalation and management of stakeholders) that can adversely affect potential or current reputation events to ensure such the Group’s ability to maintain existing events are managed timely and appropriately or establish new business relationships • Conduct comprehensive risk assessment on emerging risk and continued access to sources of events to identify areas vulnerable to reputation risk funding 72 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

Principal Risks Definition Risk Management and Internal Controls

Strategic Risk Strategic risk is the risk of current or • Business plans and targets are aligned to the Board prospective impact on the entities’ approved risk appetite and Board approved strategic earnings, capital or reputation arising directions from changes in the environment in • Close monitoring of the achievements against the which the Group operates, adverse business targets and prompt actions are instituted to strategic directions, improper arrest any variances identified and are escalated to the implementation of decisions and lack respective Boards periodically of responsiveness to industry, • Regular review of the Group’s business strategies taking economic or technological changes into account the latest market conditions and developments

Shariah Shariah non-compliance risk is the • On-going identification, assessment, monitoring and Non-Compliance risk of failure to comply with the controlling of Shariah non-compliance risk as set out in Risk Shariah rules and principles as the Shariah Governance Framework and other guidelines determined by the respective entities’ to ensure the entities’ operations and business activities Shariah Committee/Advisor or the are in compliance with Shariah requirements relevant bodies, such as the Shariah • Use of operational risk management tools such as loss Advisory Council (“SAC”) of Bank incident management, Risk and Control Self-Assessment Negara Malaysia (“BNM”) and the and Key Risk Indicators for monitoring of Shariah non- SAC of Securities Commission compliance risk exposures and effectiveness of controls • New Islamic products or services introduced and variations are subject to a vigorous product evaluation process which assesses potential Shariah non-compliance risk as well as the readiness to introduce the said products or services • Periodic review of the potential risks and issues relating to the Islamic concepts/contracts of the Group’s Islamic products and services to ensure the potential issues are managed and the products and services are Shariah compliant • Sponsoring staff to acquire Shariah certification to enhance knowledge and upgrade skills on Shariah matters THE WAY FORWARD 73

Principal Risks Definition Risk Management and Internal Controls

Compliance Risk Compliance risk is the risk of legal or • Policies and procedures to ensure compliance with regulatory sanctions, financial loss or internal controls and the relevant laws and regulations reputational damage which a financial are set out in operations manuals, guidelines and institution may suffer as a result of directives which are updated periodically its failure to comply with legal and • Compliance Function undertakes Compliance Risk regulatory requirements applicable to Assessment (“CRA”) to identify and prioritise the legal its activities and regulatory requirements and develops appropriate testing and resource plans based on the results of the CRA to manage compliance risk within the Group effectively • Full time compliance officers are deployed and stationed at branches and Hire Purchase Centres which are deemed to have higher exposure to compliance risk • Dedicated Compliance Officers are appointed to support the business/support units to establish and execute their compliance risk mitigation strategies and processes and ensure that internal controls are implemented effectively • For branches without Resident Branch Compliance Officer and Securities Documentation Centres, a mobile compliance officer is deployed for on-site compliance checks • Compliance Checklists are the core tools to monitor the compliance status of the compliance risk areas at each business/support unit within the Group

The Public Bank Group’s risk management governance and approaches, together with the various analyses of risk exposures and comparative figures are detailed in: i. Note 48 to the financial statements (pages 164 to 214 of the Annual Report 2018) ii. Pillar 3 Disclosure (pages 277 to 331 of the Annual Report 2018) 74 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

RISK CULTURE The culture of managing risk is embedded into the day-to-day attacks are not only growing but also mutating into new and operations and decision-making process through the following: insidious forms, cyber risk came under increased regulatory scrutiny and is top of the agenda of the Senior Management in • Strong corporate governance operational risk management. • Organisation structure with clearly defined roles and With this, it is imperative that close and careful attention is responsibilities given to ensuring the Public Bank Group’s IT infrastructure • Effective communication maintains strong and robust defences against cyber-attacks, • Commitment to compliance with laws, regulations and particularly around security infrastructure and operational internal controls controls to safeguarding customers’ and other stakeholders’ • Integrity in fiduciary responsibilities interest and in upholding the PB brand. In this connection, the Group’s Cyber Resilience Framework (“CRF”) provides guidance • Clear policies, procedures and guidelines to the Group on managing cyber security risk, improving cyber • Continuous training resilience as well as ensuring adequate cyber security preparedness throughout the Group on a continuous basis. The CRF laid down baseline security control requirements TOP AND EMERGING RISKS encompassing technology, processes and people in safeguarding Identifying and monitoring of emerging risks are integral to the cyber resilience. Public Bank Group’s risk management approach. The emerging risks are identified through a top-down and bottom-up approach The Public Bank Group is alert to the rapid evolvement of involving members of the RMC, Senior Management, cyber threats which would correspondingly require robust independent risk management and control units as well as cyber resiliency measures. To address this, the Group maintains business and support units. This is followed by a comprehensive continued focus and investment in its control environment risk assessment undertaken to ascertain the risk exposures and through working closely with the relevant consultants, impact of the emerging risk on the Group’s business activities organisations and regulators to understand and address threats and strategies including actions that will be taken if the risk is originating outside the Group. Some of the measures taken to assessed to result in a material impact. combat cyber risk are as follows:

• Subscribing to third party security services to proactively During the year, the Public Bank Group paid particular attention monitor, detect and remove malware and to keep abreast to the following top and emerging risks and put in place with the latest development on cyber threats and fraud various strategies to mitigate these risks: modus operandi to prepare the Group from such potential threats Operational Risk Cyber Risk • Continuous assessment of the susceptibility of its systems to The advent of financial technologies (“FinTech”) is increasingly cyber-attacks and other information security threats and redefining the provision, distribution and consumption of strengthening the information security including enhancing financial services and the increasing use of the Internet and the security controls of the internet and mobile banking mobile devices to conduct financial transactions have systems, the self-service terminals as well as the security heightened cyber risk to both the customers and the financial features of the card payment instruments institutions. In Malaysia, cyber security breaches more than • Periodic risk and control assessment to address the plausible doubled in the last 8 years (2017: 7,962 cases; 2009: 3,564 emerging risk issues relating to the threat of IT system cases) (MyCERT, 2018). To safeguard the customers and failures that could disrupt the Group’s business operations, financial institutions and given that the threats from cyber- to ensure the resilience of its IT infrastructure THE WAY FORWARD 75

• Engaging external security consultants to carry out assessment In an era of more pervasive digital banking, regulators in on IT core risks including cyber security and resilience countries where the Public Bank Group operates have directed assessments to benchmark the existing IT capabilities against greater attention to the management of risks associated with international standards and best practices the wider adoption of technology by banking institutions, which can increase exposures to financial fraud. • Carrying out continuous security awareness programmes and education on cybercrimes to alert customers on online banking Taking heed of the growing concern in these areas, the Public security and strengthening staff awareness to mitigate Bank Group continues to review and enhance its policies and information leakage procedures governing the conduct of business including the policies on the Group’s e-banking services, product development, Threats of Electronic Payment Frauds offering and marketing as well as the code of conduct of its employees to ensure compliance with the relevant laws and To foster an enabling environment for an accelerated migration regulations in all jurisdiction where the Group operates and to to electronic payments, BNM’s efforts remain centred on provide fair and responsible treatment to the customers. amongst others, establishing market incentive structures to sustain continuous investments in electronic payment Money Laundering and Terrorist Financing Risks infrastructure and services and promoting greater awareness and confidence in the use of electronic payments. Regulators increasingly seek financial institutions to place emphasis on anti-money laundering (“AML”) and counter In tandem with the growth of electronic payments, the Public financing of terrorism (“CFT”) to safeguard the financial system. Bank Group has strengthened its risk management systems and The range of threats arising from money laundering and practices to combat the threats of online fraud on financial terrorist financing continues to grow and is further exacerbated transactions. The information generated by the automated with the use of new technologies for illicit purposes. To be fraud detection system is analysed to detect fraud and any effective and efficient in combating these threats, suspicious incidences are promptly investigated. Through this implementation of robust AML/CFT system and measures are system, customers are alerted on the suspicious fraudulent critical. The AML/CFT program is continuously reviewed and transactions and actions are taken to reduce customer updated in response to changes in the operational needs, susceptibility to the online frauds. The Group also pursues business environment or regulatory requirements. continuous education to promote consumer awareness on the threats of payment fraud by publishing advisories and fraud The Public Bank Group has reinforced its group wide AML/CFT alerts at the Group’s websites. policies, systems and measures to mitigate money laundering/ terrorist financing risks through the following: Conduct of Business • Refinement of the risk-based assessment approach and risk Regulators in Malaysia and other countries have continued to factors which include enhancing the customer risk profiling increase their focus on fair treatment to customers and the and the geographical coverage assessment in managing Money conduct of businesses in an orderly and transparent manner by Laundering/Terrorist Financing risks exposures financial institutions. These include attention to sales processes and incentives, product and investment suitability, product • Enhancing its management information system and work governance, employee activities and accountabilities and processes in conducting customer due diligence, strengthening concerns on general conduct of business to ensure due transaction monitoring and detection of suspicious consideration is given with regard to the interest of the transactions consumers in developing, marketing and selling of products. • Enrichment of training programmes to ensure that staff improve their knowledge and analytical skills and keep abreast with the changing risk and regulatory landscape relating to AML/CFT 76 2018 ANNUAL REPORT PUBLIC BANK BERHAD RISK MANAGEMENT

Regulatory Developments The Public Bank Group’s lending remains focused on the retail Financial service providers continue to face stringent regulatory segment. Lending to Small and Medium Enterprises is diversified and supervisory requirements, particularly in the areas of across various business sectors. The credit risk strategy is capital and liquidity management, innovation and digitalisation aimed at supporting sustainable credit activities through of payment services, conduct of business, financial crime, achieving a balance between the credit quality, profitability and internal control framework and the integrity of financial growth objectives. Credit frameworks, policies and guidelines services delivery. The Public Bank Group acknowledges that the are reviewed to ensure they remain relevant, effective in strengthening of the regulatory framework is necessary to managing credit risks and are aligned to the overall risk maintain an orderly conduct in the financial intermediation and appetite. a sound banking system. To this end, the Group remains vigilant to the regulatory development and ensures proper The effectiveness of the credit practices and processes are planning in formulating viable and effective plans in meeting safeguarded through the periodic thematic and comprehensive the new regulatory requirements. The Group also recognises credit assessment conducted on all credit portfolios. Through the importance of proactive engagement with regulators to these assessments, any weaknesses in the practices are surfaced facilitate early understanding and expeditious implementation followed by operational actions that are instituted after the of the regulatory requirements. In this regard, the Group approval by the Credit Committee. For large credits, the credits strives to build and maintain positive relationships with are scored using the Standard and Poor’s scorecard and are regulators that have oversight responsibilities in the locations independently assessed by RMD followed by tabling of RMD’s where the Group operates. Accordingly, the Group’s frameworks, views to the Credit Committee. All the key credit risk and policies and associated practices are regularly reviewed to performance indicators of the credit portfolios are closely ensure that they keep pace with regulatory changes. monitored for any signs of stress. Whilst prudent pursuit of financing growth is key, the Group put much effort in taking Credit Risk extensive and exhaustive recovery efforts to control the delinquency and impaired loans ratios. The Group engages with The Malaysian economy had moderated in 2018, due to supply customers at early stages of delinquency to assist customers disruptions in the crude oil and petroleum sector and lower with their repayment plans and where necessary, financing may agriculture output. Domestic demand slowed as the Government be rescheduled. embarked on expenditure reprioritisation, which weighed on public sector spending. Meanwhile, private sector activity led The portfolio distribution of the respective credit portfolios is growth as household spending remained strong, underpinned monitored and reported periodically to both the management by continued expansion in income and employment. Private and board committees. During the year, the on-boarding of investment was mainly supported by capital spending in the credit with master rating grade of below D was negligible. The manufacturing and services sectors. The Public Bank Group performance of the credit scorecards is subject to statistical continuously monitors the development in operating performance monitoring to reaffirm their predictiveness and environment and maintains its vigilance in identifying areas of early identification of model risk. emerging risk that could adversely impact its credit portfolios. Assessments conducted to gauge the impact of adverse Despite the challenging operating environment, the Public developments and overhang in segments of the domestic Bank Group recorded gross impaired loans ratio of 0.5% as at property sector, changes in government policies and external the end of 2018, well below the banking industry’s gross developments indicate minimal impact on credit portfolios impaired loans ratio of 1.5%. brought about by the Group’s prudent lending practices. THE WAY FORWARD 77

Liquidity and Funding Risk Foreign Exchange Risk The key strength of the Public Bank Group is its diversified Fluctuations in exchange rates affect the value of the Public deposits franchise comprising of 51.4% of individual depositors Bank Group’s assets and liabilities denominated in foreign which provides a stable source of funding. Notwithstanding the currencies as well as the earnings from the Group’s overseas continuous intense competition for deposits in the banking operations. Sharp currency movements can also impact trade industry, the Group continued to record a growth of 6.2% of flows and the wealth of clients both of which could have an which 45.3% are from the individual segment. In intensifying impact on the Group’s performance. Fluctuations in exchange the pursuit of the operational deposits, Public Bank enhanced rates are closely monitored by the Group’s Treasury Division the cash management capabilities by launching “All-In-One and RMD. The funding of assets in the same currency is key in Digital Payment Platform” which simplifies the digital payment the Group’s exchange rate risk management. It is the Group’s acceptance process for its retail merchants. policy to hedge its foreign exchange exposures in order to protect the Group’s reserves and capital ratios from the effects The Liquidity Coverage Ratio (“LCR”) which promotes short- of fluctuations in exchange rates. In determining the ability to term resilience of a bank’s liquidity risk profile would be fully hedge, the Group takes into account the cost of hedging and implemented on 1 January 2019. Throughout 2018, the Public the liquidity of the hedging instruments. Bank Group maintained its LCR levels above the regulatory requirements of 100%.

The deferment of the Net Stable Funding Ratio (“NSFR”) provides respite to banks who have yet to comply with the NSFR requirements of 100%. For the Public Bank Group, the NSFR ratio had remained above 100% in 2018. Whilst the deferment had accorded time to comply, it may not ease deposit competition in the retail space as NSFR too accord the highest value to retail deposits. Offering of competitive deposits rates are expected to persist to maintain the optimal deposit mix that will minimise liquidity compliance cost.

Moving forward, the two key developments in the deposit space are the implementation of the 100% interest forfeiture for early withdrawal of term deposits and the removal of the tax exemption status for any interest receivable through wholesale money market fund. These two developments will be closely monitored for its impact on the deposit profile. The Public Bank Group will remain steadfast in growing its core deposits and exercise prudence in the management of its cash flows to ensure sustainable growth and strong liquidity position. 78 2018 ANNUAL REPORT PUBLIC BANK BERHAD ETHICS, INTEGRITY AND TRUST

1. Competence “WE STRIVE TO BE ‘THE BEST’, To develop and maintain the relevant knowledge, skills and behaviour to ensure that activities are conducted WHOSE WAYS OF MANAGING professionally and proficiently.

AND DOING BUSINESS OTHERS 2. Integrity To be honest and open in all business dealings or WANT TO EMULATE.” relationships. Behaving in an accountable and trustworthy – Tan Sri Dato’ Sri Dr. Teh Hong Piow manner.

3. Fairness ETHICAL LEADERSHIP To be responsible and take actions that are fair and transparent towards all stakeholders. A strong advocate of integrity and professionalism, Tan Sri Dato’ Sri Dr. Teh Hong Piow, Founder, Chairman Emeritus, 4. Confidentiality Director and Adviser of the Public Bank Group believes in To protect the confidentiality and sensitivity of building a trusted financial institution of high repute. This has information, including customer’s relationship with Public set the tone and foundation to develop as well as instill values Bank. to build a corporate culture of professionalism and ethical conduct in order to engender trust and confidence in the 5. Objectivity Group. To not allow bias, conflict of interest or undue influence of others to override business and professional judgement. The Public Bank Group has taken, and continues to take proactive initiatives, such as developing and maintaining framework and policies that lay the foundation for all employees FIT AND PROPER POLICY FOR KEY RESPONSIBLE to understand, internalise and conduct themselves with PERSONS integrity and trustworthiness. The Public Bank Group vigilantly implements and adheres to the prevailing provisions of the Group’s Fit and Proper Policy PUBLIC BANK GROUP CODE OF ETHICS for Key Responsible Persons which is in line with Bank Negara Malaysia’s (“BNM”) guidelines. This is to ensure that key The Public Bank Group’s Code of Ethics is aligned to the leadership positions in the Group are led by ethical, professional Professional Code for the Financial Services Industry issued by and competent personnel who have fulfilled the following the Financial Services Professional Board (“FSPB”). The Group’s criteria: Code of Ethics outlines the Purpose and Values which govern the Group’s way of working across all business functions and • Probity, Personal Integrity and Reputation – possesses the the interactions with all stakeholders. The Code of Ethics sets personal quality such as honesty, integrity, diligence, out the behavioural standards required of each employee, independence of mind and fairness. including employees of the Group’s subsidiaries, so that all • Competence and Capability – have the relevant knowledge, employees are united by a common set of values in the way skills, experience, ability and commitment to carry out the they think, work and act. The Group’s Purpose and Values are person’s role. encapsulated in the following 5 Fundamental Ethical Principles: • Financial Integrity – able to manage his financial affairs properly and prudently. THE WAY FORWARD 79

To ensure that there is a clear separation between ownership ANTI-FRAUD POLICY and management of Public Bank, it is a requirement for all The Public Bank Group has zero-tolerance towards any form of members of Senior Management to declare whether they hold fraud. The Group continuously strives to ensure that all its an aggregate interest of 5% or more in the shares of Public business activities are conducted with the highest standards of Bank during their initial Fit & Proper assessment. Thereafter, integrity, openness, transparency and accountability. The Anti- they are required to inform the Bank as and when there are Fraud Policy is established with the following core objectives: changes pertaining to their declaration. • Ensure the Public Bank Group’s business is conducted in accordance with the law.

INVESTOR PROTECTION POLICY • Nurture an environment of honesty and integrity. The Public Bank Group complies with the prevailing provisions • Promote awareness of the Group’s stand on improper, illegal of the Capital Market and Service Act 2007 by regularly and dishonest acts and the consequences of such acts. maintaining and developing its policies, systems and internal controls, including adherence to the following: • Create employee awareness of their roles, rights and responsibilities in relation to improper, illegal and dishonest • Standards on “fit and proper” on its employees carrying out acts. permitted capital market activities.

• Investor protection. The definition/scope of “Fraud” in the Anti-Fraud Policy has been expended to cover the following: • Maintenance of a register of names. (a) Asset Misappropriation (b) Fraudulent Statement/Representation COMPLIANCE POLICY (c) Corruption At the Public Bank Group all legal and regulatory requirements must be complied with at all times to safeguard the Group (d) Fraudulent acts (including acts of omission) or attempted against any financial, reputational or operational risks arising fraudulent acts committed on but is not limited to assets, from legal or regulatory non-compliance. In this regard, the data, records, documents or other information etc. Compliance Policy is developed with the following objectives: belonging to a shareholder, customer, staff, supplier, vendor, agent or any person(s) who has dealings with the • Set out the roles and responsibilities of the Board of Bank. Directors, Senior Management and Employees of the Public Bank Group in managing compliance risk.

• Set out the mandate of the Compliance Function for the ANTI-MONEY LAUNDERING AND COUNTER Group. FINANCING OF TERRORISM POLICY (“AML/CFT”) • Set out the compliance requirements and standards for the The Public Bank Group is fully committed to uphold laws and Group. regulations pertaining to money laundering and terrorism financing. It is incumbent upon every employee to ensure that • Set out the operating model for Compliance Function with the Group is not used as a conduit to facilitate illicit financial regard to the identification, management and reporting of activities. The Group has established an extensive infrastructure compliance risk. and system of internal controls to pro-actively safeguard the • Promote a corporate culture that upholds high standards of integrity of the Group from any money laundering or terrorism zero tolerance for legal and regulatory non-compliance, financing threats. The Group’s AML/CFT Policy sets out the integrity and ethics in the conduct of the Group’s business. following objectives: 80 2018 ANNUAL REPORT PUBLIC BANK BERHAD ETHICS, INTEGRITY AND TRUST

• Set out the expectation of AML/CFT requirements for the INFORMATION SECURITY POLICY entities within the Public Bank Group. The evolution of financial technology and digitalisation brings • Establish a framework to ensure that all employees about many forms of security threats. At the core of information understand and comply with the AML/CFT requirements to security is information assurance which encompasses the combat against money laundering or terrorism financing. maintenance and protection of data confidentiality, integrity and availability. The Information Security Policy endeavours to protect and secure, to a consistently high standard, the WHISTLEBLOWING POLICY AND PROCEDURE information assets of the Public Bank Group. The objectives of this policy are: The Whistleblowing Policy and Procedure has been put in place to promote an ethical culture and strengthen the professionalism • Protect the Public Bank Group’s information from possible expected of all employees. Employees and third parties threats whether internal or external, deliberate or accidental. including customers are provided with easy access to channels • Enable secure information sharing. which facilitate reporting of any breach, suspected breach of ethics or misconduct. • Ensure all employees are aware of their roles and responsibilities in managing and protecting the confidentiality The objectives of the policy are: and integrity of the information they handle.

• To provide an avenue and designated channels of escalation • Protect the Group from legal liability due to inappropriate for employees and third parties (e.g. interns, contractors, use of its information. consultants, vendors, suppliers and/or customers) to direct • Comply with applicable laws and regulations such as Financial their disclosures for the timely attention of Management. Services Act 2013, Personal Data Protection Act 2010 etc. • To set out the protection accorded to whistleblowers to enable them to disclose such irregularities in confidence without any risk of reprisals. EMBEDDING ETHICS, INTEGRITY AND TRUST IN THE PUBLIC BANK GROUP CORPORATE CULTURE A Board member, Mr Tang Wing Chew who is the Chairman of the Audit Committee has been designated as the Non-Executive The Public Bank Group has put in place a comprehensive Director responsible for the effective implementation of this framework in order to inculcate behaviour and conduct which policy. will create an honest, fair and objective workplace while operating in compliance with all laws and policies. The framework entails the following:

SOCIAL MEDIA POLICY • Incorporation of applicable guidelines and policies in the offer letter and service undertaking to be read, understood Today, social media are powerful communication tools that and acknowledged by all employees upon their appointment. have a significant impact on organisational and professional reputations. The Public Bank Group’s Social Media Policy • Reiteration of the guidelines and policies during the induction articulates the standard of appropriate behaviour to be programme for new employee. observed by every employee while engaging in social media • Reminders via employee circulars from time to time. activities both in their personal and professional capacity. The Social Media Policy is implemented with the following objectives:

• To set out the guidelines on the responsible and ethical usage of social media by all employees of the Group. • To set out the possible consequences of policy violation by employees. THE WAY FORWARD 81

• Comprehensive training on the standards of ethical conduct PRUDENTIAL FRAMEWORK AGAINST UNETHICAL expected of employee in the Public Bank Group with PRACTICES emphasis on: The Public Bank Group takes a serious view to any violations − Enhancing employee knowledge on regulatory requirements. of the Group’s code of ethics and conduct or applicable laws, − Enabling employee to understand and internalise the regulations or policies. The Group adopts a stringent disciplinary ethical standards set by the Group. procedure in meting out specific and appropriate disciplinary actions to reinforce the Group’s stand against any unethical or − Equipping employee with knowledge and skills to handle improper practices. The cases are also reported to the Board of ethical dilemmas with integrity. Directors to ensure that the Board has a supervisory overview − Equipping employee with knowledge and skills to detect of the ethical climate within the Group. early warning signs of fraud and malpractices. − Enabling employee to comply with the Group’s codes of ethics and conduct. • Extensive supervisory control and procedures in the Group’s daily operations to ensure scrupulous dealings which are integral to the Group’s corporate culture. • Conducting stringent and vigorous pre-employment screening on potential incumbents in order to prevent or minimise infiltration of undesirable elements into the staff force. • Conducting checks and monitoring on employee compliance of relevant guidelines or policies by the internal audit or compliance team on a regular basis. • Implementing a performance management system incorporating the achievement of expected ethical standards in the performance evaluation criteria.

• Adopting strategic risk governance on employee remuneration through malus, reversal or downward revaluation of rewards in the event of fraud and misconduct. 82 2018 ANNUAL REPORT PUBLIC BANK BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION • Designing, implementing and monitoring of the risk management and internal control system in accordance This Statement on Risk Management and Internal Control is with the Group’s strategies and overall risk appetite made pursuant to Bursa Malaysia Securities Berhad Listing Requirements which require the Board of Directors (“the • Identifying changes in the operational environment which Board”) to include in the Company Annual Report a statement give rise to risks or emerging risks and taking appropriate about the state of the Company’s risk management and internal actions and prompt escalation of the identified risks and control. Accordingly, the Board is pleased to provide the actions to the Board Statement on Risk Management and Internal Control that has been prepared in accordance with the “Statement on Risk Management and Internal Control – Guidelines for Directors of RISK MANAGEMENT AND INTERNAL CONTROL Listed Issuers” endorsed by Bursa Malaysia Securities Berhad. SYSTEM The key functions and processes that the Board has established in reviewing the adequacy and effectiveness of the risk BOARD’S RESPONSIBILITY management and internal control system include the following: The Board has oversight responsibility for the Public Bank Group’s (“the Group”) risk management and internal control Risk Management Function system and for reviewing its adequacy and effectiveness. The The Risk Management Function is responsible for the Board ensures that the risk management and internal control development and the implementation of the Group Risk system manages the Group’s relevant and material risks within Management Framework which is developed based on the Bank its risk appetite in the Group’s pursuit of its strategies and Negara Malaysia’s Policy Document on Risk Governance. The business objectives. Such a system is designed to identify, Group Risk Management Framework sets out the key principles evaluate and manage, rather than eliminate, the risk of failure of risk governance, and the development of risk management to achieve business objectives and can only provide reasonable practices and tools which enable the continuous identification, and not absolute assurance against material misstatement of measurement, controlling and monitoring of all relevant and management and financial information and records or against material risks of the Group including the identification of financial losses or fraud. emerging risks. The key elements of the Group Risk Management Framework which is approved by the Board are as follows: The Board has established an ongoing process for identifying, evaluating and managing the relevant and material risks – Risk Governance encountered by the Group and a key aspect of this process is The Group’s risk governance sets out the roles and the adoption of the three lines of defence model which sets responsibilities of the Board, the risk committees and the out clear risk management and control responsibilities of the parties involved in the three lines of defence for risk parties involved. The process for assessing the adequacy and management which consists of the business and support effectiveness of the risk management and internal control units as the first line of defence, risk management and system is regularly reviewed by the Board, which is assisted by compliance units as the second line of defence, and internal the Risk Management Committee, the Compliance Committee audit, the third line of defence. and the Audit Committee.

MANAGEMENT’S RESPONSIBILITY The Board is assisted by the Risk Management Committee (“RMC”) to oversee the management of all identified risks Management is overall responsible for ensuring that the day- including ensuring the risk infrastructures, processes and to-day management of the Group’s activities is consistent with controls are able to manage the risk activities in meeting the risk strategy, including the risk appetite and policies the risk appetite. The core committees and working groups approved by the Board. To this end, the key responsibilities of set up to manage specific risk areas include the Credit Risk the Management in respect of implementing the processes for Management Committee, the Assets & Liabilities risk management and internal control system are as follows: Management Committee, the Credit Committee, the Operational Risk Management Committee, the Shariah • Ensuring that all relevant and material risks associated with Committee and the Internal Capital Adequacy Assessment the Group’s business operations have been identified and Process Working Group. assessed to determine whether the risks are within the Group’s risk appetite Risk Management Division of Public Bank (“the Bank”) provides main support to the RMC and to the other risk THE WAY FORWARD 83

management committees in meeting their responsibilities and is responsible to develop and maintain group risk management policies and procedures that are responsive to changes in or expansion of business activities and developments in the operating environment.

– Risk Appetite The Group’s risk appetite defines the amount and types of risk that the Group is able and willing to accept in pursuit of its business objectives. It also reflects the level of risk tolerance and limits to govern, manage and control the Group’s risk-taking activities. The risk appetite of the Group is articulated via a set of risk indicators, risk limits and risk guiding principles. All entities within the Group are required to develop risk indicators and risk limits that have considered the Group’s risk guiding principles and the respective entities’ strategic business directions, risk taking capacity, risk profile and the operating environment. The processes for setting, cascading, monitoring and ongoing review of the risk appetite are set out in the Group Risk Appetite Framework.

– Risk Management Processes A structured approach to risk management which balances risks against returns is established for all relevant and material risks. The four broad processes for risk management to lead to a balanced risk-return framework are as follows:

RISK MANAGEMENT PROCESSES Risk Assessment Risk and Risk Control and Identification Measurement Mitigation Risk Monitoring

Integrated Across Risk Originated Risk or Strategy from Business Operations Balance Risk against Return

Identify, Quantify and Recommend Monitor and Understand and Assess Risk Measures to Report on Analyse Risk Impact Control and Progress and Mitigate Risk Compliance

The risk management processes are supported by Compliance Function management information systems that facilitate timely and The Compliance Function is responsible for the management of reliable reporting of risks to the Board and Management for statutory and regulatory compliance risk of the Group across deliberation. all jurisdictions in which the Group operates. The Compliance Function’s overall responsibility of monitoring the compliance – Risk Culture level of Group entities is guided by the Group Compliance The inculcation of a risk awareness culture is key in Policy, which sets out the mandate of the Compliance Function managing risk. The key factors of the Group’s risk culture for the Group and the compliance expectations for its entities are as follows: to adopt and implement. • Strong corporate governance • Organisational structure with clearly defined roles and As stipulated in the Group Compliance Policy, the Board has responsibilities the responsibility of oversight over compliance. The Board is • Effective communication assisted by the Compliance Committee (“CC”) to oversee • Commitment to compliance with laws, regulations and compliance matters including the implementation of the Group internal controls Compliance Policy. The Board recognises that a strong • Integrity in fiduciary responsibilities compliance culture cultivates high standards of integrity and • Clear policies, procedures and guidelines conduct. This pursuit is set out in the establishment of the • Continuous training Group Compliance Policy which is based on the following principles: 84 2018 ANNUAL REPORT PUBLIC BANK BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

– Zero Tolerance Approach reputation risk is consistently identified, assessed, mitigated/ The Group adopts a zero-tolerance approach towards legal controlled and monitored at both entity and group levels. In and regulatory non-compliance and all staff are expected to addition, procedures on the escalation and management of comply with the laws and regulations governing the Group’s potential or current reputation events are in place to ensure business. any reputation events are managed timely and appropriately.

– Compliance is Everyone’s Responsibility Information Technology Security and Cyber Resilience Compliance is the responsibility of all staff, regardless of The security and resiliency of the Group’s information and their position within the Group. technology infrastructure is crucial to maintaining its business operations in meeting customers’ and stakeholders’ expectations – Risk-based Approach and in safeguarding its reputation. The Corporate Information The Compliance Function undertakes a periodic Compliance Security Management Policy is established to ensure that the Risk Assessment to identify and prioritise the legal and Group’s information systems and data are properly safeguarded regulatory requirements applicable to the Group. and adequately protected from major potential threats such as errors, frauds, privacy violations, service disruptions and natural Reports on compliance matters covering compliance findings, disasters. In addition, the Group Cyber Resilience Framework corrective measures, the latest regulatory environment and any (“CRF”) is established to provide guidance to the Group on discernable areas of regulatory focus such as anti-money managing cyber security risk, improving cyber resilience as well laundering and counter financing of terrorism are tabled to the as ensuring adequate cyber-security preparedness throughout CC for review and deliberations at the monthly meetings. This the Group on a continuous basis. The CRF sets out baseline facilitates appropriate actions to be taken to address the non- security control requirements encompassing technology, compliance issues, where applicable. processes and people in achieving cyber resilience.

Shariah Compliance Continuous and systematic reviews are conducted by Information Technology Divisions of the Bank and its major The Shariah Governance Framework as well as other relevant operating subsidiaries to identify potential threats including policies and procedures are in place to manage the Islamic cyber threats and to enhance the technology infrastructure, businesses within the Group to ensure that Shariah-compliant processes and controls to strengthen the Group’s ability to products and the execution of the transactions are in compliance prevent, detect and respond to any potential business with Shariah principles. The Shariah Governance Framework disruptions and systems failures. In addition, external sets out amongst others, the roles and responsibilities of the consultants are engaged periodically to carry out targeted Board, the independent Shariah Committee, the Management assessments on IT core risks such as cyber security and and the internal Shariah compliance functions. The primary resilience assessments to benchmark the existing IT capabilities responsibilities of the Shariah Committee, which is presided by against international standards and best practices. Shariah-qualified members, are to advise the Board on Shariah matters pertaining to Islamic operations and to deliberate and Internal Control System endorse all Shariah policies and Shariah related matters. Ongoing Shariah reviews and audits are conducted to provide The key elements of the internal control system of the Group assessment of the level of compliance with the Shariah rules are as follows: and principles through an end-to-end review process from product development to management of the day-to-day – Board Executive Committee and other Board Committees operations of the Islamic business transactions. The outcome of The Board has established the Board Executive Committee the assessments and findings is escalated to the Shariah to assist the Board to manage the business of the Bank and Committee for deliberations. to ensure that the Bank’s day-to-day operations are executed in accordance with the Board’s approved Reputation Risk Management strategies, policies and business directions. The primary role The reputation of the Group is founded on trust from its of the Board Executive Committee is to oversee the customers, shareholders, employees, regulators and from the implementation and monitoring of the Board’s decisions public in general. Isolated events can undermine that trust and and to provide strategic guidance to the Management in negatively impact the Group’s reputation and it is therefore of response to the changes to the business environment or the utmost importance that it is protected. The Group’s Policy regulatory requirements. on Managing Reputation Risk is established to ensure that THE WAY FORWARD 85

In addition, to discharge its stewardship and fiduciary – Sustainability Management obligations more effectively, the Board has delegated The Group’s approach to sustainability is founded on a broad authority to various Board committees such as the understanding of its duties as a financial services provider Nomination and Remuneration Committee, the Risk and its responsibilities toward society and the environment, Management Committee, the Credit Risk Management as well as its role as an employer. The Group has in place a Committee, the Compliance Committee and the Audit Sustainability Framework which sets out the approach in Committee to enable them to oversee certain specific managing material sustainability matters, namely economic, responsibilities based on clearly defined terms of reference. environment and social risks and opportunities associated Any change to the terms of reference for any Board with the Group’s everyday operations, as part of the Group’s committee requires the Board’s approval. continuous effort to enhance its business operation to add further value to the stakeholders. – Management Committees and Management Working Committees Further details of the sustainability management of the Management Committees and the management working Group are also set out in the Sustainability Statement committees of the Bank and its major operating subsidiaries section in the Annual Report. are established to ensure that the day-to-day business – Internal Controls, Policies and Procedures operations are consistent with the corporate objectives, strategies and business plans and budgets approved by the A system of internal controls based on segregation of respective Boards including addressing issues emanating duties, independent checks, segmented system access from both the external business environment and internal control and multi-tier authorisation processes is put in operating conditions. In addition, the management working place to ensure control procedures and limits are committees also ensure the integration of sustainability in implemented and complied with. Authority limits are the business operations including the monitoring and imposed on the Management within the Group to govern implementation of sustainability-related strategies. the day-to-day risk taking activities such as extension of credits, treasury operations, investments, acquisitions and The management working committees include the Group disposals of assets. Policies and procedures are formulated Human Resource Committee, the Credit Committee, the in support of the Group’s internal control framework Operational Risk Management Committee, the Assets & including the Group Risk Appetite Framework, the Group Liabilities Management Committee, the Share Investment Compliance Policy, the Group Anti-Money Laundering and Committee, the Business Continuity Management Counter Financing of Terrorism (AML/CFT) Policy, the Committee, the IT Steering Committee and the Sustainability Group Banking Secrecy Framework, the Group Policy on Management Committee. Outsourcing Activities and the Group Policy and Procedures on Risk Management Practices for New Products to ensure – Annual Business Plans, Budgets and Management Reports compliance with internal controls and relevant laws and regulations and to govern the business and operations of Annual business plans and budgets of the Bank and its the Group. These policies and procedures are subject to major operating subsidiaries, which are developed in line periodic review based on a structured review process and with the Group’s strategies and risk appetite, are reviewed frequency to ensure relevance to the changes in the and approved by the respective Boards. Performance operational needs, business environment or regulatory achievements are assessed against the approved budgets requirements and are approved by the Boards, relevant and actions are taken to address variances identified and board committees or management committees respectively. escalated to the respective Boards periodically. In addition, the respective Boards of the Bank and its major subsidiaries The adequacy and effectiveness of the internal controls, receive and review reports from the Management on a policies and procedures as well as the level of compliance regular basis. These reports include business propositions, with the relevant laws, regulations, policies and procedures proposals on introduction of new products or services and are subject to ongoing assessment by the Risk Management management reports which highlight the key financial and Function, Compliance Function and Internal Audit Function performance indicators, as well as latest developments and of the Bank and its major operating subsidiaries. These compliance requirements on legal and regulatory matters. independent control functions assist the Boards in The Boards deliberate on the reports to ensure that discharging their oversight responsibilities on the adequacy appropriate actions are taken to resolve issues identified and effectiveness of the risk management and internal and where necessary provide directions to the Management. control system. 86 2018 ANNUAL REPORT PUBLIC BANK BERHAD STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

In addition, procedural guidelines are established to set out training programmes are in place to groom and nurture a systematic process and procedure for the annual review staff at all levels to enhance their professional competencies, of the adequacy and effectiveness of the risk management knowledge and skills. Various awareness programmes are and internal control system to provide assurance that the conducted regularly to inculcate ethical conduct and Group’s risk management and internal control system is professionalism in the staff force. operating adequately and effectively. – Group Code of Ethics – Business Continuity Management The Group Code of Ethics spells out the organisational The Bank and its major subsidiaries have established the values and ethical principles including the ethical standard Business Continuity Management Policy which sets out the of behaviour expected of all staff in the Group. It is aligned objectives, scope, strategies and emergency response to the Financial Services Professional Board’s Professional procedures as well as the lines of authority and responsibility Code for the Financial Services Industry. The five for effective implementation of business continuity fundamental ethical principles outlined in the Group Code management throughout the organisation. In addition, of Ethics are competence, integrity, confidentiality, fairness Business Continuity Plans and Disaster Recovery Plans are and objectivity. They are observed in all business and established for critical business functions and critical professional dealings towards all stakeholders. application systems respectively and are regularly tested to ensure the preparedness of staff, the readiness of alternate – Anti-Fraud Policy worksites, the reliability of backup IT systems, and the The Anti-Fraud Policy is established to ensure that the effectiveness of communication, escalation and recovery Group’s business is conducted in accordance with the laws procedures. Ongoing changes in systems, applications and as well as to articulate the Group’s zero-tolerance towards procedures are included in the disaster recovery plan any improper, illegal and dishonest acts. update cycle. It further sets out the Group’s expectations on all its staff – Information Asset Security and the requirements relating to the prohibition, recognition, The Group holds and processes confidential and personal reporting and investigation of suspected fraud, corruption, information on customers, employees, business partners misappropriation and other similar irregularities. The and suppliers as well as information relating to its own enforcement of the Anti-Fraud Policy helps to manage the operations. To safeguard and prevent the misuse of such Group’s reputational and operational risks arising from any information, the Group has established principles and fraudulent acts committed by staff. standards expected of staff when accessing and processing information in the course of their duties. In addition, – Whistleblowing Policy and Procedures policies, systems and control measures are put in place to The Group is committed to ensure its business and ensure that the information assets are properly managed, operations are conducted in an ethical, moral and legal controlled and protected during the collection, storage, use, manner. In line with this commitment, the Group has put transmission, sharing, disclosure and disposal. in place the Whistleblowing Policy and Procedures to provide an avenue for all staff, interns, consultants, – Human Capital Management contractors, vendors, suppliers and/or customers to disclose The Group manages its human capital according to a any illegal, unethical, questionable practices or improper framework based on the employee life-cycle which covers conduct committed or about to be committed within the different phases and the associated risks of each phase. The Group. The complaints shall be treated in strict confidence framework encompasses policies and operating standards and without any risk of reprisal. relating to workforce planning, talent acquisition, employment practices, talent management and succession Internal Audit Function planning aimed at managing and mitigating the people- The Internal Audit Divisions of the Bank and its major related risks. subsidiaries check for compliance with statutory/regulatory requirements, internal policies and procedures and review the The Group undertakes a structured screening in the work processes/procedures for efficiency and effectiveness. In acquisition and placement of talents designed to attract addition, the Internal Audit Divisions assess the operating and match the right talents to job functions. Customised THE WAY FORWARD 87

effectiveness of the risk management and internal control REVIEW OF THE STATEMENT BY EXTERNAL systems during their course of audits. Audits are carried out by AUDITORS Internal Audit Divisions on all units and branches, the frequency of which is determined by the level of assessed risks, to The external auditors have reviewed this Statement on Risk provide an independent and objective report on operational Management and Internal Control pursuant to the scope set and management activities of these units and branches. The out in Audit and Assurance Practice Guide 3 (“AAPG 3”), annual audit plan is reviewed and approved by the Bank’s and Guidance for Auditors on Engagements to Report on the its respective subsidiaries’ Audit Committees. Audit findings Statement on Risk Management and Internal Control included are submitted to the respective entities’ Audit Committees for in the Annual Report (previously, Recommended Practice Guide review at their monthly or periodic meetings. In addition, (“RPG”) 5 (Revised 2015), Guidance for Auditors on Shariah related findings are escalated to the Shariah Committee. Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report) issued by The Audit Committees of the Bank and its major subsidiaries the Malaysian Institute of Accountants (“MIA”) for inclusion in review internal control issues identified by the respective the annual report of the Group for the year ended 31 December Internal Audit Divisions, the external auditors, the regulatory 2018, and reported to the Board that nothing has come to authorities and the Management, including the remedial actions their attention that causes them to believe that the statement taken to address and resolve the issues identified, and evaluate intended to be included in the annual report of the Group, in the adequacy and effectiveness of the risk management and all material respects: internal control systems. The Audit Committees also review the (a) has not been prepared in accordance with the disclosures internal audit functions with particular emphasis on the audit required by paragraphs 41 and 42 of the Statement on scope, the frequency of audits and the adequacy and knowledge Risk Management and Internal Control: Guidelines for of the resources. The minutes of the Audit Committee meetings Directors of Listed Issuers, or are tabled to the respective Boards of the Bank and its major subsidiaries. Further details of the activities undertaken by the (b) is factually inaccurate. Audit Committee of the Bank are set out in the Audit Committee Report. AAPG 3 does not require the external auditors to consider whether the Directors’ Statement on Risk Management and Internal Control covers all risks and controls, or to form an ASSURANCE FROM MANAGEMENT opinion on the adequacy and effectiveness of the Group’s risk management and internal control system including the The Board has received assurance from the Chief Executive assessment and opinion by the Board of Directors and Officer and the Chief Financial Officer that the Group’s risk management thereon. The auditors are also not required to management and internal control system is operating consider whether the processes described to deal with material adequately and effectively, in all material aspects, based on the internal control aspects of any significant problems disclosed in risk management and internal control system implemented by the annual report will, in fact, remedy the problems. the Group. Taking into consideration the assurance from the management and input from the relevant assurance providers, the Board is of the view that the Group’s risk management and internal control system in place for the financial year under review and up to the date of approval of this statement for inclusion in the Annual Report is adequate and effective to safeguard the interests of shareholders, customers, employees and the Group’s assets. 88 2018 ANNUAL REPORT PUBLIC BANK BERHAD AUDIT COMMITTEE REPORT

1. COMPOSITION The Audit Committee is a Board-delegated Committee established by the Board of Directors. The Audit Committee comprises four (4) Members, all of whom are Independent Non-Executive Directors, which is in compliance with the requirements set out in the Malaysian Code of Corporate Governance (“MCCG”) revised by Securities Commission Malaysia (“SC”) on 26 April 2017. The Board-appointed Chairman of the Audit Committee is not the Chairman of the Board of Directors. Collectively, the Audit Committee Members have a wide range of necessary skills, knowledge and experience, including 1 2 accounting or related banking expertise and experience in discharging their duties.

2. ATTENDANCE OF MEETINGS Pursuant to the Terms of Reference of the Audit Committee which state that meetings shall be held not less than 12 times a year, the Audit Committee had met 17 times in year 2018. The attendance of each Audit Committee Member at the meetings held during the year is shown in the table below: 3 4 Name of Audit Attendance at Audit Committee Members Committee Meetings in 2018 Lai Wan Member/Independent 17/17 Non-Executive Chairman Tang Wing Chew Chairman/Independent 17/17 Non-Executive Director Lai Wai Keen Member/Independent 17/17 5 Non-Executive Director 1. Lai Wan Cheah Kim Ling (Member/Independent Non-Executive Chairman) Member/Independent 17/17 2. Tang Wing Chew Non-Executive Director (Chairman/Independent Non-Executive Director) 3. Lai Wai Keen (Member/Independent Non-Executive Director) 4. Cheah Kim Ling (Member/Independent Non-Executive Director) 5. Dato’ Mohd Hanif bin Sher Mohamed (Member/Independent Non-Executive Director) Note: Dato’ Mohd Hanif bin Sher Mohamed was appointed as a Member/Independent Non-Executive Director of Public Bank with effect from 22 January 2019 THE WAY FORWARD 89

3. ROLES AND RESPONSIBILITIES OF THE AUDIT • Assesses and approves the appointment, replacement COMMITTEE and dismissal of the Group Chief Internal Auditor (“GCIA”). On an annual basis, the Audit Committee The Board-approved terms of reference including the roles assesses the suitability of the GCIA in assuming his and responsibilities of the Audit Committee were drawn position in accordance with the fit and proper criteria up with reference to and in compliance with the as approved by the Board of Directors. The Audit requirements set out in the Bank Negara Malaysia’s Policy Committee also approves the recruitment and dismissal Document on Corporate Governance, Bursa Malaysia of Senior Management staff (Senior Manager level and Securities Berhad’s Main Market Listing Requirements and above) of Internal Audit Division as well as evaluates MCCG 2017. The parent bank’s Audit Committee is the performance and decides the remuneration of the supported by the Audit Committee established at the GCIA and the Senior Management staff of the Internal respective subsidiaries as the case may be. Audit Division annually.

In discharging its duties, the Audit Committee is • Oversees the performance and effectiveness of the sufficiently empowered to carry out its roles and Internal Audit function based on the approved key responsibilities with unambiguous authority to investigate performance indicators, assesses the competency and any matter within its terms of reference, to acquire experience of the Internal Audit staff as well as the independent professional advices, if necessary, and adequacy of resources in order for the Internal Audit essential resources required to perform its duties as well function to carry out its work effectively. The Audit as full and unrestricted access to any information which Committee also ensures that Internal Auditors have the belongs to Public Bank and the Public Bank Group. authority to carry out their work objectively and independently, free from any relationship or conflicts of The roles and responsibilities of the Audit Committee, interest. amongst others include the following: • Reviews the internal and external audit reports to • Reviews the adequacy and effectiveness of the risk ensure that appropriate and adequate remedial actions management systems, internal controls and governance are taken timely by Management to address and resolve processes implemented in Public Bank and the Public the key issues/significant lapses in controls and Bank Group. The Audit Committee is supported by an procedures that are identified. The Audit Committee independent Internal Audit function established in also notes any significant disagreements between the accordance with the Bank Negara Malaysia’s Guidelines GCIA and the Senior Management team, irrespective of on Internal Audit Function of Licensed Institutions. The whether the significant lapses have been resolved, in Internal Audit function performs ongoing periodic order to identify the impact of the disagreements that reviews and assessments on the risk management may have on the audit process or findings. systems, internal controls and governance processes • Reviews the annual assurance statement provided by put in place and reports the outcome of such the Internal Audit function on the adequacy and assessments directly to the Audit Committee in its effectiveness of risk management systems, internal monthly meetings. controls and governance processes before it is tabled to • Reviews and recommends the Internal Audit Charter to the Board of Directors for noting. the Board of Directors for approval as well as approves • Reviews the audit report on related party transactions the annual audit plan, training plan, internal audit on a quarterly basis for assurance that these transactions methodologies and scope. are conducted at arm’s length and to inform the Board of Directors of any irregularities noted. 90 2018 ANNUAL REPORT PUBLIC BANK BERHAD AUDIT COMMITTEE REPORT

• On its role with regard to financial reporting, the Audit 4.1 Financial Reporting Committee is entrusted to review the unaudited The Audit Committee had reviewed the draft quarterly and half-yearly financial results and annual unaudited quarterly and half-yearly financial results audited financial statements of Public Bank and the as well as the annual audited financial statements of Public Bank Group prior to its recommendation to the Public Bank and the Public Bank Group prior to its Board of Directors for approval. The Audit Committee, recommendation to the Board of Directors for through the Internal Audit function, ensures that the approval, submission to Bank Negara Malaysia and financial reporting process is reliable and transparent thereafter release to Bursa Malaysia Securities within Public Bank and the Public Bank Group. Berhad pursuant to its Main Market Listing • Reviews and assesses the performance of the external Requirements. The review covers among others, an auditor in accordance with the requirements set out in assessment on the appropriateness of the accounting Bank Negara Malaysia’s Policy Document on External standards applied and its treatments, financial Auditor. This includes assessment on the performance reporting and disclosures are in compliance with the of external auditor prior to recommendation to the relevant regulatory requirements and applicable Board of Directors for approval on their appointment/ accounting standards in Malaysia. In carrying out re-appointment, remuneration and removal in such a review, the Audit Committee had sought accordance with the criteria set out in the Public Bank explanations and additional information from the Berhad Group’s Policies and Procedures for Senior Management including the Chief Financial Appointment/Re-appointment of External Auditors for Officer on the reasons for any significant variances/ Audit and Non-Audit Services (Group Policies and fluctuations in the financial performance of Public Procedures). For provision of non-audit services by the Bank and the Public Bank Group, including the key external auditor, the Audit Committee has to be income and operating expenses. satisfied that the external auditor is capable, independent and objective in the provision of such In reviewing the quarterly and annual financial services, no element of conflict of interest and the results, the Audit Committee focused on the proposed fees are within the allowable threshold set following: before recommending the proposed engagement to the • Profits contribution by geographical locations and Board of Directors for consideration and approval. The business segments; Audit Committee also reviews key audit matters raised by the external auditor including Management’s actions • Trends on financial ratios, such as return on equity, taken to address and resolve such matters. net interest margin, cost of funds, cost-to-income ratio, loan loss allowances ratios and capital ratios; The details of the terms of reference of the Audit and Committee are available at www.publicbankgroup.com. • Significant issues relating to adoption of accounting policies and financial reporting.

4. SUMMARY OF ACTIVITIES On the review of the half-yearly and annual financial For the financial year ended 31 December 2018, the results of Public Bank and the Public Bank Group, Audit Committee had carried out the following activities the Audit Committee met up with the external in the discharge of its roles and responsibilities: auditor, Messrs. Ernst & Young (“EY”) to discuss the outcome of EY’s audit on Public Bank and the Public Bank Group with particular focus on: THE WAY FORWARD 91

• Significant matters highlighted including financial submission of the application for interim dividend to reporting issues, significant judgments made by Bank Negara Malaysia for the financial year ended the Management, significant and unusual events 31 December 2018. The solvency assessment or transactions, and how these matters are covered areas encompassing the Bank’s financial addressed and resolved; and indicators, cashflow, liquidity positions as well as any financing arrangements. • Compliance with the applicable approved accounting/auditing standards in Malaysia and 4.2 Post-Implementation of Malaysian Financial other legal and regulatory requirements. Reporting Standard 9: Financial Instruments

The Audit Committee had also discussed with the The Audit Committee in its oversight role over Public GCIA on the internal audit coverage pertaining to Bank’s implementation of the Malaysian Financial the Bank’s interim financial results including the Reporting Standard 9: Financial Instruments (MFRS adequacy and effectiveness of the procedures put in 9) on 1 January 2018, has obtained periodic updates place for the Bank’s financial reporting processes, from the Management to ascertain the adequacy of consistency in the methodology adopted and applied the methodologies and models used as follows: for impairment assessment and computation of • Observations highlighted during the validation of impairment allowance, the adequacy of the processes the models and implementation of the MFRS 9 as and procedures put in place to account for the well as the action plans to address and resolve the significant adjustments made to the financial observations; statements and risk of material misstatement due to fraud. • Appropriateness and robustness of the stage transfer criteria for the classification of loans and Based on the above reviews and discussions, the advances to ensure that the criteria set are in line Audit Committee is satisfied that the accounting with the latest developments in regulatory standards applied as well as the financial reporting requirements and operating environment; and disclosures presented in the interim financial • Day-1 adjustment and restated opening balances statements are in conformity with the applicable arising from the initial adoption of MFRS 9; accounting standards in Malaysia and in compliance with the relevant regulatory requirements in terms • Outcome of the post-implementation validation of of disclosures. MFRS 9 models to ensure that the models adopted for MFRS 9 are fit for purpose and fit for use; Overall, the Audit Committee had reviewed and • Adequacy and appropriateness of the disclosures noted that the financial statements of Public Bank relating to MFRS 9 in the annual financial reports and the Public Bank Group are presented on a in accordance with the requirements of MFRS 9 on-going concern basis, fairly presented and in and MFRS 7; conformity with the relevant accounting standards in all material aspect of its financial position and • Adequacy and appropriateness of the justification/ performance for the financial year ended 31 basis as well as consistency in the application of December 2018. model risk adjustments; and • Progress of the implementation International Pursuant to the requirements set out in the Financial Reporting Standard 9 (“IFRS 9”) at Public Companies Act 2016, the Audit Committee had Bank’s overseas banking subsidiaries. reviewed the solvency assessment performed for Public Bank and the Public Bank Group prior to the 92 2018 ANNUAL REPORT PUBLIC BANK BERHAD AUDIT COMMITTEE REPORT

4.3 External Audit 4.4 Internal Audit Matters The Audit Committee reviewed and evaluated EY’s In its oversight over the Internal Audit function, the audit plan particularly the scope of audit for the Audit Committee approved the internal audit financial year ended 31 December 2018. EY’s audit framework and the annual audit plan to ensure the plan covered its engagement team, concept of adequacy of audit scope and comprehensiveness of materiality, independence and objectivity, and the coverage over the activities of Public Bank and the areas of audit emphasis for the year. The Audit Public Bank Group and that all high risk areas were Committee also reviewed the key audit matters audited at least annually. In addition, the Audit raised by EY arising from its annual audit as well as Committee also reviewed and monitored the Internal issues raised in the Management Letter including Audit function’s performance, progress of its Management’s responses/actions taken on the achievement against the approved annual audit plan resolution of such issues. and the adequacy of audit coverage on a quarterly basis. In 2018, the Audit Committee met 4 times with Public Bank’s external auditor EY, to apprise on During the year, the Internal Audit function had matters under review and on matters in regard to adopted the standards outlined in the International the financial statements for the financial year ended Professional Practices Framework (“IPPF”), i.e. the 31 December 2018. In so doing, the Audit conceptual framework that organised authoritative Committee had: guidance promulgated by The Institute of Internal Auditors (“IIA”). • Reviewed, discussed and where necessary sought explanations from EY on the results of their audits/ The Audit Committee had reviewed and deliberated half-yearly limited review; and the revisions of the Internal Audit Charter and • Discussed the latest changes to the accounting recommended the same to the Board of Directors for standards and issues impacting Public Bank’s and approval. In addition, the Audit Committee reviewed the Public Bank Group’s financial statements. and approved the revised internal audit framework and the action plans to address the competency gaps The Audit Committee had assessed and is satisfied of the Internal Audit function. with the performance and effectiveness of EY based on the criteria set out in the Group Policies and The Internal Audit reports were tabled to the Audit Procedures, and recommended to the Board of Committee in its monthly meetings for review, Directors to approve the re-appointment of EY as deliberations and noting. Senior Management officers the external auditor for Public Bank and the proposed were invited to attend the meetings as and when remuneration for its services. necessary to brief the Audit Committee on matters relating to their areas of responsibility. Where During two (2) of the above four (4) meetings, as appropriate, the Audit Committee had directed provided under the terms of reference of the Audit Management to rectify and improve control Committee, the Audit Committee met the EY’s procedures based on the internal auditors’ engagement team to discuss matters of interest recommendations. As for the reports issued by without the presence of Management or Internal regulatory authorities, the Audit Committee reviewed Audit staff. the Management’s responses to the regulator’s recommendations, remedial actions taken and the committed timeline to rectify the gaps highlighted THE WAY FORWARD 93

for recommendations to the Board of Directors for • Increase usage of audit tools to improve the audit approval. The Audit Committee also monitored the coverage and assessment in meeting challenges progress of the corrective actions taken by arising from developments in financial technology Management to ensure that appropriate remedial and digital revolution in the banking sector; actions were taken on a timely basis to address all • Establishment of clear internal operational key areas of risk and control issues highlighted in procedures on the handling of whistleblowing the internal audit reports/reports issued by regulator. cases including resource allocation for investigation, reporting, follow-up and monitoring until the The Audit Committee reviewed on a quarterly basis closure of each case; the tests conducted on the Bank’s Business Continuity Plan and Disaster Recovery Plan and • Steps to further elevate the internal auditors’ assessed annually Public Bank’s level of commitment competency, knowledge and skill sets through to Business Continuity Management and overall specialised certification programmes with preparedness to ensure compliance with the Bank recognised bodies such that the quality of the Negara Malaysia’s Guidelines on Business Continuity Internal Audit function is in line with international Management. The Audit Committee also reviewed professional standards; and the Internal Audit report on related party transactions • Enhanced role of Public Bank’s Internal Audit entered into between Public Bank and the Public function in supporting the Internal Audit function Bank Group on a quarterly basis to ensure that these of its subsidiaries. transactions are undertaken on an arm’s length basis. For the financial year under review, the Audit During the year, the Audit Committee reviewed the Committee is not aware of any significant road map for internal auditors to be certified with disagreement between the GCIA and Management. Certification for Bank Auditors (“CBA”) within the timeline specified by Bank Negara Malaysia i.e. 50% 4.5 Following-up and Resolution of Issues Raised to be certified by 31 December 2020 and 100% by during the Audit Committee Meetings the end of year 2022. In this regard, the Audit Committee also reviewed the periodic updates on During the financial year ended 31 December 2018, the Internal Audit function’s achievement against the based on the papers presented for review and targets set by Bank Negara Malaysia. deliberation, the Audit Committee had raised some comments on the following areas which required The Chairman of the Audit Committee met with the Management’s actions: GCIA and/or Senior Management staff of the Internal (a) MFRS 9 related matters such as appropriateness Audit function five (5) times in 2018. of the bases and methodologies used, appropriateness and adequacy of the pre and During these meetings, the Chairman of the Audit post-implementation model validation as well Committee provided insights, guidance and directives as the external auditor’s observations on the to further improve the effectiveness of the Internal implementation of MFRS 9 at Public Bank and Audit function in discharging its roles and responsibilities the Public Bank Group; including its readiness to cope with any emerging risks and challenges. The matters discussed during the (b) Contributory causes to fraud/staff misconduct meetings mainly focused on the following: and actions taken to address and resolve the control weaknesses highlighted and • Key audit findings and other significant matters relating to the operations of Public Bank and the Public Bank Group; 94 2018 ANNUAL REPORT PUBLIC BANK BERHAD AUDIT COMMITTEE REPORT

(c) Key audit findings and significant matters 5. INTERNAL AUDIT FUNCTION highlighted in the internal/external audit Internal Audit function, being the third line of defence, is reports and the adequacy and timeliness of responsible to provide independent assessment of Management’s action plans to address and compliance with statutory/regulatory requirements, resolve the issues. internal policies and procedures and reviews the adequacy and effectiveness of the risk management systems, All comments/issues raised during the Audit internal controls and governance processes put in place Committee meetings are followed up by the Internal by Public Bank and the Public Bank Group. Audit function. The Audit Committee is updated on the progress until resolution of the comments/ The Internal Audit Charter sets out the purpose, objectives, issues. authority, scope of work and responsibilities of the Internal Audit function in Public Bank and the Public Bank 4.6 Audit Committee’s Oversight Over the Group. The Internal Audit Charter, which was drawn up Implementation of Whistleblowing Policies and with reference to the relevant guidelines and policy Procedures documents issued by Bank Negara Malaysia and the Basel The Audit Committee also oversees the Committee on Banking Supervision, is subject to review implementation of Public Bank’s whistleblowing annually to ensure that it remains relevant. policies and procedures that set out the avenues for Public Bank’s staff and other relevant stakeholders Public Bank’s Internal Audit Division is staffed by 200 such as contractors, consultant and interns to raise individuals with relevant experience and qualifications, concerns about illegal, unethical or questionable and comprised nine (9) sections specialising in various practices in confidence and without the risk of auditing/business areas. The GCIA reports directly to the reprisal. Audit Committee. The Internal Audit function has unfettered access to the Board of Directors, Audit Public Bank had further strengthened its Committee and Senior Management, as well as the whistleblowing policies and procedures in 2017 to authority to seek information and explanations, for the take into consideration the requirements set out in purpose of conducting its audit. the Bank Negara Malaysia’s Policy Document on Corporate Governance. In this connection, the Board Internal Audit function provides independent assurance to of Directors appointed the Chairman of the Audit the Audit Committee and Senior Management based on Committee as the designated non-executive director its report on the adequacy and effectiveness of the to be responsible for the effective implementation of internal control environment of the areas audited upon the whistleblowing policies and procedures, including the completion of each audit. Internal Audit function the evaluation of the periodic reports that monitor adopts a risk-based approach to prioritise the audit work and assess how concerns are escalated and dealt and to scope the audits on high risk auditable areas. with, and overseeing periodic reviews on the Internal Audit’s assurance covers a broad range of business effectiveness on the whistleblowing policies and activities and operations including the Outsourced Service procedures. Providers, to ascertain whether the internal controls are sufficient and effective in ensuring proper safeguarding of assets; maintenance of accurate records and transactions; monitoring the quality of assets; compliance with relevant laws and regulations; adherence to established policies and procedures and management efficiency. THE WAY FORWARD 95

Internal Audit’s assurance provides a comprehensive Internal Audit function works collaboratively with review on the established controls to determine if they Compliance function and Risk Management function to are appropriate, effectively applied and consistent with review and assess the risk governance framework and risk Public Bank and the Public Bank Group’s risk management management processes of Public Bank and the Public policies. Audit recommendations for improvement to the Bank Group in respect of their adequacy and effectiveness existing system of internal controls and work processes in managing the key risks facing Public Bank and the are made to the Management for resolutions where Public Bank Group. necessary. Internal Audit function also carries out the following: The total costs incurred for the Internal Audit function of Public Bank and the Public Bank Group for 2018 are as • Audits on the information systems of Public Bank and follows: the Public Bank Group to ensure that the computing resources are adequately secured to protect the data integrity and confidentiality, and there are adequate RM’000 measures to safeguard and provide for the continued Public Bank 27,633 availability of the system to support business operational needs; Public Bank Group 41,881

• Reviews risk exposures of new systems, business Further details of the activities of Internal Audit function products and services to ensure adequate controls are are set out in the Statement on Risk Management and in place to mitigate the risks identified prior to Internal Control. implementation. When performing such review, Internal Audit function is not involved in the system selection or implementation process in order to maintain its objectivity and independence;

• Investigative audits where there are improper, illegal and dishonest acts reported;

• Ad-hoc reviews/audits requested by regulators; • Limited reviews on the draft unaudited quarterly and half-yearly financial statements focusing on Public Bank’s conformity with applicable approved accounting and financial reporting standards as well as compliance with the relevant regulatory requirements; and

• Reviews the level of commitment to Business Continuity Management and overall preparedness, against the institution’s Business Continuity Management policies and regulatory requirements as well as to determine the adequacy of the business continuity plan and disasters recovery plan testing exercise. 96 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP MANAGEMENT PROFILE

TAN SRI DATO’ SRI TAY AH LEK DATO’ CHANG KAT KIAM 76, Male, Malaysian 64, Male, Malaysian Managing Director / Chief Executive Officer Deputy Chief Executive Officer

Qualifications Qualifications • Master in Business Administration, Henley, United Kingdom • Master in Business Administration (Finance), University of • Emeritus Fellow of the Malaysian Institute of Management Hull, United Kingdom • Fellow, Chartered Banker of the Asian Institute of Chartered Experience Bankers (AICB) • Dato’ Chang has been with Public Bank since 1975 and is • Fellow of the Chartered Banker Institute (CBI), Scotland experienced in all aspects of banking having managed • Fellow of CPA Australia branches and banking business portfolios in Head Office • Fellow of the Financial Services Institute of Australasia • Appointed Chief Operating Officer in 2006 • Advanced Management Program at Harvard Business School • Redesignated Senior Chief Operating Officer in October Experience 2013 • Tan Sri Dato’ Sri Tay is a veteran in the financial services • Appointed to his present position in January 2016 industry with 58 years of experience Present Directorship in other Public Companies • A pioneer staff of Public Bank in 1996, he held several • Director of Public Financial Holdings Ltd portfolios over the years including the Executive Vice • Director of Public Bank (Hong Kong) Ltd President position in Public Finance and Public Bank • Director of Public Finance Ltd • Appointed Executive Director of Public Bank in 1997 and • Director of Cambodian Public Bank Plc Managing Director / Chief Executive Officer in 2002 • Director of Campu Lonpac Insurance Plc Present Directorship in other Public Companies • Director of Campu Securities Plc • Director of Public Investment Bank Bhd • Director of Public Bank Vietnam Ltd • Director of Public Islamic Bank Bhd • Director of AIA PUBLIC Takaful Bhd • Director of Public Mutual Bhd • Director of Public Bank (Hong Kong) Ltd • Director of Cagamas Holdings Bhd • Director of Ombudsman for Financial Services THE WAY FORWARD 97

CHANG SIEW YEN DATO’ SULAIMAN BIN ABD MANAP 50, Female, Malaysian 62, Male, Malaysian Chief Operating Officer, Public Bank Berhad Chief Operating Officer, Public Bank Berhad

Qualifications Qualifications • Chartered Accountant of the Malaysian Institute of • Master in Business Administration (Finance), University of Accountants (MIA) Hull, United Kingdom • Certified Public Accountant of the Malaysian Institute of • Bachelor of Science (Chemistry), University of Malaya Certified Public Accountants (MICPA) Experience • Bachelor in Accounting (Hons), University of Malaya • Dato’ Sulaiman joined Public Bank in 1981 and experienced Experience in both branch banking and Head Office credit • Ms Chang has more than 25 years experience in the auditing, • Appointed Head of Credit Operations in 2003 and Chief banking and finance industry Operating Officer in July 2012 • Joined Public Bank in 2005 as Deputy Director of Finance • Presently oversees the Bank’s Knowledge & Learning, Banking and subsequently appointed Head of Finance and Chief Operations, Credit Administration & Supervision, HP Credit Financial Officer in 2006 Control, Process Innovation & Transformation and Compliance • Promoted to General Manager in 2009 and Senior General Present Directorship in other Public Companies Manager in July 2012 • Nil • Redesignated Chief Operating Officer in October 2013 • Presently oversees the Bank’s Finance, Corporate Planning, Strategy & Economics, Information Technology and Property

Present Directorship in other Public Companies • Director of PB Trust (L) Ltd • Director of PB Trustee Services Bhd 98 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP MANAGEMENT PROFILE

LEE YO-HUNN SYAMSUL AZUAN BIN AHMAD FAUZI 43, Male, Malaysian 42, Male, Malaysian Chief Executive Officer, Public Investment Bank Berhad Chief Executive Officer, Public Islamic Bank Berhad

Qualifications Qualifications • Certified Practising Accountants (CPA) Australia • Bachelor of Commerce and Management (Accounting), • Bachelor of Commerce, The University of Western Australia, Lincoln University, New Zealand Australia Experience Experience • En Syamsul Azuan has 20 years working experience in the • Mr Lee has a total of 21 years working experience comprising corporate and investment banking field (both conventional 7 years of assurance and advisory work in both Malaysia and and Islamic) of which 7 years were in the middle east Australia as well as 14 years of corporate finance and • His attachment with the various financial institutions has advisory work with Public Investment Bank developed his technical skills in Islamic finance especially on • Joined Public Investment Bank in January 2005 as Manager debt capital market/sukuk and corporate finance of Corporate Finance & Advisory Division (CFAD) • Held several senior managerial positions prior to joining • Appointed Head of CFAD in December 2012 Public Islamic Bank in February 2019 as Chief Executive • Served as the Deputy Chief Executive Officer since January Officer 2015 overseeing the CFAD, Corporate Banking & Securities Present Directorship in other Public Companies Financing Division and Debt Capital Markets Division prior • Nil to his appointment as Chief Executive Officer in January 2019

Present Directorship in other Public Companies • Nil THE WAY FORWARD 99

YEOH KIM HONG TAN YOKE KONG 57, Female, Malaysian 66, Male, Malaysian Chief Executive Officer, Public Mutual Berhad Executive Director & Chief Executive, Public Bank (Hong Kong) Limited

Qualifications • Chartered Accountant of the Malaysian Institute of Qualifications Accountants (MIA) • Fellow of the Association of Chartered Certified Accountants, • Certified Public Accountant of the Malaysian Institute of United Kingdom Certified Public Accountants (MICPA) • Fellow of the Institute of Chartered Secretaries and • Certified Financial Planner Administrators, United Kingdom Experience • Fellow of the Hong Kong Institute of Chartered Secretaries • Ms Yeoh has more than 23 years experience in the unit trust • Diploma in Commerce, TAR College industry Experience • Joined Public Mutual in 1996 and appointed to her present • Mr Tan has over 37 years experience in the banking and position in July 2007 finance industry • She is also a member of the Board of Directors and the • He was seconded from Public Bank to Hong Kong in 1991 Investment Committees of Public Mutual • Appointed to his current position as Executive Director & • She has played an active role in the development of the unit Chief Executive of Public Bank (Hong Kong) Limited after its trust industry acquisition by the Group in 2006 • She sits in the Board of the Federation of Investment • Prior to this, he was the General Manager & Chief Executive Managers Malaysia (FIMM) and is a member of the Industry of Public Finance Limited Development Committee, Regulatory Committee and • He has served as the Vice Chairman of The Deposit-Taking Disciplinary Committee Companies Association and a member of The Deposit-Taking Present Directorship in other Public Companies Companies Advisory Committee in Hong Kong for several • Nil years prior to his appointment in Public Bank (Hong Kong) Present Directorship in other Public Companies • Executive Director / Chief Executive of Public Financial Holdings Ltd 100 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP MANAGEMENT PROFILE

LEE HUAT OON DATUK PHAN YING TONG 56, Male, Malaysian 56, Male, Malaysian General Manager / Chief Executive and Executive Director, Regional Head, Indo-China Operations Public Finance Limited

Qualifications Qualifications • Master in Business Administration, University of London, • Chartered Accountant of the Malaysian Institute of United Kingdom Accountants (MIA) Experience • Bachelor in Accounting, University of Malaya • Datuk Phan has a total of 37 years service with the Public Experience Bank Group • Mr Lee has more than 31 years experience in the banking • He was a Branch Manager of several branches in Public Bank and finance industry before his appointment as General Manager of Cambodian • Joined the Public Bank Group’s Hong Kong operations in Public Bank Plc in 2002 1995 • Appointed Country Head of Cambodian Public Bank Plc in • Appointed Chief Executive of Public Finance Limited in 2006 2007 before his current appointment as Regional Head of and is also an Executive Director of Public Finance Limited Indo-China Operations in March 2014 • He is currently the Acting Chairman of The Deposit-Taking Present Directorship in other Public Companies Companies Association and a member of The Deposit-Taking • Executive Director of Cambodian Public Bank Plc Companies Advisory Committee • Director of Campu Securities Plc • He has served as the Vice Chairman of The Deposit-Taking • Director of Public Bank Vietnam Ltd Companies Association, a member of the Deposit-Taking Companies Advisory Committee, a director of The Hong Kong Mortgage Corporation Limited and a member of the Banking and Finance Industry Training Board in Hong Kong None of the Group Management staff has: for several years • Any family relationship with any Director and/or major Present Directorship in other Public Companies shareholder of Public Bank • Executive Director of Public Financial Holdings Ltd • Any conflict of interest with Public Bank • Any conviction for offences within the past 5 years other than traffic offences Being the Founder, and as the Chairman Emeritus, Director and Adviser to the Public Bank Group, I continue to hold the principle of creating long term and shared values with the stakeholders of the Group, and I am ever confident that the Public Bank Group will continue to pursue this direction for the benefit of all stakeholders. Tan Sri Dato’ Sri Dr. Teh Hong Piow Founder, Chairman Emeritus, Director and Adviser 102 2018 ANNUAL REPORT PUBLIC BANK BERHAD HEADS OF DIVISION

1 DATO’ AB. RAZAK BIN MD DALI 3 DATO’ CHIA LEE KEE 64, Male, Malaysian 65, Female, Malaysian Senior General Manager, Public Affairs Senior General Manager, Secretariat

Qualifications Qualifications • Master in Science (Corporate Communication), Universiti • Chartered Secretary (ICSA) Putra Malaysia • Fellow of the Malaysian Institute of Chartered Secretaries and Administrators Experience • Joined Public Bank in 1977 Experience • Experienced in branch banking and appointed Head of • Joined Public Bank in 1978 and appointed Head of Public Affairs in 1994 Secretariat in 1997 • Responsible for the Bank’s public relations, corporate • Dato’ Chia is the Bank’s Company Secretary and oversees communication, advertising and sports portfolio. the Group’s company secretarial matters Present Directorship in other Public Companies Present Directorship in other Public Companies • Nil • Director of PBFIN Bhd

2 CHAN CHEW FUNG 4 KOAY SEOK KHIM

60, Female, Malaysian 65, Female, Malaysian Senior General Manager, Corporate Banking/Credit Operations/ Senior General Manager, Knowledge & Learning HP Operations/Share Investment Qualifications Qualifications • Bachelor of Arts (Economics) (Hons), Ealing Technical • Bachelor of Arts (Economics) (Hons), City of Birmingham College, United Kingdom Polytechnic, United Kingdom Experience Experience • Joined Public Bank in 1981 as a Trainer • Joined Public Bank in 1982 and appointed Head of • Appointed Head of Knowledge & Learning Centre since 1993 Corporate Banking & Trade Finance in 1995 Present Directorship in other Public Companies • Promoted to General Manager in 2009 and Senior General • Nil Manager in July 2012 overseeing Corporate Banking • In January 2016, her portfolio was expanded to also oversee Credit Operations, HP Operations and Share Investment Present Directorship in other Public Companies • Director of Public Bank (L) Ltd

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5 LIM THEN FUI 7 MARLENE GOH 64, Male, Malaysian 60, Female, Malaysian Group Chief Internal Auditor Senior General Manager, Human Capital Management

Qualifications Qualifications • Chartered Accountant of the Malaysian Institute of • Bachelor of Social Science (Management) (Hons), Universiti Accountants (MIA) Sains Malaysia • Certified Public Accountant of the Malaysian Institute of Experience Certified Public Accountants (MICPA) • Joined Public Bank in 1983 and has 36 years experience in Experience the HR field • Mr Lim has a total of 39 years experience in Bank Negara • Appointed Director of Human Resource in 2011 and Malaysia and commercial banking oversees the Group’s Human Resource portfolio • Joined Public Bank in 2001 and held the positions of Head • Promoted to Senior General Manager in September 2017 of Risk Management and Head of Compliance in 2007 and Present Directorship in other Public Companies 2013 respectively • Nil • Appointed Group Chief Internal Auditor in October 2013 to oversee the Group’s Internal Audit portfolio Present Directorship in other Public Companies • Nil

6 CHAN CHIEW PENG 8 YIK SOOK LING 55, Female, Malaysian 49, Female, Malaysian Senior General Manager, Retail Financial Services Chief Financial Officer

Qualifications Qualifications • Bachelor of Economics (Analytical Economics) (Hons), • Chartered Accountant of the Malaysian Institute of University of Malaya Accountants (MIA) Experience • Certified Practising Accountants (CPA) Australia • Joined Public Bank Group in 1986 • Certified Public Accountant of the Malaysian Institute of • Held several managerial portfolios at Head Office before Certified Public Accountants (MICPA) her appointment as Head of Retail Financial Services in Experience September 2012 • Served as a Group Financial Controller before joining the • Appointed General Manager in October 2014 to oversee Public Bank Group in 2010 as Deputy Director both PB Card Services & Support and Wealth Management • Appointed Head of Finance and Chief Financial Officer in & Transaction Banking July 2012 • Promoted to Senior General Manager in September 2018 Present Directorship in other Public Companies Present Directorship in other Public Companies • Director of PB Trust (L) Ltd • Nil • Director of PB Trustee Services Bhd 104 2018 ANNUAL REPORT PUBLIC BANK BERHAD HEADS OF DIVISION

9 EDDIE CHAN KOK KWAI 11 JASMINE LOH SOOK LING 61, Male, Malaysian 47, Female, Malaysian General Manager, Credit Administration & Supervision Chief Risk Officer

Qualifications Qualifications • Bachelor of Economics (Business Administration) (Hons), • Certified Public Accountant of the Malaysian Institute of University of Malaya Certified Public Accountants (MICPA) • The Financial Studies Diploma, The Institute of Bankers, Experience United Kingdom • Ms Loh has a total of 28 years experience in Auditing, • Diploma in Banking & Finance, Institut Bank-Bank Malaysia Finance and Risk Management Experience • Joined Public Bank in 1999 and has held several managerial • Joined Public Bank in 1982 and appointed Head of Credit portfolios at Head Office before her appointment as Head Administration and Supervision in 1992 of Risk Management in January 2013 • Responsible for credit control and recovery of impaired • Appointed Chief Risk Officer in June 2016 retail loans Present Directorship in other Public Companies • Promoted to General Manager in 2011 • Nil Present Directorship in other Public Companies • Director of PBFIN Bhd

10 FAM YOKE FONG 12 TAN SHIEN DOON 49, Female, Malaysian 47, Male, Malaysian General Manager, Information Technology Chief Compliance Officer

Qualifications Qualifications • Bachelor of Computer Science, Universiti Sains Malaysia • Bachelor of Science (Business Administration), Bemidji State Experience University, USA • Joined Public Bank in 1994 Experience • Has more than 24 years experience in the IT field • Joined Public Bank in 1994 and has more than 20 years • Appointed Head of Division in January 2017 experience in Banking Operations Present Directorship in other Public Companies • Appointed Head of Banking Operations in January 2017 • Nil before his current appointment as Chief Compliance Officer in March 2017 Present Directorship in other Public Companies • Nil

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13 NG SEIW KUAN 15 BACIL FERNANDEZ 50, Male, Malaysian 60, Male, Malaysian General Manager, Corporate Planning, Strategy & Economics Head, Treasury

Qualifications Qualifications • Chartered Accountant of the Malaysian Institute of • Bachelor of Social Science (Management) (Hons), Universiti Accountants (MIA) Sains Malaysia • Certified Public Accountant of the Malaysian Institute of Experience Certified Public Accountants (MICPA) • Mr Bacil has more than 37 years experience in treasury and • Bachelor of Arts (Economics) (Hons), University of Malaya capital markets Experience • Joined Public Bank in 2009 as a Senior Manager of • Mr Ng has a total of 17 years experience in an auditing Treasury firm whereby he has developed his skills in the areas of • Appointed Head of Treasury in September 2018 corporate finance and financial advisory Present Directorship in other Public Companies • Joined Public Bank in 2010 as Head of Corporate Planning • Nil & Strategy • Promoted to General Manager in June 2016 and his portfolio was expanded to also oversee Economics in June 2017 Present Directorship in other Public Companies • Nil

14 TUAN HAJI A WAHAB BIN A RAMAN 16 CHAN SEE CHOI 60, Male, Malaysian 52, Male, Malaysian Director, Security Director, HP Credit Control

Qualifications Qualifications • Diploma in Police Science, Universiti Kebangsaan Malaysia • Bachelor of Science (Agribusiness), Universiti Pertanian Experience Malaysia • Tuan Haji A Wahab has a total of 31 years of service with Experience the Royal Malaysian Police • Joined Public Bank in 1991 with exposure to branch • Held several high rank positions in the Police Force and last banking and Head Office credit control position held was Kuala Lumpur Traffic Chief (ACP Rank) • Appointed Head of HP Credit Control in January 2018 • Joined Public Bank in 2011 as Head of Security Present Directorship in other Public Companies Present Directorship in other Public Companies • Nil • Nil 106 2018 ANNUAL REPORT PUBLIC BANK BERHAD HEADS OF DIVISION

17 CHEONG KIEN MENG 19 LEE KOK KEONG 60, Male, Malaysian 50, Male, Malaysian Director, Property Head, Credit Operations

Qualifications Qualifications • Diploma in Management Programme, Malaysian Institute of • Bachelor of Economics (Hons), Universiti Kebangsaan Management Malaysia Experience Experience • Joined Public Bank in 1979 • Joined Public Bank in 1993 and experienced in both branch • Held several managerial portfolios at Head Office before his banking and Head Office credit appointment as Head of Property in January 2018 • Appointed Head of Credit Operations in November 2016 Present Directorship in other Public Companies Present Directorship in other Public Companies • Nil • Nil

18 CARENE KHOO GEOK KHENG 20 POON YUEW SIM 52, Female, Malaysian 51, Female, Malaysian Director, Wealth Management & Transaction Banking Director, Branch Business Review & Support/Loan Product Development & Trade Finance Qualifications • Master in Business Administration (Finance), University of Qualifications Hull, United Kingdom • Bachelor of Management (Marketing) (Hons), Universiti Sains • Bachelor of Arts (Economics) (Hons), University of Malaya Malaysia Experience Experience • Joined the Public Bank Group in 1992 and experienced in • Joined Public Bank in 1992 and experienced in both branch both branch banking and retail financial services banking and Head Office branch business review, loan • Appointed Head of Wealth Management & Transaction product development & trade finance Banking in October 2014 • Appointed Head of Branch Business Review & Support/Loan Product Development & Trade Finance in November 2011 Present Directorship in other Public Companies • Nil Present Directorship in other Public Companies • Nil

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21 SAMUEL SOH BOON LEONG 23 WONG MAN HOE 46, Male, Malaysian 49, Male, Malaysian Director, Corporate Banking Director, HP Operations

Qualifications Qualifications • Bachelor of Economics (Hons), University of London, United • Master in Business Administration, Universiti Putra Malaysia Kingdom • Bachelor of Economics (Hons), Universiti Utara Malaysia Experience Experience • Joined Public Bank in 1996 and has more than 22 years • Joined the Public Bank Group in 1994 experience in managing corporate loans • Has more than 15 years experience in both branch banking • Appointed Head of Corporate Banking in 2016 and hire purchase operations prior to his transfer to Head Present Directorship in other Public Companies Office as Senior Manager in 2009 • Nil • Appointed Head of HP Operations in May 2012 Present Directorship in other Public Companies • Nil

22 TEE CHUI CHEE 24 SUNNY NG CHEONG SAN 56, Male, Malaysian 57, Male, Malaysian Director, PB Card Services & Support Head, Banking Operations

Qualifications Qualifications • Bachelor of Science (Computer Science) (Hons), • Master in Business Administration, Heriot Watt University, Universiti Sains Malaysia United Kingdom Experience • Advanced Certification in AML/CFT, International Compliance • Joined Public Bank in 1991 and has more than 31 years Association/Asian Institute of Chartered Bankers experience in the card industry • Certified Financial Planner, Financial Planning Association of • Appointed Head of Division in January 2014 Malaysia Present Directorship in other Public Companies Experience • Nil • Joined the Public Bank Group in 1981 • Has more than 33 years audit experience prior to his transfer to Banking Operations as Senior Manager in 2017 None of the Heads of Division has: • Appointed Head of Banking Operations in November 2018 • Any family relationship with any Director and/or major Present Directorship in other Public Companies shareholder of Public Bank • Nil • Any conflict of interest with Public Bank • Any conviction for offences within the past 5 years other than traffic offences

OUR SUPERIOR PERFORMANCE IN CUSTOMER SERVICE HAS ALWAYS BEEN AN INDUSTRY BENCHMARK. AS A CUSTOMER-CENTRIC BANK, WE SUPPORT THE NEEDS OF OUR CUSTOMERS AND ASSIST THEM TO ACHIEVE THEIR FINANCIAL GOALS IN ANY WAY POSSIBLE.

THE WAY FORWARD MANAGEMENT DISCUSSION AND ANALYSIS GROUP FINANCIAL REVIEW Summary of Group Financial Performance • At a Glance 112 • Key Highlights 2018 113 • 2018 Achievements of Key Performance Targets 114 • Income Statement Analysis 115 • Segmental Profitability 120 • Loans, Advances and Financing 122 • Asset Quality 124 • Customer Deposits 127 • Funding and Liquidity 130 Key Performance Indicators 132 Benchmarking Against Banking Industry’s Performance 133 Capital Management 136 Credit Ratings 139

BUSINESS OPERATIONS REVIEW Overview 140 Domestic Consumer Banking and SME Lending 142 Wealth Management 152 Transactional Services 161 Capital Market Operations 162 International Operations 165 Serving the Customer 171 Channel Management 173 Information & Communication Technology 176 Branch Performance – KPIs and Awards 180

OUTLOOK FOR 2019 Expectations and Opportunities 182 Strategies and Directions 182 112 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

AT A GLANCE

Growth 2018 2017 %

PROFITABILITY (RM’MILLION) Profit before tax expense and zakat 7,101 7,118 (0.2) Net profit attributable to equity holders 5,591 5,470 2.2 Earnings per share (sen) 144.4 141.7 1.9

BALANCE SHEET (RM’MILLION) Total assets 419,693 395,276 6.2 Gross loans, advances and financing 317,302 304,453 4.2 Deposits from customers 339,160 319,259 6.2 Shareholders’ equity 40,973 37,365 9.7

FINANCIAL INDICATORS Net return on equity 14.8% 15.8% (1.0) Cost to income ratio 33.0% 31.9% 1.1 Gross impaired loans ratio 0.5% 0.5% – Loan loss coverage 126.0% 95.5% 30.5 Gross loans to fund ratio^ 88.4% 90.0% (1.6) Gross loans to fund and equity ratio^ 79.0% 80.7% (1.7) Common Equity Tier I capital ratio# 13.1% 12.2% 0.9 Tier I capital ratio# 13.7% 13.0% 0.7 Total capital ratio# 16.3% 16.0% 0.3

^ Gross loans exclude loans/financing sold to Cagamas. Funds include deposits from customers and debt securities issued and other borrowed funds # After deducting second interim dividend declared subsequent to year end THE WAY FORWARD 113 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

KEY HIGHLIGHTS 2018 CREATING SHAREHOLDER VALUE NET PROFIT ATTRIBUTABLE EARNINGS PER SHARE DIVIDEND PER SHARE SHARE PRICE TO EQUITY HOLDERS 2.2% 1.9% 8 sen 19.2%

RM5.59 billion 144.4 sen 69 sen RM24.76 Favourable profit growth Increased from Total dividends paid and Translate to a one year from RM5.47 billion 141.7 sen in 2017. payable amounted to shareholder return of 22.3%# in 2017. RM2.68 billion, representing a dividend payout of 47.9%. # including dividend received

THE BEST HIGHEST LOWEST LOWEST NET COST TO GROSS AMONGST RETURN ON INCOME IMPAIRED DOMESTIC EQUITY RATIO LOANS BANKS 14.8% 33.0% RATIO 0.5%

LOANS GROWTH DEPOSITS GROWTH

4.2% 4.2% 6.2% 5.9% Group Domestic Group Domestic

HEALTHY 13.1% 13.7% 16.3% CAPITAL CET-I Tier I Total POSITIONS Capital Ratio Capital Ratio Capital Ratio

STRONG CREDIT AAA A- A3 RATINGS WITH RAM S&P Moody’s STABLE OUTLOOK 114 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

2018 ACHIEVEMENTS OF KEY PERFORMANCE TARGETS

Despite the challenging operating environment, the Public Bank Group made favourable progress in its business performance. The Group’s achievements against its key financial performance targets for the year are summarised below:

Key Performance Measures 2018 Public Bank Group’s Targets 2018 Public Bank Group’s Achievements

Net Return on Equity 14% to 15% 14.8% Total Capital Ratio^ >13% 16.3% Gross Impaired Loans Ratio <1% 0.5% Cost to Income Ratio 33% to 34% 33.0% Gross Loans Growth – Group 4.2% 5% – Domestic 4.2% Customer Deposits Growth – Group 6.2% 5% – Domestic 5.9%

^ After deducting second interim dividend declared subsequent to year end THE WAY FORWARD 115 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

INCOME STATEMENT ANALYSIS

SUMMARY OF GROUP PROFIT OR LOSS

2018 2017 Variance RM’000 RM’000 RM’000 %

Net interest income 7,562,967 7,417,119 145,848 2.0 Net income from Islamic banking business 1,065,885 998,717 67,168 6.7 Other operating income 2,214,578 2,330,970 (116,392) (5.0)

Net income 10,843,430 10,746,806 96,624 0.9 Other operating expenses (3,573,486) (3,428,178) (145,308) (4.2)

Operating profit 7,269,944 7,318,628 (48,684) (0.7) Allowance for impairment on loans, advances and financing (169,269) (203,292) 34,023 16.7 Other (allowances)/writeback (4,760) 5,625 (10,385) (>100.0) Share of profit/(loss) after tax of equity accounted associated companies 5,250 (3,289) 8,539 >100.0

Profit before tax 7,101,165 7,117,672 (16,507) (0.2)

Net profit attributable to equity holders 5,590,611 5,470,035 120,576 2.2

Amid an environment marked by rising uncertainties, the Public Bank Group made good business progress and achieved profit before tax of RM7,101.2 million in 2018. Net profit attributable to equity holders rose by 2.2% or RM120.6 million to RM5,590.6 million in 2018. The Group’s total net income increased by 0.9% or RM96.6 million to RM10,843.4 million mainly contributed by higher net interest income by RM145.8 million and higher net income from Islamic banking business by RM67.2 million, partially offset by drop in other operating income by RM116.4 million mainly due to certain non-recurring income recognised in the previous year. Allowance for impairment on loans, advances and financing was lower by RM34.0 million whilst other operating expenses rose by 4.2% or RM145.3 million in line with the Group’s increased business volume, and reflects the Group’s continued investment in people and technology. 116 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

Net Income

RM’Million Percentage () , . . .

, .

, .  ,. ,.

 , . ,. , . , . ,. .

, .

, ,. , . .

, .

  Year

Net interest income Net income from Islamic Other operating income banking business Net interest margin

NET INCOME The Public Bank Group’s net income rose by 0.9% or RM96.6 million to RM10,843.4 million in 2018 as compared to 2017. The increase in the Group’s net income was mainly contributed by higher net interest income by RM145.8 million and higher net income from Islamic banking business by RM67.2 million, partially offset by decrease in other operating income by RM116.4 million.

NET INTEREST INCOME Net interest income, which stood at RM7,562.9 million, accounted for 69.7% of the Group’s total income in 2018.

Net interest income grew by 2.0% in 2018 on the back of higher lending volumes which mitigated the effects of a decline in interest margin to 2.22% in 2018 from 2.28% in 2017. The margin compression arose from persistent competitive pressures on both the Group’s deposit-taking and lending business.

Net income from Islamic banking business, which represented 9.8% of the Public Bank Group’s total net income in 2018, grew 6.7% or RM67.2 million to RM1,065.9 million in 2018 led by a strong 9.4% growth in financing. THE WAY FORWARD 117 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

OTHER OPERATING INCOME

2018 2017 Variance RM’000 RM’000 RM’000 %

Income from fund management business 924,820 898,977 25,843 2.9 Net commission, service charges and fees 751,325 734,354 16,971 2.3 Brokerage and commissions from stock broking activities 101,947 103,209 (1,262) (1.2)

Net fee and commission income 1,778,092 1,736,540 41,552 2.4

Net gains and losses on financial instruments 45,875 90,431 (44,556) (49.3)

Foreign exchange income 243,745 342,436 (98,691) (28.8) Others 146,866 161,563 (14,697) (9.1)

Other income 390,611 503,999 (113,388) (22.5)

Total other operating income 2,214,578 2,330,970 (116,392) (5.0)

Other operating income decreased by 5.0% to Net gains and losses on financial instruments dropped by RM2,214.6 million in 2018 mainly due to one-off income 49.3% or RM44.6 million to RM45.9 million in 2018 mainly earned from the disposal of certain financial instruments and a due to one-off income from the disposal of certain financial non-recurring income received in the previous year offset by instruments in the previous year. higher net fee and commission income. Other operating income accounted for 20.4% of the Group’s total net income in 2018. Foreign exchange profit dropped by 28.8% or RM98.7 million to RM243.7 million in 2018 mainly due to non-operational Net fee and commission income increased by 2.4% or foreign exchange loss incurred during the year. RM41.6 million to RM1,778.1 million, with higher contribution from fund management activities, which saw an increase of Other income decreased by 9.1% or RM14.7 million to 2.9% or RM25.8 million in 2018 from higher management fees RM146.9 million in 2018 mainly due to a non-recurring income earned on higher average net asset value of funds under earned in the previous year. management. 118 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

OTHER OPERATING EXPENSES

2018 2017 Variance RM’000 RM’000 RM’000 %

Personnel costs 2,526,524 2,385,927 140,597 5.9 Establishment costs 652,051 636,214 15,837 2.5 Marketing expenses 148,610 128,284 20,326 15.8 Administration and general expenses 246,301 277,753 (31,452) (11.3)

Total other operating expenses 3,573,486 3,428,178 145,308 4.2

Cost to income ratio (%) 33.0 31.9 Staff strength 18,721 18,553

The Public Bank Group’s total other operating expenses increased by 4.2% to RM3,573.5 million in 2018. The Group’s cost to income ratio of 33.0% continued to be the most efficient amongst domestic banking groups in Malaysia.

Personnel costs rose by 5.9% to RM2,526.5 million in 2018 and account for slightly over two-thirds of the Group’s total other operating expenses, reflecting the Group’s continuous investment in talent development and retention.

Establishment costs increased slightly by 2.5% to RM652.1 million in 2018.

Marketing expenses rose by 15.8% to RM148.6 million in 2018 mainly due to higher advertisement and promotional expenses.

Administration and general expenses dropped by 11.3% to RM246.3 million in 2018 mainly due to the abolishment of Goods & Services Tax effective 1 June 2018. THE WAY FORWARD 119 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

ALLOWANCE FOR IMPAIRMENT ON LOANS, ADVANCES AND FINANCING

2018 2017 Variance RM’000 RM’000 RM’000 %

Expected credit losses, including loan/financing commitments and financial guarantees: 421,325 – 421,325 100.0

Stage 1 (230,695) – (230,695) (100.0) Stage 2 98,583 – 98,583 100.0 Stage 3 553,437 – 553,437 100.0

Collective assessment allowance – 230,844 (230,844) (100.0) Individual assessment allowance – 188,200 (188,200) (100.0) Recoveries (252,171) (215,877) (36,294) (16.8) Impaired loans and financing written off 115 125 (10) (8.0)

Total allowance for impairment on loans, advances and financing 169,269 203,292 (34,023) (16.7)

The Public Bank Group adopted the MFRS 9: Financial Instruments on 1 January 2018. Under MFRS 9, the recognition and measurement of expected credit losses (“ECL”) is different as compared to the previous requirements under MFRS 139 : Financial Instruments : Recognition and Measurement. As prior year figures have not been restated in line with the requirements of MFRS 9, the allowances for impairment on loans and advances are not comparable with previous year. The total allowances for impairment on loans and advances recorded a drop of 16.7% to RM169.3 million in 2018. The current year charge mainly consists of ECL of RM421.3 million offset by recoveries of RM252.2 million. The ECL of RM421.3 million was primarily from Stage 2 and Stage 3 ECL amounting to RM652.0 million mainly due to remeasurement as a result of deterioration in credit quality. The Stage 2 and Stage 3 ECL are offset by writeback of Stage 1 ECL amounting to RM230.7 million mainly arising from repayments, partially offset by ECL from newly originated loans. 120 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

SEGMENTAL PROFITABILITY

(I) PROFIT BEFORE TAX BY BUSINESS SEGMENT

2018 2017

% of % of Growth RM’Million Contribution RM’Million Contribution %

Domestic Operations Comprise of: Retail 3,648 51.4 3,769 53.0 (3.2) Hire Purchase 325 4.6 378 5.3 (14.2) Fund Management 667 9.4 661 9.3 0.9 Corporate Lending 558 7.9 544 7.6 2.7 Treasury and Capital Market 706 9.9 701 9.8 0.8 Investment Banking 49 0.7 46 0.6 6.4 Others* 457 6.4 331 4.7 38.0

Total domestic operations 6,410 90.3 6,430 90.3 (0.3)

Overseas Operations 691 9.7 688 9.7 0.4

Profit before taxation 7,101 100.0 7,118 100.0 (0.2)

* Others comprise mainly of domestic head office, other miscellaneous domestic segment and domestic share of results of equity accounted associated company

• Retail Operations contributed 51.4% to the Group’s pre-tax profit in 2018, followed by Treasury and Capital Market Operations and Fund Management which contributed 9.9% and 9.4% respectively to the Group’s pre-tax profits. • Retail Operations’ pre-tax profit decreased by 3.2% to RM3,647.6 million in 2018 mainly due to higher other operating expenses and lower fee and other income due to certain non-recurring income recognised in the previous year, partially offset by higher net writeback of loan impairment allowance and higher net interest income. • Hire Purchase Operations reported a lower pre-tax profit of RM324.6 million in 2018 mainly due to lower net interest income as a result of lower net interest margin. • Fund Management Operations’ pre-tax profit increased by 0.9% from RM660.9 million in 2017 to RM667.1 million in 2018 mainly due to higher management fee earned on higher average net asset value of funds under management, partially offset by higher other operating expenses. • Corporate Lending Operations recorded an increase in pre-tax profit of 2.7% or RM14.8 million to RM558.5 million in 2018 mainly due to higher net interest income on higher average loan balances partially offset by higher loan impairment allowance and higher other operating expenses. • Treasury and Capital Market Operations registered pre-tax profit of RM706.4 million in 2018, an increase of 0.8% from RM700.7 million in 2017 as a result of higher net interest income on treasury gapping, funding and liquidity management activities, partially offset by lower investment income. • Investment Banking Operations’ pre-tax profit rose by 6.4% to RM49.2 million in 2018 mainly due to higher fee income and lower other operating expenses. THE WAY FORWARD 121 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

(II) PROFIT BEFORE TAX BY GEOGRAPHICAL LOCATIONS AND MAJOR COMPANIES

2018 2017

% of % of Growth RM’Million Contribution RM’Million Contribution %

In Malaysia 6,410 90.3 6,430 90.3 (0.3)

of which: Public Bank Berhad* 4,983 70.2 5,147 72.3 (3.2) Public Islamic Bank Berhad* 619 8.7 535 7.5 15.6 Public Mutual Berhad 667 9.4 661 9.3 0.9 Public Investment Bank Berhad* 49 0.7 46 0.6 6.5

Outside Malaysia 691 9.7 688 9.7 0.4

of which: Hong Kong operations 321 4.5 340 4.8 (5.7) - Public Finance Limited* 151 2.1 163 2.3 (7.6) - Public Bank (Hong Kong) Limited* 155 2.2 163 2.3 (5.2) Cambodian operations Cambodian Public Bank Plc 289 4.1 253 3.6 14.4 Vietnam operations Public Bank Vietnam Limited 47 0.7 49 0.7 (4.4)

Profit before taxation 7,101 100.0 7,118 100.0 (0.2)

* Profit excluding dividends from subsidiaries and associated companies and any other intercompany transactions which are eliminated at Group level.

• Domestic operations contributed 90.3% to the Public Bank Group’s pre-tax profit in 2018 whilst overseas operations contributed the remaining 9.7%. • Public Financial Holdings Limited Group in Hong Kong and Cambodian Public Bank Plc remained the largest contributors to the Group’s pre-tax profit from its overseas operations. In 2018, the overseas operations’ pre-tax profit increased marginally by 0.4% from RM687.8 million in 2017 to RM690.7 million mainly due to the overall unfavourable impact arising from foreign exchange movements. Excluding the impact of foreign exchange, the total pre-tax profit from overseas operations was higher by 7.3% mainly due to lower loan impairment allowance. 122 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

LOANS, ADVANCES AND FINANCING

HEALTHY LOANS GROWTH

Outstanding (Gross) Growth Rate

2018 2017 2018 2017 % %

Domestic* (RM’Million) 294,074 282,326 4.2 4.6 of which: Public Bank Berhad (RM’Million) 249,157 241,471 3.2 3.3 Public Islamic Bank Berhad (RM’Million) 45,944 42,009 9.4 11.9

Overseas (RM’Million) 23,228 22,127 5.0 (8.0) of which: Public Bank (Hong Kong) Limited (HKD’Million) 23,679 23,613 0.3 0.4 Public Finance Limited (HKD’Million) 6,107 5,771 5.8 6.7 Cambodian Public Bank Plc (USD’Million) 1,053 1,027 2.6 2.3 Public Bank Vietnam Limited (VND’Billion) 11,785 8,979 31.2 21.7

Group (RM’Million) 317,302 304,453 4.2 3.6

* Excluding overseas branches’ loans and intercompany loans

• In view of the uncertain market conditions, the Public Bank Group maintained a cautious approach in its lending business. The Group’s gross loans, advances and financing increased by 4.2% or RM12.85 billion to RM317.30 billion as at the end of 2018, mainly supported by domestic loans which grew by 4.2%. • Overseas loans recorded an increase of 5.0% to RM23.23 billion as at the end of 2018.

Percentage (%) Loans Growth vs Industry . .  .  .  .  . . . . . . . . . . . . . . .

         Year Group Domestic Industry

• Despite stiff market competition, both the Group’s total and domestic loans grew by 4.2% in 2018. THE WAY FORWARD 123 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

Gross Loans and Domestic Loans Market Share RM'Million Percentage ( ) . . . , . . .

, .

,  .

 , .

, .

, .

, .

, .

, .  , , ,  , , ,  ,  , , ,        Year Group Domestic Domestic loans market share

• The Public Bank Group’s domestic loans market share grew from 17.1% as at the end of 2014 to 17.8% as at the end of 2017. As at the end of 2018, the Group’s domestic loans market share remained strong at 17.6%.

Outstanding Growth Rate

2018 Loans, Advances and Financing by 2018 2017 2018 2017 Market Share Key Retail Banking Segment RM’Million RM’Million % % % Residential Properties 116,258 107,289 8.4 8.6 – Domestic 110,543 101,945 8.4 10.1 19.8

Passenger Vehicles 50,721 50,669 0.1 (3.0) – Domestic 48,025 48,145 (0.2) (2.9) 28.5

SME 72,970 74,313 (1.8) 6.1 – Domestic 69,448 70,398 (1.3) 7.7 22.6

• The Public Bank Group’s lending activities continued to be driven by the financing of residential properties and passenger vehicles as well as commercial lending to SMEs, which formed 75.6% of the Group’s total gross loans, advances and financing as at the end of 2018.

• The Group’s financing of residential properties and passenger vehicle grew by 8.4% and 0.1% respectively whilst lending to SMEs decreased by 1.8% in 2018.

• Despite the challenging operating landscape, the Group sustained its leading market share position in the domestic financing for residential properties with market share of 19.8%. The Group’s market share in the domestic financing of passenger vehicles and commercial lending to SMEs also remained strong at 28.5% and 22.6% respectively. 124 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

ASSET QUALITY

SUPERIOR ASSET QUALITY

Gross Impaired Loans RM’Million . Percentage ( ) , . . . . . , .

, .

, .

 .

 . , , , , , , , , ,  ,        Year Group Domestic Gross impaired loans ratio – Group

• The Public Bank Group’s asset quality remains the best amongst Malaysian banking groups with the lowest gross impaired loans ratio of 0.5% as at the end of 2018. • While the Group faced intense competition growing its lending portfolio, the Group remained uncompromising about maintaining strong asset quality. The Group’s superior asset quality is attributed to its disciplined and prudent approach in credit risk management and loan approval processes as well as having in place efficient and effective recovery processes.

2018 2017 Gross Impaired Loans Ratio % % Domestic 0.4 0.4 of which: Public Bank Berhad 0.5 0.4 Public Islamic Bank Berhad 0.6 0.6 Overseas 1.4 1.3 of which: Public Bank (Hong Kong) Limited 0.3 0.1 Public Finance Limited 1.9 1.8 Cambodian Public Bank Plc 1.3 0.6 Public Bank Vietnam Limited 1.2 1.8 Group 0.5 0.5

• The Group’s domestic gross impaired loans ratio of 0.4% as at the end of 2018 continued to rank No. 1 in terms of asset quality amongst the Malaysian banking industry. • The gross impaired loans ratio of the Group’s overseas operations remained stable at 1.4% with gross impaired loans of RM320.3 million as at the end of 2018.

THE WAY FORWARD 125 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

Gross Impaired Loans Ratio vs Industry Percentage ( ) . . . . . . . .

.

.

. . . . . . . .

.

      Year

Industry Group

• Over the past five years, the Group’s gross impaired loans ratio has stayed low, at approximately one-third that of the banking industry’s gross impaired loans ratio. As at the end of 2018, the Group continued to sustain a low gross impaired loans ratio of 0.5%.

Public Bank Group

Industry 2018 2017 Average Gross Impaired Loans Ratio by Type % % %

Consumer Housing Loans 0.5 0.5 1.1 Hire Purchase 0.6 0.6 0.9 Commercial Properties 0.3 0.2 1.3

• The Group’s gross impaired loans ratio for housing loans, hire purchase and commercial properties financing of 0.5%, 0.6% and 0.3% respectively as at the end of 2018 remained well below the industry average of 1.1%, 0.9% and 1.3% respectively.

126 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

Loan Loss Coverage vs Industry

Percentage () MFRS  MFRS   .

.  .  .  . . . .  .  .

. . . .  . . . .  . . .  . . . .

.

      Jan   Year Group - include regulatory reserves Group - exclude regulatory reserves Industry

• The Public Bank Group has continuously maintained high levels of provisioning and regulatory reserves as evidenced by its high loan loss coverage. Upon the initial adoption of MFRS 9 on 1 January 2018, the Group’s loan loss coverage ratio was further enhanced to a prudent 142.1% from 95.5% as at the end of 2017.

• As at the end of 2018, the Public Bank Group’s loan loss coverage ratio remained prudent and stood at 126.0%, surpassing the banking industry’s loan loss coverage ratio of 97.9%. This is notwithstanding that more than 90% of the impaired loans outstanding are secured.

• With the inclusion of regulatory reserves, the Group’s loan loss coverage would be significantly higher at 237.5%.

THE WAY FORWARD 127 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

CUSTOMER DEPOSITS

STEADY CUSTOMER DEPOSITS GROWTH

RM' Million Deposits - Outstanding Balance and Market Share Percentage () , . . . . . , . .

, .

, .

, .

, .

, .

, . , ,  , , , , . , , , , , , , , ,   ,       Year Wholesale deposits Core customer deposits Total customer deposits Customer deposits market share

• Against the backdrop of challenging market conditions, the Public Bank Group prioritised on rebalancing its balance sheet to optimise profitability. The Group’s customer deposits expanded by 6.2% or RM19.90 billion to RM339.16 billion as at the end of 2018, mainly attributed to growth in core customer deposits which increased by 5.2% or RM14.12 billion to RM283.85 billion as at the end of 2018. • The Group’s domestic customer deposits market share remained strong at 16.5% as at the end of 2018 supported by the Group’s customer deposits growth, strong retail franchise and large domestic depositor base.

Outstanding Growth Rate 2018 2017 2018 2017 Total Customer Deposits by Entity % % Domestic* (RM’Million) 310,585 293,178 5.9 3.6 of which: Public Bank Berhad (RM’Million) 258,878 245,332 5.5 1.4 Public Islamic Bank Berhad (RM’Million) 53,640 49,504 8.4 16.6 Overseas (RM’Million) 28,575 26,081 9.6 (3.4) of which: Public Bank (Hong Kong) Limited (HKD’Million) 30,021 29,203 2.8 0.2 Public Finance Limited (HKD’Million) 5,465 5,077 7.7 2.0 Cambodian Public Bank Plc (USD’Million) 1,890 1,631 15.9 37.7 Public Bank Vietnam Limited (VND’Billion) 9,903 7,956 24.5 5.6 Group (RM’Million) 339,160 319,259 6.2 3.0

* Excluding overseas branches’ deposits and intercompany deposits. 128 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

• Despite stiff competition, domestic customer deposits increased by 5.9% or RM17.41 billion to RM310.58 billion as at the end of 2018.

• The Public Bank Group’s customer deposits from overseas operations grew by 9.6% or RM2.49 billion to RM28.58 billion as at the end of 2018. In particular, the customer deposits of Public Bank Vietnam Limited and Cambodian Public Bank Plc registered commendable growth of 24.5% and 15.9% respectively in terms of VND and USD.

2018 Customer Deposits Mix .

.

. Demand deposits Savings deposits  Fixed deposits Money market deposits

. • Core customer deposits comprising demand deposits, savings deposits and fixed deposits formed 83.7% whilst low cost deposits comprising demand deposits and savings deposits accounted for 25.7% of the Group’s total customer deposits as at the end of 2018.

Core Customer Deposits Growth vs Industry Percentage ( ) .  .

 .

. . . . . . . . . . . . . . . . . . .       Year Group Domestic Industry

In 2018, the Public Bank Group’s core customer deposits grew by 5.2% mainly driven by domestic core customer deposits which increased by 4.8%. THE WAY FORWARD 129 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

Outstanding

2018 2017 Growth Rate Domestic Core Customer Deposits RM’Million RM’Million %

Demand deposits 44,182 43,019 2.7 Savings deposits 30,517 29,154 4.7 Fixed deposits 180,581 171,476 5.3

255,280 243,649 4.8

• The domestic core customer deposits growth was mainly attributed to healthy growth of demand, savings and fixed deposits, which grew by 2.7%, 4.7% and 5.3% respectively in 2018.

2018 Customer Deposits By Type of Customers

. . .

Federal and state governments . . Local government and statutory authorities Business enterprises Individuals  Foreign customers Others

.

• Individual depositors represent 51.4% of the Group’s total customer deposits as at the end of 2018. 130 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW SUMMARY OF GROUP FINANCIAL PERFORMANCE

FUNDING AND LIQUIDITY

STABLE FUNDING AND LIQUIDITY POSITION

Outstanding 2018 2017 Growth Rate Composition Funding Profile RM’Million RM’Million % % Deposits from Customers Core customer deposits 283,846 269,723 5.2 68.8 Wholesale deposits 55,263 49,489 11.7 13.4 Other deposits 51 47 8.5 – Deposits from banks 9,483 11,446 (17.2) 2.3 Debt Capital Funding Senior Medium Term Notes 4,319 2,403 79.7 1.0 Tier II Subordinated Notes/Sukuk Murabahah 4,000 4,949 (19.2) 1.0 Additional Tier I Capital Securities 99 – 100.0 – Non-innovative Tier I Stapled Securities 2,097 2,113 (0.8) 0.5 Equity Capital Shareholders’ equity 40,973 37,365 9.7 9.9 Others Obligations on securities sold under repurchase agreements 4,046 1,238 >100.0 1.0 Bills and acceptances payable 215 287 (25.1) 0.1 Borrowings 2,921 2,863 2.0 0.7 Recourse obligations on loans sold to Cagamas 5,500 5,922 (7.1) 1.3 412,813 387,845 6.4 100.0

• The Public Bank Group’s total funding expanded by 6.4% or RM24.97 billion to RM412.81 billion as at the end of 2018, mainly due to healthy core customer deposits growth of 5.2% to RM283.85 billion as at the end of 2018. • The Group’s main funding are core customer deposits followed by wholesale deposits which contributed 68.8% and 13.4% respectively to the Group’s total funding. • The Group’s equity capital and long term debt capital funding comprising of Senior Medium Term Notes, Subordinated Notes, Subordinated Sukuk Murabahah, Additional Tier I Capital Securities and Non-innovative Tier I Stapled Securities formed 12.4% of the Group’s total funding.

Group Funding Profile

2014 2015 2016 2017 2018 Year % % % % % Core customer deposits 63.9 68.8 69.3 69.5 68.8 Wholesale deposits 17.6 15.7 13.9 12.8 13.4 Deposits from banks 6.1 2.8 3.2 3.0 2.3 Debt capital funding 3.2 3.1 2.7 2.5 2.5 Equity capital 8.3 8.8 9.2 9.6 9.9 Others 0.9 0.8 1.7 2.6 3.1 THE WAY FORWARD 131 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

• The Group remains well funded with a significant portion of the Group’s funding coming from customer deposits. The Group’s core customer deposits has contributed approximately two-thirds of the Group’s total funding over the last five years. These cost efficient long term sources of funding underpins the Group’s ability to grow volume and market share in its core lending business.

RM'Million High Quality Liquid Assets (“HQLA”) Profile Percentage ()  , .  .  , . .  , . . . .  , .

 , .

 , .

 , .

 , . , ,  , ,  ,      Year Total HQLA Total HQLA Total Assets Ratio

• The Group holds high quality, well diversified liquid assets to meet balance sheet liquidity needs and regulatory requirements. As at the end of 2018, the Group’s high quality liquid assets stood at RM74.63 billion which formed 17.8% of the Group’s total assets.

Gross Loans to Fund Ratio and Gross Loans to Fund and Equity Ratio Percentage ( ) . . . . . . . . . . .  . .

.

.

 Year      Gross loans to fund ratio Gross loans to fund and equity ratio

• The Group sustained a stable gross loans to fund ratio and gross loans to fund and equity ratio of 88.4% and 79.0% respectively as at the end of 2018. 132 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW KEY PERFORMANCE INDICATORS

The table below summarises the key performance indicators of the Public Bank Group and targets for 2019 set by the Group:

Key Performance Indicators 2014 2015 2016 2017 2018 2019 Targets

Profitability (%) Net return on equity 19.9 17.8 16.5 15.8 14.8 13% – 14% Cost to income ratio 30.0 30.5 32.3 31.9 33.0 34% – 35%

Asset Quality (%) Gross impaired loans ratio 0.6 0.5 0.5 0.5 0.5 <1%

Balance Sheet (RM’Billion) Assets 345.7 363.8 380.1 395.3 419.7 – Gross loans 245.0 273.4 294.0 304.5 317.3 5% growth Deposits 276.5 301.2 310.0 319.3 339.2 5% growth

The Public Bank Group is focused on delivering positive shareholder value through steady profit performance, consistent balance sheet growth and operational efficiency. The Group continues to drive sustainable organic growth in its lending and deposit-taking businesses in line with industry trend, while maintaining its strength of strong asset quality and high productivity.

PROFITABILITY • Over the last few years, net return on equity has been trending down as a result of capital conservation to meet more stringent regulatory requirements as well as margin compression due to stiff market competition. Nevertheless, in terms of profitability, the Public Bank Group still maintained the highest net return on equity amongst Malaysian banking groups with net return on equity of 14.8% in 2018.

• The Group remained the most cost efficient bank in Malaysia with the lowest cost to income ratio of 33.0%.

ASSET QUALITY • The Group’s gross impaired loans ratio of 0.5% as at the end of 2018 remained the lowest and ranked No. 1 amongst domestic banking groups.

BALANCE SHEET STRENGTH • The Public Bank Group has demonstrated consistent growth in balance sheet over the last five years. Since the end of 2014, the Group’s total assets grew by 21.4% to RM419.69 billion as at the end of 2018 whilst total loans and deposits increased by 29.5% and 22.6% respectively to RM317.30 billion and RM339.16 billion respectively as at the end of 2018.

TARGETS FOR 2019 • For 2019, the Group targets to achieve net return on equity between 13% and 14%, cost to income ratio between 34% and 35% whilst maintaining a low gross impaired loans ratio of below 1%.

• In 2019, the Group is also targeting to achieve 5% growth in both gross loans and deposits. THE WAY FORWARD 133 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW BENCHMARKING AGAINST BANKING INDUSTRY’S PERFORMANCE

The table below compares the key financial indicators of the Public Bank Group with those of the banking system and domestic commercial banking groups in Malaysia.

2018 2017

Latest Latest Public Industry Public Industry Key Financial Indicators Bank Group Average Bank Group Average

Profitability (%) Pre-tax return on average equity 18.2 13.0 20.0 13.0 Pre-tax return on average assets 1.7 1.5 1.8 1.5 Cost to income ratio 33.0 44.8 31.9 44.8

Productivity (RM’000) Pre-tax profit/employee 379 305 384 305 Gross loans/employee 16,949 13,330 16,410 13,330 Deposits/employee 18,117 14,837 17,208 14,837

Asset Quality (%) Gross impaired loans ratio 0.5 1.5 0.5 1.5 Loan loss coverage 126.0 97.9 95.5 82.9

Growth Rate (%) Gross loans (domestic) 4.2 5.6 4.6 4.1 Customer deposits (domestic) 5.9 7.5 3.6 4.1

NA Not available

The Public Bank Group was the third largest banking group in Malaysia with an asset size of RM419.69 billion as at the end of 2018. The Group’s total assets represent 14.2% of the domestic industry’s total assets whilst domestic market share of gross loans and customer deposits stood at 17.6% and 16.5% respectively as at the end of 2018.

PROFITABILITY • The Public Bank Group remained the best amongst the domestic banking groups in terms of profitability and cost efficiency. • The Group’s pre-tax return on average equity and pre-tax return on average assets of 18.2% and 1.7% respectively were above the banking industry’s average of 13.0% and 1.5% respectively.

• The Group continued to be the most cost efficient domestic banking group in Malaysia with its cost to income ratio of 33.0%, which was well below the banking industry’s average cost to income ratio of 44.8%. 134 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW BENCHMARKING AGAINST BANKING INDUSTRY’S PERFORMANCE

PRODUCTIVITY • The Public Bank Group’s gross loans per employee and deposits per employee grew by 3.3% and 5.3% respectively to RM16.9 million and RM18.1 million respectively as at the end of 2018 whilst pre-tax profit per employee stood at RM379,000 as at the end of 2018, well above the banking industry’s pre-tax profit per employee, gross loans per employee and deposits per employee of RM305,000, RM13.3 million and RM14.8 million respectively.

ASSET QUALITY • The Public Bank Group continued to lead in terms of asset quality amongst its domestic banking peers. The Group’s gross impaired loans ratio remained low at 0.5% as at the end of 2018, significantly below the banking industry’s gross impaired loans ratio of 1.5%.

• The Group’s loan loss coverage ratio of 126.0% as at the end of 2018 was higher as compared to the banking industry’s loan loss coverage ratio of 97.9%.

The tables below compare the key financial indicators of the Public Bank Group with those of the domestic banks in Malaysia as well as leading regional banks in the Asia Pacific region.

COMPARISON AGAINST KEY DOMESTIC BANKS

Gross Net Return Cost to Impaired on Equity Income Ratio Loans Ratio Banks % % %

Public Bank Group 14.8 33.0 0.5

Malaysia Malayan Banking Berhad 10.8 46.9 2.7 CIMB Group Holdings Berhad 9.8 48.0 3.1 RHB Capital Berhad 10.3 49.0 2.4 Berhad 11.7 42.0 0.8 AMMB Holdings Berhad 8.2 51.0 1.7 Affin Holdings Berhad 5.7 63.0 2.8 Alliance Financial Group Berhad 10.2 46.8 1.4

* The key financial indicators of the other domestic banks in Malaysia are based on their latest published results.

The Public Bank Group ranks No. 1 in terms of profitability, asset quality and cost efficiency amongst the key domestic commercial banking groups in Malaysia with the highest net return on equity of 14.8% and lowest cost to income ratio of 33.0% as well as lowest gross impaired loans ratio of 0.5%. THE WAY FORWARD 135 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

COMPARISON AGAINST LEADING BANKS IN ASIA PACIFIC

Gross Net Return Cost to Impaired on Equity Income Ratio Loans Ratio Banks % % %

Public Bank Group 14.8 33.0 0.5

SINGAPORE DBS Group 12.4 43.2 1.6 UOB 11.6 43.8 1.6 OCBC 12.3 42.7 1.4

HONG KONG Hang Seng Bank 17.4 27.7 0.3 The Hongkong and Shanghai Banking Corporation Limited 15.8 40.4 NA

AUSTRALIA ANZ Bank 10.9 49.2 0.3 Commonwealth Bank of Australia 14.4 45.4 0.4 National Australia Bank 11.2 50.0 0.7

* The key financial indicators of the other leading regional banks are based on their latest published results. NA Not available

When benchmarked against the leading banks in the Asia Pacific region, the Public Bank Group’s net return on equity and cost to income ratio of 14.8% and 33.0% respectively ranked third and second respectively. The Group’s gross impaired loans ratio of 0.5% ranked fourth when compared to the leading regional banking groups. 136 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW CAPITAL MANAGEMENT

OBJECTIVE • forecasting capital demand for regulatory requirements, business strategy and material risks based on the Group’s The Public Bank Group’s Capital Management Framework sets risk appetite; and out the following key objectives: • determining the availability and composition of different capital • Compliance with regulatory capital requirements components as well as requirements for any capital issuance. • Alignment of capital levels to the Group’s risk appetite and strategic business plans The annual capital plan is approved by the Board of Directors for • Maintenance of strong external credit ratings of AAA by implementation at the beginning of each financial year. A semi- domestic rating agency and A3/A- (in line with country annual update is also carried out to reflect the latest developments rating) by international rating agencies in capital regulatory requirements and to monitor the effective and timely execution of the capital initiatives planned. • Maintaining an appropriate balance between optimising returns to shareholders and prudent capital management REGULATORY ENVIRONMENT The Group continuously reviews its capital position, capital mix and capital allocation taking into consideration the Group’s The Public Bank Group adopts the Bank Negara Malaysia’s strategic and organisational requirements as well as the regulatory (“BNM”) Capital Adequacy Framework, which is in line with the and business environment in which the Group operates. Basel Committee on Banking Supervision Basel III Capital Adequacy Framework.

COMPREHENSIVE RISK ASSESSMENT UNDER ICAAP Minimum capital adequacy requirements The Public Bank Group’s capital management objectives are Under the BNM’s Capital Adequacy Framework, banking implemented through the Group’s Internal Capital Adequacy institutions are required to maintain a minimum Common Assessment Process (“ICAAP”). The Group’s ICAAP involves a Equity Tier (“CET”) I, Tier I and Total Capital Ratios of 4.5%, comprehensive assessment of all material risks that the Group 6.0% and 8.0% respectively. is exposed to as well as an evaluation of the adequacy of the Group’s capital to support its business activities in relation to Capital buffer requirements those risks. Capital stress tests are also performed under Banking institutions are also to hold the following capital adverse but plausible events to assess the ability of the Group’s buffers over and above the minimum capital requirements: capital to withstand market shocks. The actual market stresses • capital conservation buffer (“CCB”) of 2.5% maintained in which occurred in recent years are used in the stress testing the form of CET I capital from 1 January 2019. exercise. The stress test exercise enables the Group to assess • counter-cyclical buffer requirement in a range of 0% to capital adequacy and identify potential risks that may arise. 2.5% of total risk-weighted assets. This capital buffer is This then allows the Group to develop action plans and currently not required for credit exposures in Malaysia but mitigating actions beforehand if the stress test results show may be applied by BNM in the future. that such events may adversely impact the Group’s capital. Stress test results would also be used to determine the level of BNM may also introduce additional capital loss absorbency capital buffer required to absorb losses that may be experienced requirements for domestic systemically important banks in the during an economic downturn. Based on these assessments, future. the Group’s internal capital targets will be reviewed and recalibrated, if necessary, so that the Group will continue to BNM has also introduced additional capital deductions from CET maintain sufficient capital above regulatory requirements even I capital whereby items such as intangible assets and investments under stressed economic conditions. in banking and insurance subsidiaries and associates are deductible from CET I capital. Tighter requirements pertaining to A detailed capital plan is prepared annually over the medium write-off and/or conversion to equity have also been introduced term horizon of at least three years and includes consideration for new Tier I and Tier II capital instruments. The Public Bank of the following factors: Group’s previously issued Tier I and Tier II capital instruments • internal capital targets for the Group and entities within which do not contain these stringent write-off or conversion the Group taking into account anticipated future regulatory features have been gradually disallowed from inclusion in changes and stakeholder expectations; regulatory capital since 1 January 2013. THE WAY FORWARD 137 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW

HEALTHY CAPITAL ADEQUACY RATIOS The table below shows the capital composition and capital adequacy ratios of the Public Bank Group and Public Bank as at the end of 2017 and 2018:

Public Bank Group Public Bank

2018 2017 2018 2017 RM’Million RM’Million RM’Million RM’Million

Equity Capital 35,104 31,521 25,776 23,965 Additional Tier I Capital Instruments 1,659 1,950 1,659 1,950 Regulatory adjustments 62 57 – –

Tier I Capital 36,825 33,528 27,435 25,915 Tier II Capital 6,891 7,606 5,449 5,217

Capital Base 43,716 41,134 32,884 31,132

Risk-weighted assets 268,125 257,352 215,000 208,288

Public Bank Group Public Bank

2018 2017 2018 2017 % % % %

After Deducting Second Interim Dividends CET I capital ratio 13.1 12.2 12.0 11.5 Tier I capital ratio 13.7 13.0 12.8 12.4 Total capital ratio 16.3 16.0 15.3 14.9

CAPITAL INITIATIVES (ii) Debt Capital Key capital management initiatives that were undertaken by In June 2018, Public Bank issued the first tranche of the Public Bank Group during the year are as follows: RM100.0 million Basel III Compliant Additional Tier 1 Capital Securities (“AT1CS”) under its inaugural (i) Equity Capital RM10.0 billion Basel III Compliant AT1CS Programme which was established on 7 March 2018. Disposal of Public Bank’s entire remaining treasury shares of 20.6 million for a total consideration of In October 2018, Public Bank issued RM1.0 billion RM474.5 million in the open market at an average price Subordinated Notes under its RM10.0 billion Basel III of RM23.03 per share, which has further enhanced the Compliant Tier II Subordinated Medium Term Notes equity capital of the Group and the Bank by approximately Programme, which partly refinanced the early redemption 1.5% and 2.0% respectively. of RM1,950 million Subordinated Notes. 138 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW CAPITAL MANAGEMENT

As at the end of 2018, the Public Bank Group has a total (iv) Superior Returns to Shareholders of RM6.20 billion debt capital outstanding comprising: The Public Bank Group continues to deliver consistent and superior returns to shareholders. In 2018 alone, RM’Billion shareholders would have enjoyed a remarkable return of 22.3%, taking into account the share price appreciation 1 Non-Basel III (old-style) from RM20.78 as at the beginning of 2018 to RM24.76 as Non-innovative Tier I stapled capital at the end of 2018 together with total dividend received securities 2.10 during the year.

Basel III compliant Taking a five-year medium term period, a shareholder of Subordinated notes/Sukuk Murabahah 4.00 Public Bank who purchased 1,000 Public Bank shares at a Additional Tier I Capital Securities 0.10 price of RM19.40 per Public Bank share as at the end of 2013 with an initial investment outlay of RM19,400 6.20 coupled with the rights subscription of RM13.80 per share 1 Debt capital instruments issued prior to 1 January 2013 for the 1 for 10 rights issue in August 2014, the shareholder would have invested a total of RM20,780. As The old-style debt capital instruments which do not meet at the end of 2018, he would have also received gross Basel III standards will be gradually phased-out over a 10 dividends totalling RM3,278 and have 1,100 Public Bank year transition period starting from 1 January 2013. shares worth RM27,236 based on the closing share price However, this will not significantly impact the Group’s of RM24.76 per share. Together with the dividends capital position as the BNM’s Basel III transitional received, this investment would have given the shareholder provisions allow these capital instruments to continue to a compounded annual rate of return on investment of be included as part of the total regulatory capital during 8.2% for the five-year period. the transitional period. The Group actively assesses market conditions to ensure future debt instruments are If a shareholder of Public Bank had bought 1,000 shares issued in the most cost efficient manner to replace old- in Public Bank when it was listed in 1967, and assuming style debt securities and to support continuous business the shareholder had subscribed for all rights issues to growth. date and had not sold any of the Public Bank shares, he would have, at the end of 2018, 148,938 Public Bank (iii) Healthy Dividend Payout shares worth RM3.7 million based on the share price of Public Bank shares of RM24.76 as at the end of 2018. In The Public Bank Group aims to pay consistent and addition, he would have received a total gross dividend of sustainable dividends to its shareholders over the long RM1.3 million whilst having only invested a capital outlay term by balancing growth with proactive capital of RM235,612, including subscription for all rights issues. management. The Group’s dividend per share increased The dividends received and the appreciation in share from 61 sen in 2017 to 69 sen in 2018 which represent value translate to a remarkable compounded annual rate a healthy dividend payout of 47.9%. of return of 19.0% for each of the 51 years that this shareholder has held the shares in Public Bank since it was listed in 1967. THE WAY FORWARD 139 MANAGEMENT DISCUSSION AND ANALYSIS – GROUP FINANCIAL REVIEW CREDIT RATINGS

Public Bank is rated by three rating agencies, RAM Ratings, Standard & Poor’s and Moody’s Investors Service.

During the year, RAM Ratings, the domestic rating agency, reaffirmed the AAA rating on Public Bank. The AAA rating is the highest rating assigned by RAM and reflects the ability to offer the highest level of safety for timely payment of its financial obligations. The credit ratings reaffirmed by Standard & Poor’s and Moody’s Investors Service also remain unchanged and are equivalent with Malaysia’s sovereign rating.

The credit rating agencies conduct annual rating reviews on Public Bank. As part of the Bank’s commitment to maintain its investment grade credit ratings, the Bank conducts regular communication with the credit rating agencies as well as regulators to provide comprehensive, timely and transparent information on the Bank’s performance, business strategies and prospects.

Rating Agency Date Issued Rating Classification Rating Outlook

RAM Ratings 26 April 2018 • Financial Institution Ratings AAA/Stable/P1 • RM5 billion Non-Cumulative Perpetual Capital AA2 Securities under the Non-Innovative Tier I Stapled Securities Programme • RM20 billion Senior Medium Term Notes AAA Stable Programme • RM10 billion Subordinated Medium Term Notes AA1 Programme • RM10 billion Additional Tier I Capital Securities AA3 Programme

Standard & Poor’s 2 November 2018 • Counterparty Credit Rating A-/Stable/A-2 Stable

Moody’s Investors Service 21 August 2018 • Bank Deposits A3/P-2 • Baseline Credit Assessment a3 Stable • Adjusted Baseline Credit Assessment a3 • Counterparty Risk Assessment A2(cr)/P-1(cr) 140 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS OPERATIONS REVIEW

OVERVIEW FOCUS AREA PBB GROUP’S STRATEGIC FOCUS: Core Focus

ORGANIC GROWTH DOMESTIC CONSUMER BANKING AND SME LENDING IN FOCUS AREAS (Page 142-151)

The Group pursues a focused organic growth strategy in retail banking Other Areas business, particularly in domestic of Focus consumer banking and SME lending. WEALTH MANAGEMENT

(Page 152-160)

TRANSACTIONAL SERVICES

(Page 161)

CAPITAL MARKET OPERATIONS

(Page 162-164)

INTERNATIONAL OPERATIONS

(Page 165-170) THE WAY FORWARD 141 MANAGEMENT DISCUSSION AND ANALYSIS

STRATEGIC APPROACH SUPPORTED BY

• Focus on consumer lending for purchase of residential properties and passenger vehicles • Continue to penetrate mid-market SME financing in encouraged sectors SERVING THE CUSTOMER • Secure higher growth in retail and low cost deposits (Page 171-172) • Sustain existing pool of deposits • Achieve balance between growth and escalating cost of Provide top-notch customer service in line with funds the Group’s corporate tagline “Excellence Is Our Commitment”

• Sustain its leading market position in the private unit trust business • Offer superior services to customers and diversify product CHANNEL MANAGEMENT range (Page 173-175) • Develop new insurance products with AIA Serve customers through multi-channel network comprising branches, self service terminals and • Promote e-payment digital channels which include mobile, internet and • Maintain effective collaboration with its banking and social media platform non-banking partners

• Continue to focus on commercial foreign exchange revenue INFORMATION & • Continue to grow existing corporate portfolio and acquire COMMUNICATION TECHNOLOGY targeted new corporate clients (Page 176-179) • Continue to grow retail and institutional customer base in the investment banking space Harness information technology to support the Group’s business needs and improve customer experience • Enhance contribution from overseas operations in Hong Kong/People’s Republic of China and Indo-China through organic growth 142 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW DOMESTIC CONSUMER BANKING AND SME LENDING

AT A GLANCE

DOMESTIC CONSUMER GROSS LOANS, CORE GROSS BANKING AND SME ADVANCES AND CUSTOMER IMPAIRED LENDING PROFIT FINANCING DEPOSITS LOANS RATIO

RM3,972.1 Mil RM252.64 Bil RM255.28 Bil 0.5% 4.2% 4.2% 4.8% 2017: 0.5%

Market Shares

RESIDENTIAL COMMERCIAL PASSENGER PROPERTY PROPERTY VEHICLE FINANCING FINANCING FINANCING 19.8% 35.2% 28.5%

2018 HIGHLIGHTS • The domestic consumer banking and SME lending operations continued to be the largest profit contributor to the Public Bank Group and contributed 62.0% to the Group’s total profit from domestic operations.

• Gross loans grew by 4.2% mainly driven by the resilient 8.4% growth in residential property financing. • The Group’s market leading position in residential property financing and commercial property financing was maintained with market shares of 19.8% and 35.2% respectively. • Gross impaired loans ratio sustained at 0.5% with low gross impaired loans ratio of 0.5%, 0.6% and 0.4% respectively for residential properties, passenger vehicle hire purchase financing and SME lending respectively. THE WAY FORWARD 143 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

The Public Bank Group’s domestic retail banking provides a As at the end of 2018, the gross impaired loans ratio of the comprehensive range of retail loans, deposits products and Public Bank Group’s domestic residential property loans financial services, covering both conventional and Islamic, to remained low at 0.5%, well below the industry’s ratio of 1.1%. individual customers as well as small and medium enterprises The ability to sustain the strong asset quality of its residential (“SME”). The two core business segments under the Group’s property loans stems from the Group’s prudent credit culture domestic retail banking are consumer banking and SME lending and stringent underwriting standards. and they collectively accounted for 85.9% of the Group’s total domestic lending portfolio as at the end of 2018. Products and Marketing Initiatives The flagship 5HOME (“Home Ownership Made Easy”) Plan and DOMESTIC CONSUMER BANKING MORE (“Mortgage Refinancing”) Plan are the Public Bank Group’s primary loan products in the residential property The Public Bank Group’s domestic consumer banking comprise: segment. In 2018, the majority of residential property financing i) Residential property financing were approved under 5HOME Plan and MORE Plan for ii) Passenger vehicle hire purchase financing approximately 40,000 customers. During the year, competitive iii) Personal consumer financing rates offered for housing loans under 5HOME Plan and MORE iv) Credit and debit cards Plan have boosted loans growth and improved cross-selling v) Share margin financing effort in other products. vi) Customer deposits The Public Bank Group continued to be a strong supporter of Bank Negara Malaysia’s (“BNM”) Priority Sector Lending to Residential Property Financing provide financing for affordable homes. As at the end of 2018, Property development remains a key driver of the Malaysian total loans outstanding for this priority sector amounted to economy with the development of residential properties being RM2.78 billion. the main focus of property developers. The property market saw a gentle recovery in 2018 buoyed by the momentum in The Public Bank Group’s sustained leading position in the economic growth and more aggressive marketing effort from residential property market was achieved through the support developers to promote their products. from its strong sales and marketing force, leveraging on its wide domestic branch network, as well as efficient loan service Performance Review delivery. In addition, the Group also maintains strong support Notwithstanding the relatively cautious and soft property and close business relationship with solicitors, property valuers, market, the Public Bank Group’s domestic lending to the real estate agents and reputable property developers. residential property sector, which accounted for 37.6% of the Group’s total domestic loan portfolio, increased by 8.4% to Anticipated risks RM110.54 billion as at the end of 2018. The Group’s market Unaffordable property prices and property locations that are share in residential property financing increased to 19.8% as at less than ideal coupled with concerns over unequal distribution the end of 2018, from 19.6% a year ago and the Group of household incomes may continue to contribute to the remains the largest residential property financier in Malaysia. property overhang situation in Malaysia. In addition, under Budget 2019, the increase of real property gains tax (“RPGT”) The Public Bank Group’s total residential property loans approved from 0% to 5% and stamp duties by 1% to 4% for property in 2018 amounted to RM16.18 billion, which accounted for transfers worth more than RM1 million may also affect the 30.3% of the total domestic loans approved. The Group continues market environment. to focus on the mass market segment with the majority of the residential property loans granted for the financing of properties costing between RM100,000 and RM500,000. Properties in this price range accounted for 62.3% of the total number of residential property loans approved in 2018. 144 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW DOMESTIC CONSUMER BANKING AND SME LENDING

Prospects maintained a strong market share of 28.5% as at the end of Several key initiatives in the 2019 Budget are expected to fuel 2018. Asset quality also remained strong as evidenced by its low demand for housing in the affordable price segment. Under gross impaired loans ratio of 0.6% as compared to the industry’s Budget 2019, the government has pledged to spend gross impaired loans ratio of 0.9% as at the end of 2018. RM1.5 billion on affordable housing projects via the 1Malaysia People’s Housing Programme and Syarikat Perumahan Negara Marketing Initiatives Bhd. Other than increasing the supply of affordable housing, The Public Bank Group continued to drive market expansion the government has also introduced various initiatives to and deepen market penetration through aggressive marketing improve household income and assist first time home buyers. strategies and maintaining close business collaboration with Under Budget 2019, multiple incentives such as exemptions reputable car dealers, distributors and manufacturers. This was from RPGT, waiver of stamp duty, discounts from developers, mainly driven through its strong team of more than 1,500 staff exemptions on sales and service tax are offered to first time from the Group’s extensive distribution network of 26 Hire home buyers. The newly unveiled National Housing Policy Purchase Centres and 263 branches nationwide. In 2018, the 2018-2025 which focus on solving the country’s supply and Group has participated in more than 200 sales promotions, car demand mismatch issues and assist low income earners to own sales carnivals and roadshows nationwide as well as initiated a home will further increase affordable home offerings. The various tie-up campaigns with approximately 8,500 established government’s holistic approach in handling housing issues and car dealers. positive initiatives could boost consumer spending and revive interest in the housing market. In order to enhance customer experience, the Public Bank Group introduced its online hire purchase loans submission The Public Bank Group is confident that it is well placed to system through its digital channels. With the introduction of capitalise on opportunities to sustain its residential property this online application functionality, customers can now submit financing segment growth given its focus on home mortgages applications online at their convenience, hence enabling for own occupation and the broader base mass market segment. customers to enjoy hassle-free loan applications. The Group will also continue to support the government’s efforts to promote affordable housing and pursue growth Anticipated Risks opportunities by developing proactive marketing strategies backed by competitive pricing and product packages that meet In view of the uncertainty in the global economy and weak customers’ needs. consumer sentiment due to high household debt and rising cost of living, the automotive industry is expected to remain subdued and challenging. Intense competition among auto Passenger Vehicle Hire Purchase Financing vehicle financiers is also expected to persist resulting in The automotive industry remained challenging in 2018 due to continued pricing pressure and further net interest margin uncertainties in the operating environment and weak consumer compression. sentiment. In general, consumers were cautious on big ticket item spending such as passenger vehicles partly due to the Prospects weaker Ringgit and rising cost of living. Vehicle sales are expected to pick up pace in 2019 with new model launches in late 2018 and upcoming launches of new Performance Review vehicle models. Whilst operating environment remain Passenger vehicle hire purchase financing continued to be one challenging, the Public Bank Group will strive to grow its of the core retail lending business of the Public Bank Group, domestic vehicle hire purchase financing portfolio as well as accounting for 16.3% of the Group’s total domestic loan increase its related fee-based income. Leveraging on its strong portfolio. As a result of stiff competition and weaker vehicle market presence, the Group is confident that its foundation sales, the Public Bank Group’s domestic vehicle hire purchase built on proven business strategies will enable the Group to financing decreased by 0.2% or RM0.12 billion to capitalise on opportunities and address challenges from a RM48.02 billion as at the end of 2018. Nevertheless, the Group position of strength. THE WAY FORWARD 145 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Personal Consumer Financing New Products and Marketing Initiatives The Bai’ Al-Inah (“BAE”) Personal Financing-i which is offered In March 2018, Public Bank launched the PB Corporate MyDebit by Public Islamic Bank is the main driver for the Public Bank Card which caters to sole proprietors as well as companies and Group’s domestic personal consumer financing business. This is linked to their PB Current Account to enable easy payments product is tailored for the employees of government agencies, to be made to selected government agencies. The cardholder statutory bodies, government linked corporates and large can now make payments to participating government agencies corporations. To date, Public Islamic Bank has established over the counter at Public Bank branches and government agency arrangements with 293 entities. In line with the agency’s counters using the Electronic Data Capture terminals. adoption of more stringent lending criteria, total financing outstanding of BAE Personal Financing-i declined by 5.4% to Public Bank continued to offer attractive rewards and merchant RM1.68 billion as at the end of 2018. privilege programmes to encourage spending and increase billings and receivables. Some of the notable campaigns launched during the year include “PB Cash Back 4 U”, “Spend Credit and Debit Cards Now 4 More Cash”, “The Choice Is Yours. Exclusive Offer When In 2018, the competition in the cards industry remained intense You Apply PB Card Now” and “Apply Now For PB Card & Take due to the lowering of interchange rate for domestic credit card Your Choice Home”. transactions and the imposition of credit card service tax in September 2018. As a result, there was fierce competition To further drive sales and support the adoption of cashless among industry players to gain market share. Despite the stiff payment, Public Bank launched the WeChat Pay mobile wallet competition, Public Bank achieved commendable growth in its service in August 2018, which also includes cross border credit card, debit card and merchant base in 2018. payment acceptances. In November 2018, Public Bank enhanced front-end digital tools for better service delivery with the Performance Review launch of the all-in-one merchant terminal. Retail merchants operating in physical outlets can now accept both card Public Bank’s credit card base achieved a growth of 16.3% in payments and mobile payments in a single terminal, thus 2018, outpacing the industry’s growth rate of 4.7%. Total providing greater efficiency and convenience for the merchants. credit card sales and credit card receivables also increased by 8.9% and 5.2% respectively in 2018, mainly attributable to extensive marketing effort and promotional activities. Anticipated Risks Interchange fee for credit card transactions is expected to In 2018, Public Bank’s debit card base also grew by 11.6% continue to reduce in 2019 which will impact interchange fee whilst debit card sales increased by 17.8% to RM2.95 billion in income. Meanwhile, competition will further intensify as 2018, mainly due to more campaigns and awareness competitors continue to be aggressive and introduce strong programmes to promote its usage during the year. credit/debit cards acquisition and tactical usage campaigns as well as engage in price wars to acquire new merchant outlets. Although the merchant acquiring business continued to face stiff pricing competition due to the lowering of domestic Prospects interchange reimbursement fee, merchant sales recorded a Despite the intense competition in the card business, Public significant growth of 21.2% in 2018. Public Bank rolled out Bank is confident of sustaining its market share, leveraging on more than 13,000 new terminals and to date has more than its good product value proposition, excellent customer service 43,500 merchant outlets deploying approximately 66,500 and strong brand awareness. Moving forward, the Bank will terminals. step up its efforts to acquire new merchants and card members to increase card sales. The Bank will also leverage on digital technologies to further enhance customer experience and improve operational efficiency. 146 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW DOMESTIC CONSUMER BANKING AND SME LENDING

Share Margin Financing The Public Bank Group’s share trading and share margin During the year, Public Bank’s online share trading transactions business in Malaysia, PB Sharelink, achieved satisfactory saw an encouraging growth of 15.4% in terms of volume of performance despite the downturn in equity markets. Share transactions carried out. In the year ahead, the Bank will strive trading volume grew by 2.4% or RM332.0 million to to grow its online share trading business, enhance operational RM14.29 billion in 2018. Consequently, the Group’s total efficiency and improve service delivery as well as product brokerage and interest income grew by 6.7% or RM4.7 million offerings to cater to the needs of its customers. to RM74.6 million in 2018.

Customer Deposits

2018 2017 Growth Market Share Domestic Core Customer Deposits RM’Billion RM’Billion % %

Demand Deposits 44.18 43.02 2.7 12.5 Savings Deposits 30.52 29.15 4.7 19.4 Fixed Deposits 180.58 171.48 5.3 18.5

Total Domestic Core Customer Deposits 255.28 243.65 4.8 17.2

Performance Review Premier ACE Account Although competition continued to be intense in the market, The Public Bank Group launched the Premier ACE Account, a the Public Bank Group’s total domestic core customer deposits hybrid current account that offers competitive interest and increased by 4.8% to RM255.28 billion as at the end of 2018. consolidated monthly statements, specially designed for Red The growth achieved for demand deposits, savings deposits and Carpet Banking customers. fixed deposits of 2.7%, 4.7% and 5.3% respectively in 2018 was mainly attributable to the Group’s focus on acquiring fresh Tactical Campaigns funds from retail customers. The Group’s market share of core In 2018, the Public Bank Group launched several tactical campaigns customer deposits was 17.2% as at the end of 2018. The to attract fresh deposits and reward loyal customers for their Group’s domestic low cost demand and savings deposits stood continuous support. Some of the campaigns launched were PB at RM74.70 billion as at the end of 2018 and accounted for Super Savers Reward Campaign, PB Golden Savers Reward 29.3% of the Group’s domestic core customer deposits. Campaign, PB Golden Fortune Campaign, PB ACE Enterprise Campaign, PB Special Fixed Deposit/Term Deposit-i Campaign, PB New Products and Marketing Initiatives FD Bonanza Campaign, PB eFD Campaign, PB Special Term In 2018, the Public Bank Group introduced a new deposit Deposit-i Campaign, PB Special2 Fixed Deposit/Term Deposit-i product and implemented several promotional initiatives and Campaign and PB FCY FD Campaign. As a result of focused tactical campaigns to acquire new deposits and increase retail marketing efforts, total deposits amounting to RM48.74 billion customer base. were successfully generated via these tactical campaigns. THE WAY FORWARD 147 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Red Carpet Banking SME LENDING Public Bank’s Red Carpet Banking (“RCB”) is dedicated to The Small and Medium Enterprises (“SME”) segment is one of managing the wealth of the high net worth and affluent the main contributors to Malaysian economic growth, customer segment. In 2018, RCB customers grew by 24.9% accounting for more than 95% of total business establishments and the average product holding per RCB customer also in the country and contributing more than 30% to Malaysia’s improved to an average of 3.75 products per RCB customer Gross Domestic Product (“GDP”). from 3.70 in 2017. Performance Review During the year, Public Bank opened two new RCB Centres at Recognising that the SME sector is a key growth engine of the its Jalan Raja Chulan and Mont Kiara branches, bringing the Malaysian economy, SME lending remains one of the core total RCB Centres nationwide to seven. Another new centre businesses and target growth segment of the Public Bank was opened at the Kota Damansara branch in January 2019. At Group. As at the end of 2018, loans to SMEs stood at the opening of these new RCB Centres, the Bank organised RM69.45 billion and accounted for 23.6% of the Group’s several wealth management seminars on topics such as Market domestic loans portfolio. In 2018, the Group approved Outlook, Will Writing and Malaysia Property Insights. In RM11.05 billion loans to domestic SMEs, which represent conjunction with the opening of the new Mont Kiara RCB 20.7% of the Group’s total domestic loans approved. Centre, the Bank also launched a new RCB campaign known as the “PB Premier High Yield FD”, exclusively for new and existing RCB customers, which bundle PB Series of Equity/ Products Balanced/Mixed Asset Funds and PLUS Fixed Deposit. SWIFT (“Shophouse, Warehouse, Industrial Factory and Trade Financing”) Plan Public Bank continues to enhance RCB privileges to meet customer need and expectations. On 29 January 2018, the The SWIFT Plan which is the Public Bank Group’s flagship and Bank launched a hybrid current account, the “Premier ACE core product for SME lending offers financing for asset Account” exclusively for RCB customers. The product offers acquisition, working capital as well as trade financing and competitive interest rates with multi-tiered interest and allows flexible bundling to suit the financing needs of SME consolidated monthly statement for the benefit and ease of its customers. In 2018, Public Bank approved RM6.24 billion under valued customers. Moving forward, the Bank aims to set up the SWIFT Plan for about 11,000 SME customers. more RCB Centres across Malaysia to expand its RCB business and provide greater accessibility as well as personalised services to meet customers’ needs.

Anticipated Risks and Prospects The competition for customer deposits is expected to remain intense as banks continue to aggressively compete for lower cost and stable deposits to meet Basel III liquidity requirements. In addition, the 100% interest forfeiture ruling applied on premature withdrawal of fixed deposits with effect from 1 January 2019 may attract unfavourable market response.

In the year ahead, Public Bank will continue to enhance its existing product features and roll out deposit campaigns with attractive features to encourage deposit placements. At the same time, the Bank will also seek opportunities to engage with Financial Technology (“FinTech”) companies to provide product offerings via its digital channels. 148 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW DOMESTIC CONSUMER BANKING AND SME LENDING

BNM Initiated Financing Schemes Anticipated Risks The Public Bank Group continues to be a strong supporter of In 2019, business sentiment for SMEs is likely to remain BNM initiated financing schemes to promote SME activities. cautious due to uncertainties in the global and domestic These schemes include: economy. Competition for SME lending is also expected to exert • BNM’s priority sector lending to SMEs. The Group has pressure on profit margin for financiers. consistently exceeded the commitment set by BNM. Prospects • BNM Fund for SME. The Group continues to provide financial assistance to SMEs that require funds for capital expenditure Despite the more cautious business environment, the SME and working capital at a reasonable financing cost. sector is expected to achieve steady growth supported by the various government initiatives as announced under Budget 2019. • Disaster Relief Facility. In November 2017, BNM established Amongst the initiatives are the exemption of specific business- a fund of RM500 million to provide financial assistance to to-business service tax and a credit system for small manufacturers businesses that have been affected by floods, through the that import raw materials and intermediary goods. To sustain its provision of new financing at a concessionary rate, to market leadership position in SME financing, the Public Bank enable them to resume and revive their business operations. Group will continue to tap on market opportunities by offering The Group has approved a total of RM8.1 million under this products and services to meet the needs and demands of SMEs. scheme which ended in May 2018.

Credit Guarantee Corporation (“CGC”) and Government Guaranteed Schemes The Public Bank Group has been actively participating in guarantee schemes offered by CGC. CGC provides guarantee cover to assist SMEs that lack collateral to obtain credit facilities. Among those schemes that the Group has participated in are BizJamin and BizJamin Bumi. Other than GCG guaranteed schemes, the Group also participates in government guaranteed financing schemes such as the Working Capital Guarantee Scheme – Extension, Working Capital Guarantee Scheme – Start Up and Services Sector Guarantee Scheme which are sponsored by Syarikat Jaminan Pembiayaan Perniagaan Bhd.

Marketing Initiatives During the year, the Public Bank Group participated in various seminars, forums, road shows and exhibitions to support the relevant government bodies, BNM and CGC. The Group also extended its promotional campaign under the Group’s SWIFT Plan for SMEs to gain access to financing at competitive pricing. In line with the Group’s strategic focus to grow its SME portfolio, the Group will continue to reach out to the SME market by leveraging on its strong PB brand and its wide network of domestic branches across the country as well as the strong support from its sales and marketing team. THE WAY FORWARD 149 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

ISLAMIC BANKING

At a Glance

PROFIT GROSS FINANCING DEPOSITS FROM GROSS IMPAIRED BEFORE TAX AND ADVANCES CUSTOMERS LOANS RATIO

RM618.6 Mil RM45.94 Bil RM53.64 Bil 0.6% 15.6% 9.4% 8.4% 2017: 0.6%

Public Islamic Bank Berhad (“Public Islamic”) is a wholly-owned Public Islamic’s customer deposits registered healthy growth of subsidiary of Public Bank and the Islamic banking arm of the 8.4% or RM4.14 billion to RM53.64 billion as at the end of Public Bank Group. Public Islamic leverages on Public Bank’s 2018, accounting for 15.4% of the Public Bank Group’s total infrastructure, strong PB brand and extensive branch network customer deposits. Public Islamic’s funding position remained to offer innovative and comprehensive range of Shariah healthy, with gross financing to fund ratio as well as gross compliant products and services under the guidance of the financing to fund and equity ratio standing at 81.4% and Public Islamic Shariah Committee. 75.4% respectively as at the end of 2018.

Performance Review Public Islamic’s asset quality remained strong with gross impaired financing ratio sustained at 0.6% as at the end of Public Islamic recorded a commendable growth in its financial 2018, well below the Islamic banking industry’s gross impaired performance, with an increase of 15.6% in profit before tax from financing ratio of 1.2%. Public Islamic continued to be well- RM534.9 million in 2017 to RM618.6 million in 2018. The capitalised with its Common Equity Tier I capital ratio, Tier I increase in profit before tax was mainly due to higher net capital ratio and total capital ratio, after deducting second financing income and lower allowance for impairment on financing interim dividend, standing at 12.0%, 12.0% and 16.0% and advances. Public Islamic’s profit before tax accounted for respectively as at the end of 2018. 8.7% of the Public Bank Group’s pre-tax profit in 2018.

Public Islamic’s gross financing and advances grew by 9.4% or RM3.93 billion to RM45.94 billion as at the end of 2018 from RM42.01 billion as at the end of 2017, accounting for 14.5% of the Public Bank Group’s total loans, advances and financing. The increase was mainly due to higher financing for the purchase of residential properties. 150 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW DOMESTIC CONSUMER BANKING AND SME LENDING

New Product The SCOM which consists of five members appointed by the In March 2018, Public Islamic launched the PB ExcelLink-i, Board of Directors performs an oversight role on Shariah matters which is a single contribution Investment-Linked Takaful plan and advise Public Islamic to ensure its business and activities that provides benefits upon Death and Total Permanent comply with Shariah principles. The roles and responsibilities of Disability of the policy holders. the SCOM, as guided by BNM’s SGF are as follows: • Responsible and accountable for all Shariah decisions, In June 2018, Public Islamic launched the Foreign Currency opinions and views provided; Remittance Services and an online term deposit product, the PB eTerm Deposit-i, which allows online placements of term • Advise the Board on Shariah matters; deposits via Public Bank’s internet banking. • Endorse the Shariah-related policies and procedures;

In July 2018, Public Islamic successfully transitioned its Wadiah • Validate and endorse relevant documentations including based products to the Qard concept in line with Bank Negara terms and conditions contained in the contracts and Malaysia (“BNM”)’s Qard Policy. agreements used in executing the transactions as well as marketing advertisements and sales illustrations used to In support of BNM’s initiative to develop the market for Retail describe the product and services; Negotiable Instruments of Deposit and Islamic Negotiable • Assess work carried out by Shariah review and Shariah audit; Instruments, Public Islamic launched the Retail Negotiable Islamic Debts Certificate to retail customers in September 2018. • Assist related parties on Shariah matters; • Advise on matter to be referred to the Shariah Advisory Public Islamic will also embark on an investment intermediation Council of BNM; and business by introducing Investment Account product in support of BNM’s initiative to promote investment account products. • Provide written Shariah opinions.

The Shariah Committee comprises of the following members: RAM Ratings In April 2018, Rating Agency Malaysia reaffirmed Public 1. Professor Emeritus Dato’ Paduka Dr. Mahmood Zuhdi Bin Islamic’s long and short term financial institution ratings at Haji Ab Majid AAA and P1 respectively. The reaffirmation of Public Islamic’s 2. Tuan Haji Mohd Ridzuan Bin Awang ratings reflects Public Islamic’s strategic importance as the Islamic banking arm of the Public Bank Group. The reaffirmation 3. Associate Professor Datin Dr. Rusnah Binti Muhamad also recognises Public Islamic’s robust asset quality and sound 4. Associate Professor Dr. Abdul Bari Bin Awang capitalisation. 5. Assistant Professor Dr. Mohd Afandi Bin Awang Hamat

Role and Authority of Shariah Committee Public Islamic’s Shariah Committee (“SCOM”), which was established in line with the Islamic Financial Services Act 2013 as well as the Shariah Governance Framework (“SGF”) issued by BNM, is responsible for the overall Shariah governance and Shariah-compliance of Public Islamic. THE WAY FORWARD 151 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

During the year, a total of 12 meetings were held and the details of attendance of each member are as follows:

Number of Committee Meetings

Shariah Committee members Held Attended

Professor Emeritus Dato’ Paduka Dr. Mahmood Zuhdi Bin Haji Ab Majid 12 12 (Chairman of Shariah Committee)

Tuan Haji Mohd Ridzuan Bin Awang 12 11

Associate Professor Datin Dr. Rusnah Binti Muhamad 12 12

Associate Professor Dr. Abdul Bari Bin Awang 12 12

Assistant Professor Dr. Mohd Afandi Bin Awang Hamat 12 12

Zakat Obligation Prospects Public Islamic made a total of RM260,000 zakat payments for Despite these challenges, Public Islamic will continue to review its 2017 Islamic banking operations. The zakat was paid out to its business strategies to expand its financing portfolio and zakat collection centres in 14 states and selected orphanage further grow its deposits, particularly deposits from retail homes in Malaysia. customers which include current and savings account, in order to secure a more stable funding base with lower funding costs. Anticipated Risks To sustain its market position in the SME financing segment, Profit margin compression is expected to persist as Public Public Islamic will continue to tap on business opportunities by Islamic faces intense market competition to secure retail offering products and services that meet the demands of SMEs. deposits as well as financing and advances. Looking ahead, Public Islamic will also continue to work with AIA PUBLIC further changes in the regulatory environment and the Takaful Bhd to develop relevant and competitive bancatakaful challenging domestic as well as external economic outlook will products that meet customers’ needs. also weigh on the growth of Public Islamic. 152 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW WEALTH MANAGEMENT

FUND MANAGEMENT At a Glance

OPERATING PROFIT TOTAL SHAREHOLDERS’ REVENUE* BEFORE TAX ASSETS FUNDS RM1,164.4 Mil RM667.1 Mil RM992.4 Mil RM255.9 Mil 5.5% 0.9% 4.2% 3.4%

* After offsetting direct sales commission

RM'Billion Net Asset Value  .  . .   . .   . . .

 . .    . . .  . .       Year NAV - Conventional NAV - Islamic

Billion Units in Circulation and Number of Funds          

         . . .  . .   * * * * * Year Units in Circulation Number of Funds

* Inclusive of six Private Retirement Scheme Funds in 2014 and nine Private Retirement Scheme Funds from 2015 onwards THE WAY FORWARD 153 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Overview In 2018, global and regional equity markets experienced volatile trading conditions on concerns over rising interest rates in the United States of America (“US”) and escalating trade tension between US and China. The FTSE Bursa Malaysia Kuala Lumpur Composite Index recorded a loss of 5.9% for 2018 amid a weaker Ringgit and outflows of foreign funds while the bond market remained broadly stable.

Performance Review Public Mutual Berhad (“Public Mutual”) registered steady growth in 2018 with profit before tax increasing by 0.9% to RM667.1 million as compared to RM660.9 million in 2017. Total operating revenue grew by 5.5% from RM1,103.9 million in 2017 to RM1,164.4 million in 2018. Public Mutual’s total assets under management (“AUM”) stood at RM78.75 billion as at the end of 2018 with retail funds accounting for RM72.44 billion or 92.0% of its total AUM.

Due to challenging market conditions, the total AUM of the Malaysian retail private unit trust industry recorded a slower growth of 6.9% in 2018 as compared to 33.3% in 2017.

Despite volatile global financial markets, Public Mutual continued to sustain its leading position in the retail private unit trust industry, garnering an overall market share of 37.2% in 2018. Public Mutual retained its dominant position in the key retail unit trust fund sectors of equity funds, Islamic funds, bond funds and foreign funds with market shares of 55.5%, 46.0%, 46.8% and 39.6% respectively in 2018.

Due to the retracement of the domestic and foreign equity markets, Public Mutual’s domestic and foreign equity funds registered returns of up to -0.7% and -3.6% respectively in 2018. Meanwhile, bond funds registered resilient performance with returns of up to +6.5% over the same period.

New Fund Launches

SEVEN NEW FUNDS IN 2018 NUMBER OF FUNDS 147 total funds Fund Launch date

Public India-Global Equity Fund 19 January 2018

PB Islamic Dynamic Allocation Fund 28 February 2018

Public e-Islamic Flexi Allocation Fund 3 April 2018 134 unit 9 Private 4 wholesale trust funds Retirement funds Public Islamic ASEAN Growth Fund 21 June 2018 Scheme funds

PB Asia-30 Equity Fund 26 July 2018

Public Lifestyle & Technology Fund 8 August 2018

Public U.S. Equity Fund 13 November 2018 154 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW WEALTH MANAGEMENT

Awards Public Mutual reinforced its No.1 position in the private unit trust industry by clinching a total of 23 renowned accolades in 2018.

TYPE OF AWARDS TOTAL AWARDS

FUND PERFORMANCE AWARDS

Asia Asset Management – Best of the Best Country Awards 2018

• Islamic Retail House of the Year, Malaysia • Best Retail House, Malaysia 2

The Edge | Thomson Reuters Lipper Fund Awards 2018

• Best Overall Group Award – Malaysia Provident Funds

3-Year • Public Far-East Alpha-30 Fund Category – Equity Asia Pacific-Malaysia • Public Islamic Asia Leaders Equity Fund – Equity Asia Pacific Ex Japan-Malaysia Islamic • PB China ASEAN Equity Fund – Equity Asia Pacific Ex Japan-Malaysia • PB Islamic Asia Strategic Sector Fund – Equity Asia Pacific-Malaysia Provident Funds

5-Year • Public Far-East Balanced Fund Category – Mixed Asset MYR Balanced-Global-Malaysia Provident Funds • Public Tactical Allocation Fund – Mixed Asset MYR Flexible-Malaysia 14 • Public Bond Fund – Bond MYR-Malaysia • PB China Pacific Equity Fund – Equity Asia Pacific-Malaysia • PB China ASEAN Equity Fund – Equity Asia Pacific Ex Japan-Malaysia • PB Islamic Asia Equity Fund – Equity Asia Pacific-Malaysia Provident Funds

10-Year • Public Dividend Select Fund Category – Equity Malaysia Income-Malaysia • Public Global Select Fund – Equity Global-Malaysia Provident Funds • Public Bond Fund – Bond MYR-Malaysia

Thomson Reuters Lipper Global Islamic Fund Awards 2018

3-Year • Public Islamic Asia Leaders Equity Fund 1 Category – Equity Asia Pacific Ex Japan THE WAY FORWARD 155 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

TYPE OF AWARDS TOTAL AWARDS

OTHER AWARDS

• The BrandLaureate BestBrands Awards 2017-2018 1 – Brand of the Year for Financial and Wealth Planning – Unit Trust

• Reader’s Digest Trusted Brand Awards 2018 1 – Platinum Award for the Investment Fund Company Category in Malaysia

• The Asset Triple A Islamic Finance Awards 2018 1 – Islamic Asset Manager of the Year – Malaysia (Retail)

• The BrandLaureate Prominent Business BestBrands Award 2018 1 – Best Choice Brand of the Year for Financial & Wealth Planning – Unit Trust Category

• The BrandLaureate World Halal Brand of the Year Award 2018 1 – BestBrands in the Islamic Fund Category: Public Islamic Asia Leaders Equity Fund

• The BrandLaureate Industry Champion Brand ICON Leadership Award 2018 1 – Financial and Wealth Planning – Unit Trust

Marketing and Promotional Initiatives In its continuous effort to increase brand recognition, Public Mutual has stepped up its advertising and branding efforts in 2018 with business initiatives such as: • Extensive billboard coverage at strategic locations nationwide. • Placement of print advertisements in major newspapers including The Star, The Edge, Berita Harian, Sin Chew and Nanban. • Online advertisements to reach out to the digital-savvy audience. • Nationwide roadshows, investment seminars and financial planning talks. • Targeted investment seminars to engage retail and corporate investors as well as Mutual Gold and Mutual Gold Elite members. • Sharing of financial planning tips as well as the latest news and happenings on Public Mutual’s Instagram, LinkedIn and Google+ to engage investors and the public as a whole, especially the Gen-Yers. 156 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW WEALTH MANAGEMENT

Customer Service Public Mutual Online (“PMO”) which was launched in January 2009, enables subscribers to make enquiries pertaining to their investment accounts and perform investments and transaction requests such as switching and redemption of fund units. In 2018, the number of subscribers of PMO service increased to more than 430,000. >430,000 number of PMO service subscribers Training, Branches Network and Support Public Mutual supports its network of unit trust consultants (“UTCs”) with comprehensive training and development programmes to equip them with the necessary knowledge, skills and tools to better serve investors. Public Mutual’s programmes also emphasise on the importance of ethics and compliance as well as industry best practices.

On 16 July 2018, Public Mutual relocated its headquarters to Menara Public Bank 2, a 40-storey Grade A sustainable commercial building located in Jalan Raja Chulan, >110,000 Kuala Lumpur. high net worth Mutual Gold members Anticipated Risks In today’s technology-driven world, the emergence of new FinTech services and solutions in the wealth management segment may impact the competitiveness of the unit trust industry as tech-savvy investors may be drawn to innovative digital experiences featuring convenience and easy access to information at low cost. In view of the above, Public Mutual remains committed to embracing technological innovations by providing online services to its customers and UTCs. 32 In 2018, more features were added to PMO to enhance unitholders’ investing branch offices and customer service centres nationwide experience. Besides being made mobile responsive, the improved PMO allows unitholders to register for Direct Debit Authorisation via PayNet and provides Regular Withdrawal Plan facility that allows redemption of units at regular intervals. Fund Analytics features that facilitate unitholders to easily review funds’ features and performance were also incorporated.

Public Mutual will continue to strengthen its digital capabilities to allow for digital onboarding of new investors. In addition, Public Mutual will leverage on technological advancements to enhance customer experience in the areas of risk profiling and portfolio construction and analysis, tap into new demographics and expand its investor base.

Prospects With global financial markets expected to remain volatile, growth in the retail unit trust industry is expected to remain moderate as investors may adopt a more cautious approach to investing. Nevertheless, Public Mutual will continue to focus on offering a wide range of investment products and services to fulfil the demands of investors. THE WAY FORWARD 157 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

BANCASSURANCE As a result of more cautious consumer sentiment amid heightened volatility in the global financial market, the The Public Bank Group’s bancassurance business continues to annualised new premium of the domestic bancassurance be one of the Group’s main fee income generating business, business decreased slightly by 1.5% or RM3.9 million from driven mainly by the Group’s strategic bancassurance RM254.1 million in 2017 to RM250.2 million in 2018. partnership with AIA Group Ltd. (“AIA”). Between 2013 and 2017, the Group’s strategic bancassurance partnership with Products and New Initiatives AIA has delivered strong results, with annualised new premium growing at a compounded annual growth rate of 20%. Given PB WealthElite the success of this tie-up, Public Bank and AIA have extended In May 2018, Public Bank and AIA introduced the PB the partnership, which is due to expire in 2022, by another 15 WealthElite, a regular premium investment-linked product that years to 2037. The Group will collaborate with AIA to further provides customers with high protection during their productive grow the bancassurance business, leveraging on the Group’s years and/or a supplement for their legacy planning. strong multi distribution channel, digital capabilities and efficient processes in order to create a comprehensive and PB ExcelLink-i personalised array of products and services for customers. To provide an alternative investment product with takaful The Public Bank Group’s domestic bancassurance business is protection for customers, Public Islamic Bank Berhad and AIA fully supported by approximately 440 Financial Executives and introduced the PB ExcelLink-i for AIA PUBLIC Takaful Bhd in 2,100 credit related licensed staff, based at the Group’s March 2018. PB ExcelLink-i provides insurance coverage upon branches, to promote bancassurance products such as regular death up to the age of 100 years and Total Permanent Disability premium investment-linked, single premium investment-linked (“TPD”) benefits up to the age of 65 years. and other credit related life insurance products. Enhancements of Product Features Performance Review In April 2018, the insurance coverage of Mortgage Decreasing Domestic Annualised New Premium RM’Million Term Assurance (“MDTA”) and Business Loan Decreasing Term  Assurance (“BLDTA”) for properties under construction was extended to 5 years from 3 years. The TPD coverage for MDTA  and BLDTA was also enhanced to cover the insured up to 70 years of age in order to provide better protection. In July 2018,  AIA has also extended the number of critical illnesses covered, from 36 to 39 at no additional premium to the insured.  Integration with AIA Vitality  In support of healthy living for a longer and better life, Public  Bank’s customers who are insured under any bancassurance insurance plan are eligible to sign up as a AIA Vitality member.  . . . .  . Year Members enjoy additional insurance benefits when they earn         vitality points through their participation in the AIA Vitality Programme, which is a unique wellness and insurance programme that actively motivates and rewards its customers for getting fit and staying healthy. 158 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW WEALTH MANAGEMENT

Telemarketing Insurance Products Training Initiatives Public Bank remains committed to build a competent work RM’Million Annualised New Premium from Telemarketing force and continues to invest in various training programmes  and courses to equip sales staff with comprehensive product  knowledge and selling skills. Newly licensed sales staff are  provided with First Advisor’s Sales Training Results Achieving  Curriculum (“FASTRAC”), Follow Up Follow Through for  FASTRAC and Basic Sales Effectiveness Programme trainings  which cover selling skills and comprehensive knowledge of the  Bank’s products and services.  . . . . . In April 2018, Public Bank together with AIA launched the  Year          Activity Management Dashboard (“AMD”) application to channel leads from various sources and support the daily sales activities of sales staff. The application also enables managers Amidst a softer market, the telemarketing channel generated to provide immediate feedback to sales staff based on the annualised new premium of RM59.2 million, a drop of 19.7% results obtained from the AMD application. or RM14.5 million from RM73.7 million in 2017. The annualised new premium was mainly generated from the sales of PB Care In 2018, sales staff attended the Enhance Sales Performance, PA, PB Cancer Guard and PB CI Protector. Embrace Sales Effectiveness and Embark Sales Success training courses which focus on driving high value sales activities, need- On 1 August 2018, a new telemarketing product, the PB Global based selling, sales professionalism and provision of after sales PA was launched. The PB Global PA is a personal accident plan service. that provides insurance protection for accidental injury, dismemberment and death. Hong Kong Operations Public Bank is actively intensifying its telemarketing initiatives Public Bank (Hong Kong) Limited (“PBHK”) and AIA International to improve insurance penetration rate and continuously reviews Limited (Hong Kong) (“AIA”) entered into its sixth year of the the suitability of its telemarketing products to cater to bancassurance partnership in 2018. The Public Bank Group’s customers’ changing needs. bancassurance business in Hong Kong is supported by 51 licensed Customer Service Officers stationed across the Group’s Marketing Initiatives network of 32 branches to serve customers’ financial needs.

Sales Campaigns In 2018, a total of HKD35.9 million in annualised new premium In order to motivate and boost the productivity of its was generated, an increase of 15.4% or HKD4.8 million from bancassurance sales staff, Public Bank launched various HKD31.1 million in 2017, mainly contributed by the sales of campaigns in 2018 such as the “2018 Quarterly Regular the “Simply Love Encore 2” insurance plan which has high Premium Challenge”, “2018 Fast Start Ang Pow Challenge”, savings elements. “2018 Malaysia Day Gold Rush”, “2018 Bancassurance Bangkok Conference Trip Challenge”, “2018 Incentive Trip Challenge” A new AIA product, the “Protect Elite Ultra” was launched and “PB WealthPlus Campaign”. In order to make the campaigns together with the AIA Vitality Programme in November 2018, more attractive and competitive, outstanding sales staff stood effectively combining insurance and health programme to to win not only cash but also gold bars, petrol cards and travel provide customers with insurance protection whilst encouraging packages to Eastern Europe, Busan and Bangkok. them to achieve a healthy and active lifestyle. THE WAY FORWARD 159 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Cambodian Public Bank INVESTMENT PRODUCTS Cambodian Public Bank (“Campu Bank”) through its exclusive PB Dual Currency Investment (“PB DCI”) distribution partnership with AIA (Cambodia) Life Insurance Plc achieved good results in bancassurance sales with a total of PB DCI, a short term currency-linked structured product USD2.0 million annualised new premium generated in 2018 investment contributed RM1.4 million to the Public Bank from USD1.4 million in 2017. Group’s fee based income in 2018. Going forward, the performance of PB DCI is expected to be moderate given the To enhance public awareness of its bancassurance business, uncertain market conditions. In addition, downside risks remain Campu Bank in collaboration with AIA have organised a number as the volatility in the foreign exchange market could result in of sales events and campaigns in 2018 such as Feng Shui less attractive returns for this investment. Seminars, Special Football Coaching Session for Kids by two Tottenham Hotspur FC coaches, Junior Art Talent Kid Colouring PB Retail Negotiable Instruments of Deposit (“PB R-NID”) Contest, Leadership Talk and AIA Health & Wealth Talk. These To provide customers with an alternative choice of investment, events received favourable response and have generated Public Bank launched the PB R-NID Tranche 3 from 18 June annualised new premium of approximately USD530,000. 2018 to 18 July 2018, which offered a return of 4.38% per annum. over a 15-month period. Meanwhile, PB R-NID Public Bank Vietnam Tranche 1 matured on 2 May 2018 whilst PB R-NID Tranche 2 In August 2018, Public Bank Vietnam Limited (“PBVN”) entered will be maturing on 3 April 2019. To date, total sales generated into a five-year Distribution Agreement with AIA (Vietnam) Life from all three tranches amounted to RM127.5 million. Insurance Company Limited to become an exclusive agent for the distribution of life insurance products in Vietnam. The inaugural life insurance product, the “PB Life Enhancement” was introduced and bancassurance kick-off workshops were organised at all PBVN branches in September 2018 to promote awareness of life insurance products amongst bank staff and customers.

Anticipated Risks and Prospects Despite the challenging operating environment and strong competition in the bancassurance business, the Public Bank Group will continue to drive market expansion and market share by increasing the penetration rate and take-up rate of its regular premium products. The Group will continue to draw on the collective strength of the partnership between the Group and AIA to jointly develop new products that match the lifestyle and needs of customers, leveraging on the Group’s wide distribution of physical and digital network. 160 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW WEALTH MANAGEMENT

Initiatives for Product Cross-Sell to deepen customer engagement so as to enable the Bank to Public Bank regularly engages its customers to offer wealth develop customer-centric products and solutions. With this, the management solutions that fulfil their needs through their life Bank aims to further strengthen its position and image as a stages. By leveraging on customer analytics, the Bank has been one-stop financial solution provider rather than just a able to further grow transaction volumes through improved transactional product supplier. customer engagement and better operational efficiency. Cross-Selling Unit In order to generate more sales leads, Public Bank has launched Public Bank established a dedicated team of account some referral campaigns in 2018 such as the Staff Referral management executives at selected branches to enhance Programme, Branch PB WealthElite Referral Campaign and engagement with customers. By engaging with customers, Referral leads by Sales and Marketing Executive. In addition, dedicated staff would be able to ensure customers benefit from Public Bank has also launched the Staff Purchase Programme to financial solutions which are designed to suit their lifestyles, promote PB WealthElite and PB WealthPlus. life stages and aspirations, thereby increasing customers’ loyalty and satisfaction towards Public Bank. Currently, the Product Promotional Event Bank has a team of 80 dedicated account management In order to attract and acquire new customers, Public Bank has executives stationed at branches and expects to progressively continued to conduct quarterly Product Promotional Events expand this unit to more branches in the future. (“PPEs”) in 2018 which carried themes such as the “PB Golden Fortune”, “PB One Family”, “PB Smart Investor” and “PB Savings Lead Generation Galore”. In 2018, Public Bank has also launched a few big scale Lead Generation is another initiative that Public Bank has PPEs jointly with AIA to further promote and create awareness embarked on to further institutionalise its engagement with of the AIA Vitality programme as well as the regular premium customers. With lead generation, every staff in a branch is and single premium products. A total of 937 PPEs were mobilised to proactively engage with customers and create conducted which have generated total sales amounting to awareness of the Bank’s products and services. RM120.7 million from various products which included new deposits accounts, unit trust investments, regular premium The key components of the lead generation programme involve: products and cross-selling of credit and debit cards. Cultural Change Customer Relationship Management To inculcate and reinforce a cultural norm where customer Public Bank leverages on big data analytics to uncover trends and engagement is prioritised, branch leadership has line-of-sight meaningful insights in order to improve understanding of on lead generation activities to review the timeliness and customers’ lifestyle preferences. These enable the Bank to develop quality of customer follow-ups. Regular briefings are also intuitive and distinctive solutions as well as provide advisory conducted by branch leaders to align with the branch’s goals. services that meet the needs of various customers. The Bank To create role models for replication, success stories and best continues to upgrade the Customer Relationship Management practices are regularly shared with staff. Application tool to identify new engagement opportunities, improve services and address customers’ queries in order to better Customer and staff engagement serve customers and enhance customer experience. Staff are trained to be proactive in engagements with customers in order to understand their needs. As needs are uncovered, Customer Strategic Initiative referrals can then be made for cross-selling of need-based While digitalisation and innovative product offerings remain financial solutions. Through improvement in teamwork, the important to stay competitive, sustainable long term growth level of engagement throughout the branch between customers can only be achieved by staying relevant in the eyes of the and staff will increase, hence bringing the branch as a whole customers. In 2018, Public Bank expanded its pilot programmes closer to its goals. THE WAY FORWARD 161 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW TRANSACTIONAL SERVICES

CASH MANAGEMENT SERVICES Marketing Initiatives Public Bank’s cash management services are customised to PB Overseas Education Campaign provide comprehensive collection and payment solutions to In 2018, Public Bank extended the highly in demand “PB assist in the management of receivables and payables. These Overseas Education Campaign” which offers preferential foreign services are widely supported by the Bank’s extensive network exchange rates for education remittances to Australia, New of branches and digital channels. Zealand, United Kingdom and United States of America (“US”) for the seventh consecutive year. A total of RM607.0 million In March 2018, a new online cash management services called was remitted under the campaign. “PB enterprise” was implemented to cater for new and existing corporate customers’ needs as well as to enhance customers’ PB Overseas Remittance Campaign online banking experience. PB enterprise delivers end-to-end In 2018, Public Bank continued running the “PB Overseas customised solutions and support for e-Payment and collection Remittance Campaign” to promote cross broader remittance services under a reliable and secure environment. service between the Bank and its overseas subsidiaries or branches in Hong Kong, Vietnam, Laos, Cambodia and Sri Public Bank continued to support Bank Negara Malaysia’s Lanka. The campaign which offered reduced service charges for (“BNM”) initiatives to promote e-Payments by conducting each remittance transaction has generated more than 127,000 briefings at 184 branches nationwide and participating in 13 transactions amounting to USD3.98 billion during the campaign e-Payment Roadshows initiated by BNM during the year. As a period. result of these activities, the total number of payee and payor corporation grew by 73.6% to more than 10,500 as at the end PB Indonesia Money Transfer (“PBIMT”) 2018 Ramadan of 2018. The Bank has also been actively promoting PayNet Campaign services such as Financial Process Exchange (“FPX”), Direct Debit and JomPAY. In collaboration with PayNet, several online In conjunction with the Ramadan and Hari Raya festive season, campaigns have been successfully organised together with Public Bank collaborated with Bank Central Asia to launch the various merchants. “PBIMT 2018 Ramadan Campaign”. The Campaign which was introduced from 2 May 2018 to 30 June 2018 offered zero fees In recognition of Public Bank’s contribution to the country’s for outward remittance services to Indonesia. e-Payment agenda, the Bank was conferred with the following awards at the Malaysian e-Payments Excellence Awards 2018 PB-Western Union Remit and Win Cash Campaign by PayNet: In 2018, Public Bank collaborated with Western Union to launch • Best IBG Bank the “PB-Western Union Remit and Win Cash Campaign”. During the campaign period, customers stood to win attractive cash • Best MyDebit Bank prizes when they used Western Union remittances via the Bank. • Outstanding Contribution to FPX • Outstanding Contribution to MyDebit Anticipated Risks and Prospects • MyDebit Top Acquirer Despite gradual recovery in major economies, global geopolitical risks and escalating trade disputes between US and China remain a concern for businesses. However, the government’s REMITTANCES efforts to attract investments into Malaysia will continue to provide opportunities for the remittance business. Although Public Bank offers comprehensive remittance services through competition from non-bank remittance players and FinTech the Public Bank Group’s physical and digital network. Despite remittance companies are intensifying, Public Bank will step up cautious domestic business sentiment, the Bank’s total its promotion and expansion of its remittance business and remittance transactions amounted to RM47.03 billion in 2018. money transfer services, leveraging on its large branch network, This was achieved through effective collaboration with the digital platform and digital offerings. Bank’s business partners and various remittance campaigns launched during the year. 162 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW CAPITAL MARKET OPERATIONS

TREASURY Despite challenging market conditions, the Public Bank Group’s domestic treasury operations recorded a profit before tax of The Public Bank Group’s treasury operations offer a wide range RM706.4 million in 2018, an increase of 0.8% or RM5.7 million of financial services solutions to corporate, institutional and from RM700.7 million in 2017. Net interest income improved by retail customers that enable them to manage risk exposure and 5.9% due to higher gapping activities. Other operating income, maximise returns on their investments. These include however, was lower by RM16.9 million mainly attributed to conventional and Islamic foreign exchange and wholesale lower trading gain from sales of fixed-income assets. deposit products offered primarily through the treasury offices of Public Bank, Public Islamic Bank, Public Investment Bank, Anticipated Risks Public Bank (L) Limited and the Group’s overseas subsidiaries. Other functions of the Group’s treasury operations include The continuing trade tensions between the US and its trading liquidity and interest rate risk management, proprietary trading partners have increased the likelihood of sustained trade and investment activities in accordance with prudent risk and conflicts into the medium term. As the domestic economy control measures set by the management. remains exposed to the external environment and is dependent on global trades, the mounting uncertainty may continue to The Public Bank Group has also formed strategic alliances with weigh on investor interest towards the Ringgit currency and Resona Bank, Saitama Resona Bank and The Kinki Osaka Bank assets. On the other hand, the US dollar is envisaged to benefit of Japan, Bank Central Asia of Indonesia, The Siam Commercial from an expectation that US interest rates will rise further and Bank and China Construction Bank of China via its International the US economy will continue to strengthen and expand. The Business Unit to drive targeted client origination opportunities rising US dollar and interest rate could also pose another in specific market segments. headwind for markets in the developing economies as the value of investments made in local currencies may reduce, making them less attractive for investors to hold. Performance Review In 2018, growth in major economies especially the United Nonetheless, the Ringgit may have further upside potential States of America (“US”) continued to gain traction, in contrast along with the increased pace of economic growth and higher to emerging market economies which did not perform as well. crude oil prices. The risk appetite for Malaysian assets is The currencies and asset prices of emerging markets were improving amid growing investor confidence in the new affected by the strong US dollar, trade tension and signs of an government’s policies, including some subtle changes in foreign economic slowdown in China. As a result, investors have policies, such as deepening ties with Japan to broaden business increasingly gravitated towards developed markets. The opportunities for both countries. resultant shift of capital had created greater volatility in the international financial markets and sharp depreciation of the Prospects emerging market currencies, including the Ringgit. The Public Bank Group strives to remain prudent in its business approach while pursuing new growth strategies. Moving On the domestic front, Bank Negara Malaysia was the first forward, the Group will place customer centricity as a focus central bank in South East Asia to normalise the degree of area of its growth strategy and capitalise on its wide network monetary accommodation by increasing the Overnight Policy and business partners to enrich customer offerings and improve Rate (“OPR”) by 25 basis points to 3.25% in January 2018. customer experience. The Group will also focus on adopting a This, coupled with the subdued foreign investor demand for multi-strategic approach to increase efficiency. The Group will emerging market assets, had led to an upward shift in Ringgit further strengthen its risk management capacity to brace for bond yields despite the Ringgit outperforming regional any emerging challenges in the global financial markets. Other currencies. Domestic inflation was also benign from tax policy strategic priorities in 2019 include broadening product ranges, adjustments. leveraging on technology to improve process flows and building a focused and passionate workforce to meet changing customer expectations. THE WAY FORWARD 163 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

DOMESTIC CORPORATE LENDING

At a Glance

GROSS LOANS, PROFIT ADVANCES AND GROSS IMPAIRED BEFORE TAX FINANCING LOANS RATIO

RM558.5 Mil RM40.95 Bil 0.1% 2.7% 4.2% 2017: 0.1%

The domestic corporate lending operations of the Public Bank Group recorded an increase in loans growth of 4.2% or RM1.65 billion to RM40.95 billion as at the end of 2018. The moderate loans growth was mainly attributed to customers adopting a more cautious approach in managing their gearing in the face of various emerging risks that had surfaced in 2018 such as the trade war between the United States of America (“US”) and China. Notwithstanding the presence of various challenges, the asset quality of the Group’s domestic corporate lending remained intact with gross impaired loans ratio standing at 0.1% as at the end of 2018 due to the Group’s stringent credit underwriting standards and effective credit monitoring practices.

Profit before tax of the Public Bank Group’s corporate lending operations increased from RM543.7 million in 2017 to RM558.5 million in 2018 primarily attributed to higher net interest income on higher average loan balances partially offset by higher loan impairment allowance and higher other operating expenses.

Anticipated Risks The continued soft property market and unresolved trade tension between China and US are amongst the anticipated risks in 2019. Any heightening in these emerging risks is likely to have an impact on corporate lending and the quality of corporate loans portfolio.

Prospects Amidst expectation of an equally challenging 2019, the Public Bank Group will continue to expand its corporate lending business by targeting its existing clientele with good track record and credit rating as well as diversify its lending portfolio to other viable business sectors. 164 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW CAPITAL MARKET OPERATIONS

INVESTMENT BANKING

At a Glance

OPERATING PROFIT TOTAL REVENUE BEFORE TAX CAPITAL RATIO

RM171.9 Mil RM49.2 Mil 52.1% 4.7% 6.5% 2017: 40.8%

Public Investment Bank Berhad (“Public Investment Bank”) provides a wide spectrum of investment banking services catering to both institutional and retail customers. The services offered include corporate finance and advisory services, advisory for the issuance of corporate bonds and sukuk, corporate lending, treasury as well as stock broking services.

In 2018, Public Investment Bank completed a total of 34 corporate exercises comprising initial public offering, equity fund raising, merger and acquisition as well as independent advisory. A total of RM4.04 billion was also successfully raised through four new fund raising programmes from the debt capital market via the issuance of corporate bonds and sukuks.

For its stock broking business, Public Investment Bank continued to grow its retail customer base leveraging on its internet share trading platform and the Public Bank Group’s Share Investment Units nationwide. Meanwhile, strong support from its institutional sales and in-house research team further drove its institutional customer base growth.

Amidst the challenging environment, Public Investment Bank achieved satisfactory operating revenue and profit before tax of RM171.9 million and RM49.2 million respectively in 2018.

Anticipated Risks The investment banking operations are susceptible to capital market conditions which could be adversely affected by changes in regulations, political conditions, uncertainties in interest rates, foreign currency fluctuations as well as global economic conditions. Any uncertainty and adverse sentiment to the capital market may dampen investor confidence and affect the equity market while companies may also hold back on fund raising or corporate exercises thus affecting the corporate advisory and debt capital market operations.

Prospects Local equity market may be volatile as concerns over trade war between United States of America and China threaten to keep sentiment uncertain. With low likelihood of domestic interest rate hikes in the near term, debt fund raising activities could pick up as companies take advantage of the prevailing accommodative interest rate environment. Conditions for equity fund raising activities should also be encouraging as activities are expected to accelerate in line with government’s economic and growth policies. THE WAY FORWARD 165 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INTERNATIONAL OPERATIONS

At a Glance

GROSS LOANS, DEPOSITS Presence in Hong PROFIT ADVANCES AND FROM GROSS IMPAIRED Kong & People’s BEFORE TAX FINANCING CUSTOMERS LOANS RATIO Republic of China, Cambodia, Vietnam, RM690.7 Mil RM23.23 Bil RM28.58 Bil 1.4% Laos and Sri Lanka 0.4% 5.0% 9.6% 2017: 1.3%

The Public Bank Group maintains strategic regional presence across five countries in the Asian region, with overseas branches in Laos and Sri Lanka as well as subsidiaries in Hong Kong, Cambodia and Vietnam.

The pre-tax profit of the Public Bank Group’s international operations increased marginally by 0.4% or RM2.9 million from RM687.8 million in 2017 to RM690.7 million in 2018 mainly due to the overall unfavourable impact arising from foreign exchange movements. Excluding the impact of foreign exchange movements, the pre-tax profit from the Group’s international operations was higher by 7.3% mainly due to lower loan impairment allowance. The Group’s international operations contributed 9.7% to the Group’s total pre-tax profit in 2018 mainly contributed by Public Financial Holdings Limited Group in Hong Kong and Cambodian Public Bank Plc. 166 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INTERNATIONAL OPERATIONS

HONG KONG

At a Glance

Hong Kong PROFIT PROFIT PROFIT BEFORE TAX BEFORE TAX BEFORE TAX 77 branches 2017: 79 branches PUBLIC FINANCIAL PUBLIC BANK (HONG PUBLIC FINANCE HOLDINGS GROUP KONG) LIMITED^ LIMITED^ People’s Republic of China HKD622.2 Mil HKD300.8 Mil HKD292.8 Mil 0.9% 1.5% 1.1% 4 branches 2017: 4 branches

^ profit excluding dividends from subsidiaries

Public Bank (Hong Kong) Limited

GROSS LOANS, ADVANCES AND DEPOSITS GROSS IMPAIRED TOTAL CAPITAL FINANCING FROM CUSTOMERS LOANS RATIO RATIO* HKD23.68 Bil HKD30.02 Bil 0.3% 17.5% 0.3% 2.8% 2017: 0.1% 2017: 17.3%

Public Finance Limited

GROSS LOANS, ADVANCES AND DEPOSITS GROSS IMPAIRED TOTAL CAPITAL FINANCING FROM CUSTOMERS LOANS RATIO RATIO* HKD6.11 Bil HKD5.47 Bil 1.9% 22.3% 5.8% 7.7% 2017: 1.8% 2017: 22.8%

* presented in accordance with Banking (Capital) Rules under Section 97C of the Banking Ordinance issued by the Hong Kong Monetary Authority THE WAY FORWARD 167 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

The Public Bank Group’s operations in Hong Kong are The asset quality of the Public Bank Group’s Hong Kong undertaken by Public Financial Holdings Limited (“PFHL”), a operations continued to be sound. The gross impaired loans company listed on the Stock Exchange of Hong Kong. PFHL has ratio of Public Bank (Hong Kong) Limited and Public Finance two major banking subsidiaries, namely Public Bank (Hong Limited remained low at 0.3% and 1.9% respectively as at the Kong) Limited which focuses on retail and commercial banking end of 2018. and Public Finance Limited which concentrates on the provision of personal financing. In 2018, Public Bank (Hong Kong) Limited and AIA International Limited (Hong Kong) entered into its sixth year of bancassurance Performance Review partnership to market bancassurance products. The Public Bank Group’s bancassurance business in Hong Kong is supported by Amidst intense competition in Hong Kong, Public Bank (Hong 51 licensed Customer Service Officers stationed across the Kong) Limited posted a profit before tax of HKD300.8 million Group’s branch network in Hong Kong. Arising from marketing in 2018, an increase of 1.5% from HKD296.5 million in 2017. initiatives, the annualised new premium increased by 15.4% to However, Public Finance Limited’s profit before tax dropped HKD35.9 million in 2018 from HKD31.1 million in 2017. 1.1% to HKD292.8 million in 2018 from HKD296.1 million in 2017 as a result of higher operating overheads and higher allowance for loan impairment. Anticipated Risks and Prospects The economic outlook in Hong Kong and Mainland China is Public Finance Limited which specialises in the personal loans anticipated to be challenging in 2019 in light of the ongoing business that serve the middle-to-low income households and trade war between United States of America and China, overseas contract workers recorded a healthy loans growth of slowdown in the property market and possibility of interest 5.8% to HKD6.11 billion as at the end of 2018 while Public rate hikes. The banking industry is forecast to face greater Bank (Hong Kong) Limited’s loans and advances increased competition for market share in loans, deposits and fee income. marginally by 0.3% to HKD23.68 billion as at the end of 2018. Moving forward, the Public Bank Group will continue to safeguard its financial strength and manage risks cautiously. Despite intense market competition, Public Bank (Hong Kong) The Group will also continue to pursue organic growth in its Limited and Public Finance Limited registered healthy deposits retail and commercial lending as well as consumer financing growth of 2.8% and 7.7% respectively in 2018 to businesses. HKD30.02 billion and HKD5.47 billion respectively as at the end of 2018. 168 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INTERNATIONAL OPERATIONS

CAMBODIA

At a Glance Cambodian Public Bank Plc

GROSS LOANS, PROFIT ADVANCES AND DEPOSITS GROSS IMPAIRED Cambodia BEFORE TAX FINANCING FROM CUSTOMERS LOANS RATIO 31 branches

2017: USD71.6 Mil USD1.05 Bil USD1.89 Bil 1.3% 30 branches 21.7% 2.6% 15.9% 2017: 0.6%

The Public Bank Group’s operations in Cambodia are undertaken by: i. Cambodian Public Bank Plc (“Campu Bank”) ii. Campu Securities Plc (“Campu Securities”) iii. Campu Lonpac Insurance Plc (“CLIP”)

Campu Bank drives the Public Bank Group’s retail and commercial banking business in Cambodia and has been leading the Group’s business in Cambodia since 1992. Campu Bank offers a comprehensive range of banking products and services and presently has 31 branches across the country. Campu Securities, a wholly-owned subsidiary of Campu Bank, was incorporated in 2012 to carry out underwriting and trading activities in conjunction with the establishment of the Cambodia Securities Exchange, whilst CLIP which is 55% owned by the Group provides general insurance services.

In recognition of Campu Bank’s strong commitment to excellence in banking, Campu Bank was awarded the “Bank of the Year Cambodia for 2018” award by The Banker, London for the 11th time and “Domestic Retail Bank of the Year – Cambodia for 2018” by Asian Banking and Finance for the seventh consecutive year. During the year, Campu Bank also won the “2018 Asiamoney Best Banks Awards for Cambodia” in two categories, namely Best Domestic Bank and Bank for SMEs, for the first time.

Performance Review Campu Bank registered a commendable pre-tax profit growth of 21.7% or USD12.7 million to USD71.6 million from USD58.9 million in 2017. The improved financial performance was mainly driven by enlarged low-cost deposits, higher fee income and prudent cost management.

Amidst the challenging operating and economic conditions, Campu Bank maintained a cautious approach in its lending business, recording loans growth of 2.6% or USD26.6 million in gross loans and advances to USD1.05 billion as at the end of 2018. Although gross impaired loans increased during the year, credit risk remained sound with gross impaired loans ratio of Campu Bank standing at 1.3% as at the end of 2018. THE WAY FORWARD 169 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

During the year, Campu Bank realigned its business focus to deposits mobilisation. As a result, Campu Bank recorded a strong deposits growth of 15.9% or USD259.3 million to USD1.89 billion as at the end of 2018, from USD1.63 billion a year ago.

Campu Bank entered into its second year of strategic partnership with AIA (Cambodia) Life Insurance Plc (“AIA Cambodia”) as its exclusive referral agent for AIA bancassurance products in Cambodia. A total of USD2.0 million annualised new premium was generated in 2018, from USD1.4 million in 2017. Campu Bank will continue to work closely with AIA Cambodia to intensify effective sales and marketing activities to grow the bancassurance business in Cambodia.

Subsidiaries CLIP, which commenced operations in 2007, remained a major player in the highly competitive general insurance business in Cambodia. Leveraging on Campu Bank’s extensive customer base, CLIP’s pre-tax profit improved significantly by 53.2% to USD2.3 million in 2018 from USD1.5 million in 2017.

Anticipated Risks and Prospects Economic growth in Cambodia is expected to remain robust, buoyed by a rebound in textile and apparel exports as well as the tourism and agriculture sectors. Nevertheless, there could be downside risks from erosion of export competitiveness due to rapidly rising real wages, and a buildup of vulnerabilities from a prolonged real estate and construction boom.

Campu Bank will continue to reinforce its position as the largest foreign bank in Cambodia by expanding its lending in the retail and commercial sectors. To support long term business growth, Campu Bank will further leverage on technology and enhance customer service to further strengthen Campu Bank’s competitiveness in the market.

VIETNAM

At a Glance Public Bank Vietnam Limited

GROSS LOANS, PROFIT ADVANCES AND DEPOSITS GROSS IMPAIRED 18 branches BEFORE TAX FINANCING FROM CUSTOMERS LOANS RATIO

2017: VND261.48 Bil VND11,785.16 Bil VND9,902.91 Bil 1.2% 13 branches 2.8% 31.2% 24.5% 2017: 1.8%

Performance Review Vietnam continues to be one of the strongest growing economies in ASEAN driven by improved economic competitiveness, exports and domestic consumption. Riding on the favourable economic environment, Public Bank Vietnam Limited (“PBVN”) achieved strong results in 2018. Profit before tax grew 2.8% to VND261.48 billion in 2018 from VND254.26 billion in 2017 on the back of strong double-digit growth in both loans and deposits of 31.2% and 24.5% respectively. Meanwhile, the asset quality of PBVN continued to strengthen with gross impaired loans ratio improving to 1.2% as at the end of 2018 from 1.8% a year ago. 170 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INTERNATIONAL OPERATIONS

In August 2018, PBVN entered into an exclusive Distribution Agreement with AIA (Vietnam) Life Insurance Company Limited which saw the appointment of PBVN as the exclusive agent for AIA bancassurance products in Vietnam. This tie-up will enable PBVN to provide bancassurance products to meet the varying needs of customers and further boost PBVN’s fee-based income.

PBVN was once again recognised for its banking excellence when it was awarded “The BrandLaureate Special Edition World Award 2018” for Brand Excellence in Banking and Finance (Vietnam) for the second consecutive year on 20 November 2018.

As part of its ongoing business expansion, PBVN opened five new branches and transaction bureaus in 2018, bringing the total branches to 18. Going forward, the Public Bank Group plans to open more new branches and further expand its market presence in Vietnam.

Anticipated Risks and Prospects The strong economic growth in Vietnam will continue to provide impetus to the banking sector, notwithstanding the challenges in the operating environment. PBVN will continue to grow its business organically and diversify its products and services to capture a larger market share.

LAOS OPERATIONS Public Bank Laos Operations registered significant improvement in profit before tax of more than 100% to USD8.5 million in 2018 from USD0.1 million in 2017. This was mainly due to writeback of loans provisioning made in previous years as a result of regulatory changes to the loans provisioning requirements in 2018. With the challenging operating conditions in Laos, total loans and customer deposits declined by 14.6% and 20.3% respectively to USD168.1 million and USD89.6 million respectively.

To promote online banking, Public Bank Laos Operations launched the PBe Internet Banking Services in September 2018 which offer an array of banking services to its customers. Public Bank currently has four branches in Laos.

SRI LANKA OPERATIONS The Public Bank’s operations in Sri Lanka achieved a higher profit before tax of LKR399.8 million in 2018, an increase of 6.9% from LKR374.1 million in 2017. Total customer deposits recorded a double-digit growth of 20.2% to LKR2.50 billion as at the end of 2018, from LKR2.08 billion a year ago. Meanwhile, total loans and advances recorded a growth of 8.8% to LKR6.95 billion as at the end of 2018 from LKR6.39 billion as at the end of 2017. Currently, Public Bank has three branches in Sri Lanka. THE WAY FORWARD 171 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW SERVING THE CUSTOMER

CUSTOMER SERVICE EXCELLENCE IS OUR SERVICE AMBASSADORS COMMITMENT “Service Ambassadors” are stationed at branches to provide The Public Bank Group takes cognisance of the evolving digital face-to-face service to customers. They assist customers to trends which are shaping customer behaviour. Even as the familiarise themselves with the range of services offered over needs and expectations of customers evolve, the Group remains the counters and at self service terminals. Feedback gathered committed to deliver superior customer experience in order to from customers provide valuable insight surrounding customer’s deepen customer engagement and forge enduring relationships. perception of the quality of services rendered and are used to Public Bank’s service ethos, built on its corporate tagline further improve the Bank’s processes and quality of services. “Excellence Is Our Commitment”, reflects its continuous pursuit to deliver best-in-class customer service. UNINTERRUPTED BANKING SERVICES To maintain high service standards, operational risks are The Public Bank Group continues to reimagine banking, appropriately managed to ensure the delivery of uninterrupted leveraging on digital technology and innovation to design services. The Public Bank’s Business Continuity Plan (“BCP”) is experiences that will make banking simpler and more seamless developed to ensure operational and infrastructure sustainability across multi delivery channels and touchpoints. Customer in the event of disruptions. The Bank’s BCP is constantly experience is continuously reviewed and benchmarked against reviewed, enhanced and tested throughout the year to ensure internal performance standards for continuous improvement. that essential banking services are uninterrupted. Premised on the core belief that customer satisfaction is key to building brand loyalty, the Group is committed to promote and instil a service oriented culture amongst staff to deliver on the PB brand promise. This commitment has enabled the Group to SIRIM CERTIFICATION maintain its competitive edge and build the PB brand over the In 2018, Public Bank’s ISO 9001:2015 certification for the last 52 years. “Provision of Customer Service at the Front Office” and “Provision of Customer Service in Loan Delivery” were reaffirmed by SIRIM for another three years to 2020. The STANDARD WAITING TIME continued ISO certification is a testament of the Bank’s firm commitment to continuously improve and uphold the quality of To ensure the efficiency of its service delivery at the branch its customer service. counters, Public Bank implements and vigorously monitors the performance and quality levels of its counter service through its Queue Management System (“QMS”). The QMS measures the “Standard Waiting Time” (“SWT”) at the branch counters PROMPT CUSTOMER RESOLUTION SYSTEM which are monitored based on a 2-minute, 3-minute and Public Bank takes all customer complaints seriously. The Bank has 5-minute customer waiting time. In 2018, 74%, 80% and 87% established an efficient customer complaint resolution system to of frontline customers were served within the 2-minute, ensure efficient redress of all customer complaints received. The 3-minute and 5-minute SWT respectively. customer complaint resolution system includes a maximum 10- day benchmark for all customer complaints to be acknowledged and resolved. The Bank is fully committed to ensure that all complaints are resolved within the benchmark set. Public Bank’s corporate tagline “Excellence Is Our Commitment” reflects its continuous pursuit to deliver best-in-class customer service 172 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW SERVING THE CUSTOMER

CUSTOMER SERVICE FOCUS GROUP CUSTOMER FEEDBACK SURVEY Public Bank implemented the Customer Service Focus Group The Public Bank Group’s commitment to service excellence programme at branches to collect information from customer aims to ensure Public Bank’s customers enjoy a consistent feedback which are used to improve the Bank’s service experience of service excellence across the Bank’s network of efficiency and service quality. The Bank has also actively branches. The achievement of this is crucial towards building engaged staff through campaigns such as “Mad4Ideas” for brand loyalty and customer retention. To improve learning and creative ideas on how to improve work processes and elevate gauge effectiveness of its service delivery, the Bank conducts service delivery. regular Customer Feedback Questionnaire. The responses from the feedback have been encouraging as more than 90% of the Bank’s customers surveyed were satisfied with the level of the SPECIAL CARE COUNTERS FOR CUSTOMERS Bank’s customer experience at the branch frontline counters and loan delivery services. In September 2018, the Customer Caring for the disabled and those needing special assistance is Engagement Campaign – “PB Listens and Rewards” was a priority in Public Bank. Being a responsible corporate citizen, successfully launched. The primary objective of the Customer Special Care Counters at branches are provided to ensure that Engagement Campaign was to acquire key insights on customer the physically disadvantaged, expectant mothers and senior behaviour and expectations. The campaign has successfully citizens are accorded priority services irrespective of the nature garnered more than 66,000 responses and the customer of financial transaction. insights obtained can be used to deepen customer relationships and attract new customers.

STANDARD TURNAROUND TIME Under the scope of Public Bank’s ISO 9001:2015 Certification for the “Provision of Customer Service in Loan Delivery”, the Bank has implemented a number of standard operating Special Care Counters are provided to ensure procedures, continuous work process improvements and that the physically disadvantaged, expectant compliance with standard turnaround time for processes from mothers and senior citizens are accorded priority loan approval to loan documentation to ensure an efficient services loan delivery process. The “Provision of Customer Service in Loan Delivery” is extensively supported by the Bank’s in-house developed electronic Loan Delivery System. THE WAY FORWARD 173 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW CHANNEL MANAGEMENT

SELF SERVICE INTERNET AND INTERNET BANKING MOBILE BANKING TERMINALS MOBILE BANKING PBe GROWTH PB engage GROWTH

NEW USERS NEW USERS 21.2% 44.6% 2,132 INTERNET AND ACTIVE USERS ACTIVE USERS MOBILE BANKING 19.1% 56.2%

2017: 2,107 PBe FINANCIAL FINANCIAL PB engage TRANSACTIONS TRANSACTIONS PB enterprise 33.4% 63.5%

The Public Bank Group reaches out to its customers through its wide network of branches and digital channels which include self service terminals, internet and mobile banking as well as social media.

SELF SERVICE BANKING The Public Bank Group’s wide network of self service terminals located in various off-branch and in-branch locations throughout Malaysia provide customers with easy and convenient access to banking services outside conventional banking hours. As at the end of 2018, Public Bank has more than 2,100 units of self service terminals comprising Automated Teller Machines, Cash Deposit Machines, Cash Recycling Machines, Coin Deposit Machines and Cheque Deposit Machines. The Group closely monitors, reviews and improves the up-time of these self service terminals to ensure maximum service availability for customers’ convenience.

FINTECH & DIGITAL INNOVATION The Public Bank Group is cognisant that being truly digital and customer-centric involves embedding banking into customer’s journey and deploying best-in breed technologies at the back end in order to allow the Group to be more responsive to customers at the front end. As part of the Group’s bank-wide strategic initiative of embracing digitalisation, the Group has formulated a 3-year Digital Roadmap which outlines the Group’s digitalisation plans towards year 2020. The Digital Roadmap takes into account current digital trends and outlook as well as encompasses the Group’s FinTech strategies and targets, customer demand, FinTech solutions and the associated risks involved.

Following the successful collaboration with Ant Financial Services Group, an affiliate company of the Alibaba Group, the Public Bank Group is now collaborating with Tencent, another Chinese FinTech giant to deliver a fully integrated cross-border solution. The Group is also working closely with its bancassurance partner, AIA Group Ltd, to enhance customer engagement and customer experience. To date, the Group has launched PB Direct, a straight through online insurance application via iPad, and Ask Sara, a virtual assistant which contains more than 700 questions, for easier on-boarding of customers. The Group will soon deploy the Application Programming Interfaces (“API”) market place on its online banking channel. These APIs allow third party developers to develop solutions on the Group’s APIs or partner with the Group to enhance existing solutions within the Group’s delivery channels. 174 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW CHANNEL MANAGEMENT

The Public Bank Group is establishing an Innovation Hub at its supporter of PayNet’s Real-Time Retail Payment Platform and headquarters as a collaborative touchpoint with third party has leveraged on this platform to introduce DuitNow, an technology and FinTech companies to showcase their solutions, instant funds transfer service which enables customers to make build prototypes and test their solutions in a sandbox retail payments using only their MyKad or mobile phone environment. With this hub, the release cadence of new numbers. initiatives and applications within the Group is expected to increase. To streamline various initiatives under the Group’s In 2018, more than 20,000 companies registered and nearly overall digital transformation strategy, the Innovation Hub will one million financial transactions were processed on the Public be under the purview of Public Bank’s FinTech and Digital Bank Group’s new and revamped PB enterprise, the Group’s Innovation unit. The FinTech and Digital Innovation unit will online banking for business enterprises. Looking ahead, the continue to engage, drive and coordinate the Group’s overall Group will continue to enhance its online banking portal for digital roadmap and pave the way forward for the Group to business enterprises to improve user experience and meet the embrace digital innovation. requirements of businesses.

Following feedback received from a survey conducted on PBe, INTERNET BANKING AND MOBILE BANKING the Public Bank Group is revamping its internet and mobile banking channels to include new and in-the-now technologies 2018 was a great year for the Public Bank Group’s digital such as Quick Response payment service and biometric channels. However, it was not without challenges. The need to verification for better user experience. Moving forward, the stay on top of the digital agenda was profoundly felt given the Group will continue to improve digital features by adding more more intense competition within the industry, the threat of features and improving its user interface and user experience. new entrants in the form of FinTech companies as well as changing consumer behaviour.

In 2018, the Public Bank Group continued to focus on enhancing user experience by introducing new and innovative Innovation Hub is a collaborative touchpoint with functionalities, enhancing user friendliness and introducing third party technology and FinTech companies to more personalised internet as well as mobile banking experience. showcase their solutions, build prototypes and Notwithstanding the challenging operating environment, the Group registered commendable growth in new PBe and PB test their solutions in a sandbox environment engage users. The number of newly registered users on PBe and PB engage rose by 21.2% and 44.6% respectively in 2018. The Group also registered an increase in the number of active users on PBe and PB engage respectively by 19.1% and 56.2% respectively. Consequently, the number of transactions on PBe and PB engage also rose by 33.4% and 63.5% respectively in 2018.

To encourage the move towards a cashless society, Bank Negara Malaysia (“BNM”) announced in December 2017 that interbank instant transfer fees would be waived effective 1 July 2018 for transactions below RM5,000. In support of BNM’s e-Payment initiatives, the Public Bank Group waived all interbank instant transfer fee and Interbank GIRO fee, regardless of amount, with effect from 13 June 2018. The response was positive as there was a 15% jump in transaction volume from the month before. The Group is also a strong THE WAY FORWARD 175 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

ONLINE SECURITY PROSPECTS The Public Bank Group continues to raise the level of awareness Today, customers are increasingly more tech-savvy and of the Group’s customers on cyber threats and cyber security transacting or engaging more with banks via digital channels. by providing information and educational content through the Rather than resist this tide, the Public Bank Group will build Group’s websites and via emails, SMS messages as well as face- the requisite capabilities to support new modes of digital to-face engagements. As cyber-attacks are becoming more engagement with customers. Moving forward, the Group will prevalent worldwide, the Group has taken pre-emptive also gradually shift from viewing digital as a project to viewing precautions to secure itself from being used as a channel for digital as a way of business. As the pace of digital adoption perpetrating financial crime or carrying out money laundering. increases, the Group is sparing no effort to strive to deliver The Group has further improved its policies and procedures as world class digital capabilities to customers. The Group will well as established a Cyber Fraud Security unit to review also prioritise on digitalisation to further grow its business and financial transactions, keep abreast of techniques and cyber improve customer experience. threats as they evolve in order to develop the appropriate countermeasures as well as improve the Group’s Fraud Management System. During the year, further enhancements were made by the Cyber Fraud Security unit to the Group’s Fraud Management System.

ANTICIPATED RISKS The evolving digital landscape continues to see changes in cyber crimes and customer behaviour. To expedite customer journey without compromising security, the Group will continue to give appropriate and proportionate consideration to speed up banking transactions in scenarios such as customer application and authentication processes in low-risk situations. In addition, the Group will also ensure security measures are in place even as partnerships continue to be initiated and API connections are established for business growth. 176 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INFORMATION & COMMUNICATION TECHNOLOGY

The Public Bank Group continues to invest heavily in technology, a testament of the Group’s commitment to deliver value through digital transformation. The Group has laid out a strategic digital roadmap and identified key areas to ensure the right capabilities are built for the future. During the year, the Group focused on providing new digitalised products and services, ensuring technology infrastructure remain resilient and reliable, increasing efficiency and enhancing risk management as well as cyber security infrastructure.

Digital roadmap implementation New products and services Business process digitalisation

• Refresh of digital channels • WeChat Pay • Credit review digitalisation • Robotic process automation • All-in-one digital payment • Electronic signatures • FinTech micro site platform • Digital Online Collection System • Digital skillset upgrade • DuitNow payment service • MyDebit card acceptance at petrol kiosks

Infrastructure resilience Risk management and compliance Cyber resilience

• All-Flash storage and object • Integrated Statistical System • Multi-layered cyber defence storage backup Phase 3 • Online brand abuse protection • Credit card system upgrade • Automated Net Stable Funding • Independent cyber resilience • Merchant network expansion Ratio reporting assessments • Centralisation of cheque image • Tax regime changes servers

DIGITAL ROADMAP IMPLEMENTATION Refresh of Digital Channels To remain relevant and achieve long term sustainability, the Public Bank’s mobile banking app has been enhanced with Public Bank Group leverages on the creative strength of fingerprint biometrics for quick balance inquiry. The next FinTech innovations as well as new emerging technologies such version, PB engage 2.0, will be launched with more features as data analytics, Open Application Programming Interfaces including facial recognition. Leading edge technologies have (“API”), blockchain, chatbots, taskbots, metabots and artificial also been adopted to shorten product delivery time and intelligence. Such leading edge technologies have been adopted increase speed to market delivery of digital offerings. To or are being actively explored for possible application. Higher further enrich customer experience, the existing PBe internet levels of digitalisation were also implemented for existing banking is also being revamped with the latest web design, systems while existing digital channels were enhanced to user customisable interface, multi-language support and provide richer customer experience. The Group is fully aware additional functionalities such as allowing future dated that the realisation of the Group’s digital roadmap depends on transactions. an engaged and agile team. The Group has invested in various trainings to upskill staff in order to equip them with the necessary skills and tools to stay ahead of the curve. THE WAY FORWARD 177 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Robotic Process Automation All-In-One Digital Payment Platform To enable proactive countermeasures to be taken on a timely To further encourage merchants to accept QR-code mobile basis, taskbots are used for robotic process automation to payments, Public Bank rolled out an integrated payment assist in analysing and detecting emerging problems on critical terminal that handles QR code payments such as AliPay and systems. Meanwhile, machine learning and artificial intelligence WeChat Pay as well as card payments through MyDebit, Visa, powered solutions are in the pipeline to be introduced in order Mastercard, UnionPay and JCB using Chip-and-PIN or to enhance end-to-end response time of monitoring and contactless methods. In partnership with Revenue Group Bhd., tracking tasks at the data centre. the Bank is the first bank in the country to launch such smart Android device terminals. FinTech Micro Site DuitNow Payment Service A FinTech micro site will soon be set up to harness the creative innovations from FinTech providers with a view of establishing DuitNow, a brand new instant peer-to-peer funds transfer potential smart partnerships for mutual benefit. Open API service, is now available on PBe, PB enterprise and PB engage. specifications that allow the Group’s services to be available This new service enables customers to conveniently use MyKad seamlessly through the FinTech provider’s apps will also be and mobile phone numbers to make payments instead of using provided. traditional bank account numbers.

Digital Skillset Upgrade MyDebit Card Acceptance at Petrol Kiosks The Public Bank Group continues to upskill its ICT staff to Customers will soon be able to use their MyDebit cards to pay prepare them for a rapidly transforming landscape. Training for petrol at Petron petrol kiosks. Previously, only credit cards courses were provided on rapid software development were accepted at petrol kiosks as MyDebit cards could not be methodologies such as Agile Spring Development and used to perform the pre-authorisation required before allowing programming languages such as Python. These new skillsets the kiosk to dispense petrol. In collaboration with Petron and have since been used to accelerate software development and PayNet, this restriction is being removed to enable Public Bank implement taskbots for the automation of processes. to acquire MyDebit card transactions at petrol kiosks.

NEW PRODUCTS AND SERVICES BUSINESS PROCESS DIGITALISATION During the year, new payment methods were introduced to Through the digitalisation of business processes, the Public meet customer demand. Bank Group further improved efficiency in both customer service and internal process while reducing cost and increasing WeChat Pay productivity. Public Bank now accepts payments using WeChat mobile wallets. The new WeChat payment platform supports both Quick Response (“QR”) code and In-App Web-based payments. With this, the Bank’s merchants can now accept QR-code based mobile payments from both WeChat Pay and AliPay users. 178 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW INFORMATION & COMMUNICATION TECHNOLOGY

Credit Review Digitalisation INFRASTRUCTURE RESILIENCE The credit review system was completely revamped using the The capacity of the current technology infrastructure was latest agile software development methodology to improve upgraded to further support growth and meet increased operational efficiency. With increased automation, the new demand for computing power and storage. system is now integrated directly to various source systems and embedded with the latest credit risk rating scorecards, thus All-Flash Storage and Object Storage Backup providing instant access to relevant customer information and The capacity of the Public Bank Group’s Storage Area Network facilitating follow-ups. Other features include user customised infrastructure for Unisys, Windows and Unix systems was dynamic review process workflow for better efficiency, dynamic doubled to cater for big data analytics, FinTech and digitalisation reporting for flexible on-demand reporting as well as Business- initiatives. The new All-Flash storage is more than three times to-Business submission of data to Bank Negara Malaysia faster than existing system and supports hardware compression (“BNM”). to optimise storage. The tape backup infrastructure was also replaced with a tapeless backup system that replicates data Electronic Signatures directly to the backup site, hence eliminating the risk of Operational efficiency was further enhanced with the physical tapes being lost in transit. digitalisation of the account opening process in the Branch Delivery System. Other than digital forms being prefilled with Credit Card System Upgrade customer data obtained from either the customer’s MyKad or To support business growth for the next three years, Public the Bank’s database, customers can also sign on digital form Bank invested RM27 million to enhance the processing capacity using digital tablets, hence reducing manual processes and of the Unisys Clearpath server that supports the credit card eliminating paper usage. system by 50%. With the use of the new All-Flash storage, the storage capacity has more than doubled while batch processing time was reduced by half.

Electronic Signature helps to reduce manual Merchant Network Expansion processes and eliminate paper usage Public Bank’s credit and debit card merchant point-of-sales acquiring network infrastructure was upgraded to improve service capacity, serviceability and network up-time. A new Digital Online Collection System architecture was also implemented for better consolidation of resources while the number of connections were doubled to To ease collection, a new Digital Online Collection System was service more concurrent card transactions. As terminals migrate developed which provides an integrated view of all related to the new network, dial-up costs for many merchants will also accounts and real-time reporting of collectors’ achievements. reduce as they will only need to pay local charges. To further improve efficiency and speed of collection, a predictive dialler has been installed whereby only calls that are successfully connected will be routed to officers.

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Centralisation of Cheque Image Servers CYBER RESILIENCE Cheque image processing servers which were previously located With the growing concern of cyber threats, the Public Bank in each branch have been centralised and replaced with high Group vigilantly monitors and maintains its cyber security availability centralised servers at data centres which helped to capabilities in line with the Group’s cyber resilience framework. ensure maximum service uptime. A total of RM2 million was saved as the upkeep of nearly 300 branch cheque image Multi-Layered Cyber Defence servers was discontinued. An additional layer of advanced malware protection system was deployed to combat advanced persistent threats. The existing network intrusion protection systems were also upgraded to RISK MANAGEMENT AND COMPLIANCE keep the Public Bank Group’s cyber defence up to date and New systems were developed while existing systems were provide sufficient capacity to thwart potential cyber attacks. enhanced to address regulatory changes and support risk management. Online Brand Abuse Protection A reputable global fraud prevention service provider has been Integrated Statistical System Phase 3 engaged to monitor brand abuse and remove infringement of System enhancements were performed to cater for the brand content on social media. The service not only protects implementation of BNM’s Integrated Statistical System Phase 3 the Public Bank brand from illegitimate claims of affiliation as requirements. Additional information on customers and credit well as fake posts but also protects the public from phishing applications are extracted in a straight through process from fraud and investment scams. various source systems for submission to BNM. Independent Cyber Resilience Assessments Automated Net Stable Funding Ratio Reporting The Public Bank Group continuously assesses its capabilities to The enhancements to the Assets & Liabilities Management prevent, detect, respond and recover from security threats. System have allowed for automated Net Stable Funding Ratio Leading security experts were engaged to conduct an inaugural reporting. independent compromise assessment security health check aimed at detecting the presence of targeted attackers. Other Tax Regime Changes regular resilience assessments conducted include social System changes for the implementation of 0% GST were engineering tests, ethical hacking by reputable white hat implemented on 1 June 2018 whilst changes to re-implement hackers and an industry-wide cyber drill held in conjunction sales and services tax on 1 September 2018 were also with regulatory bodies. These tests enable the Group to completed on time. benchmark its cyber-attack response and recovery capabilities to minimise damage in case of an incident. 180 2018 ANNUAL REPORT PUBLIC BANK BERHAD MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW BRANCH PERFORMANCE – KPIs AND AWARDS

BRANCH KEY PERFORMANCE INDICES Public Bank evaluates the business performance and operational efficiency of branches with the use of Key Performance Indices (“KPIs”). The Bank’s KPIs serve as a tool for the execution of the Bank’s business strategies and allocation of resources. These KPIs encompass all the key performance factors which are crucial in ascertaining the performance of each branch such as profitability, loans and deposits growth, asset quality, service delivery, control and compliance as well as staff productivity and efficiency. These KPIs also form the basis for appraising and rewarding the key management and supervisory staff at branches.

Public Bank’s Approach The KPIs are reviewed annually and aligned to the current operating environment and business strategies of the Bank. The performance of each branch and its ranking among its peer group of branches is communicated on a monthly basis to enable the branches to benchmark themselves against their peers and to take corrective actions to improve their performance in underperforming areas.

Public Bank’s Measurement Criteria The KPIs included in the assessment of branches, key management and supervisory staff are set out below:

KEY PERFORMANCE INDICATORS

• Retail profit Profitability • Return on Equity • Non-interest income

Loans • Retail loans Performance • Hire purchase financing

Deposits • Demand, savings and fixed deposits Performance • Foreign currency deposits

Asset Quality • Credit control and operational lapses

• Customer service in frontline operations Productivity / • Loan service delivery Efficiency • Cost efficiency • Controls & compliance MEASUREMENT CRITERIA MEASUREMENT THE WAY FORWARD 181 MANAGEMENT DISCUSSION AND ANALYSIS – BUSINESS OPERATIONS REVIEW

Branch Performance Awards Each year, Public Bank accords recognition to domestic and overseas branches with outstanding business performance. The Branch Performance Awards with attractive monetary prizes are awarded to motivate branches to strive for outstanding achievement in the various key performance areas.

The various categories of the Branch Performance Awards are reviewed annually. The branches are assessed based on very stringent criteria incorporating the key areas of business performance, loan asset quality, risk management, cost efficiency and customer service delivery. Branches are segregated into six groups based on branch size and each branch is rated against their respective peer groups.

The Branch Performance Awards comprise the following:

• The Founder and Chairman Award for the Overall Best Domestic Branch; • The Best Branch Awards for domestic and overseas branches; and • The Special Awards which cover the areas of business performance, branch management and service quality.

The Winners A total of 101 awards with cash prizes close to RM1.0 million were given to the winners of the Branch Performance Awards for 2018.

WINNERS OF THE BEST BRANCH AWARDS FOR 2018

Domestic Branches Overseas Business Units

Group 1 Taman Johor Jaya Branch Public Bank (HK) Limited Western Branch

Group 2 Taman Desa Cemerlang Branch Public Finance Limited Mongkok Branch

Group 3 Bandar Bukit Tinggi Branch Cambodian Public Bank Phnom Penh Main Branch

Group 4 Bandar Baru Air Itam Branch Public Bank Vietnam Ho Chi Minh Branch

Group 5 Jalan Tun Sambanthan Branch Sri Lanka Operations Nawala Branch

Group 6 Tangkak Branch

FOUNDER AND CHAIRMAN AWARD – RM50,000 & GOLD TROPHY

TAMAN DESA CEMERLANG BRANCH EXPECTATIONS AND OPPORTUNITIES

Although the global economy continues to expand, there is Despite market volatility, the domestic financial sector remains increased divergence across economies and signs of a slower sound as financial institutions continue to operate with strong growth momentum ahead. In advanced economies, job growth capital and liquidity buffers. In January 2019, Bank Negara and policy support are expected to continue to drive domestic Malaysia maintained the Overnight Policy Rate at 3.25% as the demand. At the same time, growth is expected to moderate in degree of monetary accommodativeness is consistent with the Asia due to the normalisation of global trade cycle. Meanwhile, intended policy stance. the downside risks to the global economy stem from uncertainties including the ongoing trade tension, which pose Businesses in Malaysia are expected to continue to emphasise challenges for export related businesses and global trade. The on operational efficiencies, which include cost control and financial market adjustments in emerging economies are also balance sheet management. Similarly, banks will likely remain expected to continue due to monetary policy normalisation in prudent in cost management, maintain balance sheet advanced economies. efficiencies as well as drive market share by offering competitive pricing, attractive terms and product innovation. The Malaysian economy expanded by 4.7% in 2018 (2017: 5.9%), as private sector activity was offset by lower public sector spending. In 2019, the economy is expected to be STRATEGIES AND DIRECTIONS private sector driven. Private consumption is expected to be supported by continued wage and employment growth. However, public sector spending is expected to weigh on The Public Bank Group will continue to focus on operational growth as the Government embarks on expenditure efficiency, adopt prudent and responsible financing practices, reprioritisation and fiscal recalibration. Downside risks remain, uphold strong corporate governance and compliance culture as mainly due to supply disruption in the commodity sector and a well as sound risk management practices. potential escalation of trade tension. The Public Bank Group will remain focused in the financing of Headline inflation remained moderate at 1.0% in 2018 residential properties, commercial properties, passenger (2017: 3.7%). For 2019, inflation is expected to remain vehicles as well as lending to the small and medium enterprises contained in the absence of strong demand pressures. (“SMEs”). The Group will continue to capitalise on its efficient Nevertheless, the trajectory of headline inflation will be customer service and extensive network to maintain its market dependent on global oil prices. position in the domestic retail segment. In particular, the OUTLOOK2019 FOR

Group will continue to enhance access to financing for SMEs The Public Bank Group will continue to improve the digital by offering products and services to meet the needs of features and user interfaces of its digital channels to further businesses while tapping on market opportunities in order to enhance customers’ experience. In embracing digitalisation, the sustain market leadership in SME financing. The Group will also Group has formulated a Digital Roadmap that outlines its continue to grow its corporate lending business by leveraging plans, taking into account the digital trends and outlook, on existing clients with good track record and acquire new encompassing the Group’s FinTech strategy, customer demand, corporate clients in growth and resilient sectors. The Group FinTech solution and their associated risks. remain supportive of key government initiatives under the Eleventh Malaysia Plan and SME Masterplan, which will be beneficial for the SME segment. THE PUBLIC BANK GROUP

Amidst intensified market uncertainties, the Public Bank REMAINS COMMITTED TO EXPAND Group’s treasury operations will remain vigilant and exercise caution in executing its growth strategy. The Group’s treasury ORGANICALLY AND STRENGTHEN and capital market operations will continue to ensure strong liquidity positions while managing risk. ITS REGIONAL PRESENCE BY

In the unit trust business space, the Public Bank Group will LEVERAGING ON ITS STRONG continue to introduce new products and enhance its services to meet the diverse needs of investors. The private retail unit PB BRAND AND PRUDENT trust industry is expected to grow in tandem with market conditions. MANAGEMENT PRACTICES.

To remain competitive and achieve higher penetration in the bancassurance segment, the Public Bank Group will proactively collaborate with AIA Bhd to enhance its suite of bancassurance products. Also, the Group will continue to leverage on its wide distribution network to improve customer satisfaction and provide relevant product solutions.

OUR DEDICATED AND COMMITTED EMPLOYEES FORM THE BACKBONE OF OUR ORGANISATION. WE WILL INSTIL IN THEM THE NECESSARY SKILLS AND KNOWLEDGE TO FACE CHALLENGES AHEAD. IT IS OUR AIM TO CREATE A DIGITALLY ENABLED WORKFORCE AND EMBED INNOVATION INTO OUR WORKPLACE CULTURE AS WE MOVE FORWARD.

THE WAY FORWARD 186 2018 ANNUAL REPORT PUBLIC BANK BERHAD

SUSTAINABILITY STATEMENT

At the Public Bank Group, sustainability practices has been the bedrock of the Group’s success over the span of more than five decades of its operations. Guided by its Corporate Philosophy, the Group charts the course towards sustainable business growth, focusing not only on financial performance but also on social and environmental aspects, to deliver long term values for its shareholders, customers, employees and the community it serves. THE WAY FORWARD 187

ABOUT THE SUSTAINABILITY STATEMENT In 2018, the Public Bank Group continued to initiate efforts to enhance its sustainability practices focusing on the areas of Economic, Environmental and Social (“EES”). In this report, the Group describes how it addresses the sustainability matters that are material to the Group and stakeholders, and presents the progress of strategies and practices implemented in managing the sustainability matters. The Group also included its overseas operations in this year’s sustainability reporting, and more relevant indicators are incorporated to describe the Group’s sustainability performance. As in previous years, the Group has prepared the Sustainability Statement 2018 as guided by Bursa Malaysia Securities Berhad’s (“Bursa Malaysia”) Sustainability Reporting Guide and Toolkits. 188 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

REPORTING SCOPE The scope of Sustainability Statement 2018 covers Public Bank Berhad and Public Islamic Bank Berhad’s banking operations in Malaysia for the financial year 2018. Together, they account for more than 90% of the Group’s banking business. For selected sustainability matters, the Group has included information on Cambodian Public Bank Plc (“Campu Bank”) in Cambodia and Public Bank Vietnam Limited (“PBVN”) in Vietnam.

For the Group’s operations in Hong Kong, sustainability reporting is made by Public Financial Holdings Limited (“PFHL”), the Group’s listed subsidiary in Hong Kong. PFHL publishes its Environmental, Social and Governance Report in compliance with the Listing Rules by Hong Kong Exchanges and Clearing Limited. The scope of the report covers Public Financial Holdings Limited and four of its subsidiaries, Public Bank (Hong Kong) Limited, Public Finance Limited, Winton Financial Limited and Public Securities Limited.

SUSTAINABILITY GOVERNANCE Board of Directors In guiding the management of sustainability matters, the Public Bank Group has developed the Sustainability Framework which outlines the processes for effective management of the Group’s Board Executive Committee material sustainability risks and opportunities. The Framework is developed in alignment with Bursa Malaysia Listing Sustainability Management Committee Requirements with reference to the Bursa Malaysia’s Sustainability Reporting Guide and Toolkits, and sets out the • Managing Director/Chief Executive Officer core elements for embedding sustainability which include materiality assessment, identification and prioritisation of • Deputy Chief Executive Officer sustainability matters, management of these matters and disclosure. • Chief Operating Officers

The Framework also outlines the governance structure of the • Heads of Business/Support Divisions Group in embedding sustainability. THE WAY FORWARD 189

The Group’s Board of Directors (“Board”) has the ultimate responsibility for sustainability. As set out in the Public Bank Berhad’s Board Charter, the Board has the responsibility to promote sustainability through appropriate environment, social and governance consideration in the Group’s business strategies. The Board sets the tone to embed sustainability practices, and is assisted by the Board Executive Committee in the implementation of sustainability practices. The Sustainability Management Committee (“SMC”) assists in driving sustainability initiatives by ensuring adequate resources and processes are in place to manage the sustainability matters, and reporting the performance of sustainability practices. These include conducting stakeholder engagement, reviewing material issues, collecting data and ensuring the Group’s sustainability reporting is in compliance with Bursa Malaysia’s Main Market Listing Requirement. The SMC constantly works with Business and Support Divisions to map out and exercise sustainability plans.

MATERIALITY PROCESS In 2018, the Public Bank Group reviewed its materiality process and conducted assessments to validate the materiality of the 18 sustainability matters. The process has enabled the Group to gain a better grasp of the materiality of each matter, and focus on the issues that matter most to the Group and the stakeholders.

Materiality Assessment Identification of Relevant Prioritisation of Sustainability Matters Sustainability Matters

Stakeholder On-going & Management of Material Prioritisation Special-purpose Sustainability Matters Engagement and Disclosure

Key Stakeholders Management Views Assessment

Through continual engagements with stakeholders, the Group was able to gather an insight into sustainability issues that matter most to the stakeholders and relevant to its business. In 2018, as part of its efforts to enhance stakeholder engagement specifically pertaining to the Group’s sustainability issues, the Group conducted a special purpose engagement to gauge customers’ views on the importance of each sustainability matter.

After assessing and analysing stakeholders’ feedback and Management’s view, the Group identified the ranking of the importance of each sustainability matter. The outcome of the assessments and analysis on the materiality of the 18 sustainability matters have been mapped into the matrix on page 193. 190 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

STAKEHOLDER PRIORITISATION The Public Bank Group identified and engaged the key stakeholders, to obtain feedback on the priority of sustainability issues. In the process of identifying the key groups of stakeholders for engagement, the Group took into consideration the influence of stakeholders on the Group, and the dependence of stakeholders on the Group.

Through the various engagements conducted with the key stakeholders, the Group gained insights of their priorities and key interests, which the Group subsequently responded, as shown in the table below:

Key Stakeholders Engagement Platforms Key Issues Group’s Response

Customers • Branches - Product features - Seek better understanding of customers’ • Sales and marketing team - Service quality views through surveys • Customer surveys - Fair and ethical banking - Continue to enhance service delivery • Online and phone conduct channels customer service channels - Data privacy - Continue to strive for higher service • Social media - Access to financial standard as set out in Customer Service • Annual Report services Charter - Further strengthen oversight of compliance practices - Continue to strengthen employees’ awareness on Public Bank’s Code of Ethics - Continue to strengthen data security through staff and customers’ education and enhanced cyber resilience

Employees • Training - Career progress - Continue to enhance its robust training • Appraisal meeting - Remuneration and system to cater for all levels of staff • Individual development benefits - Provide sponsorship to encourage plan - Working environment employee to pursue higher qualification • Staff contest - Employees in key job functions to • Public Bank’s intranet acquire specialised certifications • Circular Management - Implemented Making a Difference 4.0 System Staff Contest to promote employee • “Call, Engage and Mentor” engagement in 2018 for new recruits - Continue to review and enhance staff • Annual Report remuneration and benefits • Newsletter - Organise workshops to promote staff • Wawasan Vision Quarterly well-being and healthy lifestyle Bulletin - Continue with the Group’s fair and • New Year Message merit-driven reward system • Email blast

• On going • When required • Yearly • Twice a year • Quarterly THE WAY FORWARD 191

Key Stakeholders Engagement Platforms Key Issues Group’s Response

Shareholders • Investor relations channel - Financial performance - Continue to strengthen the Group’s and Investors • Annual General Meeting - Strategies and prudent management to deliver • Investors conferences and directions sustainable financial performance roadshows - Ethical business - Provide ongoing clear and transparent • Analyst briefings conduct Group’s performance • Annual Report - Compliance with - Continue to ensure strict compliance regulations with rules and regulations - Stay vigilant and continue to implement sustainable measures for continuous future growth

Regulators • Meetings - Compliance with - Further enhance the Group’s sound risk • Industry forums regulations management and compliance function • Dialogues - Responsible business - Ensure strict adherence to rules and • Consultation sessions conduct regulations • Correspondences - Corporate culture - Keep abreast on the development of - Financial inclusion regulations - Electronic banking - Proactively take part in activities promoting financial inclusion

Suppliers and • Procurement process - Fair pricing - Continue to review vendors’ financial Vendors • On-site visits - Efficient and strength, business continuity plan and responsible business practices procurement process - Continue to encourage the shift of - Good business ethics procurement process to electronic platforms - Strengthen the efforts to encourage them to undertake ESG practices - Continue to conduct on-site visits

Media • Interviews - Financial performance - Continue to provide timely, clear and • Press release - Timely and transparent transparent updates on Group’s • Social media reporting performance and business • Annual General Meeting - Ethical business - Continue to enhance the conduct communication platforms with media - Relationship building

• On going • When required • Yearly • Twice a year • Quarterly 192 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

Key Stakeholders Engagement Platforms Key Issues Group’s Response

Communities • Philanthropy activities - Community investment - Continue to undertake philanthropy • Financial carnivals, seminar - Economic, activities such as donations and and conferences Environmental and volunteering • Annual Report Social impact of the - Take part in road shows and carnivals Group’s activities on which promote financial inclusion to a the community wider community - Financial services to the community

Rating Agencies • Meetings - Financial performance - Continue to provide clear and • Analyst briefings - Strategies and transparent updates on Group’s directions performance and business - Business conduct - Continue to enhance communication platforms with rating agencies

Industry • Industry forums - Fair business conduct - Continue to engage with financial Association • Meetings - Strategies and sector and non-financial organisations • Consultation sessions directions to keep abreast of current trends and • Correspondences - Compliance with collaborate for mutual growth regulations - Service delivery

• On going • When required • Yearly • Twice a year • Quarterly High Low Influence on Stakeholder Assessments and Decisions MATERIALITY MATRIX For thecategorisation ofthesustainabilitymatters,please refertopage194 in SupplyChain Sustainability Community Contribution Conduct andCompliance Responsible Business Emission Greenhouse Gas Significance ofGroup’sEconomic,EnvironmentalandSocial Impacts Waste Management Energy Management Inclusion and Accessibility Financial Corporate Citizenship Developing Employees Employment Practices Anti-fraud Safety, and Health and Well-being Employee Transformation Infrastructure Digital and IT Products and Marketing of Design and Services Responsible Lending Managing EnvironmentalImpact Education and Development Employee Attraction Retention Talent and Compliance Satisfaction Customer THE WAY FORWARD and Counter Financing of Anti-money Laundering Terrorism Security aa Data 193 High 194 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

MANAGING SUSTAINABILITY MATTERS As in previous years, the Public Bank Group has categorised the 18 sustainability matters into five themes:

RESPONSIBLE CONDUCT AND DEVELOPING CORPORATE MANAGING BUSINESS COMPLIANCE EMPLOYEES CITIZENSHIP ENVIRONMENTAL IMPACT • Data Security • Compliance • Talent Attraction • Community • Energy • Customer • Anti-money and Retention Contribution Management Satisfaction Laundering and • Employee Education • Waste Management • Responsible Counter Financing and Development • Greenhouse Gas Lending of Terrorism • Employee Health Emission • Financial Inclusion • Anti-fraud and Safety, and and Accessibility Well-being • Design and • Employment Marketing of Practices Products and Services • Digital Transformation and IT Infrastructure • Sustainability in Supply Chain

The Public Bank Group is supportive of the Sustainability Development Goals (“SDG”) set by the United Nations, a blueprint which addresses global challenges, including poverty, climate environmental degradation, prosperity and, peace and justice. The SDG comprises 17 sustainable development goals which are targeted to be achieved by 2030, such as No Poverty, Gender Equality, Good Jobs and Economic Growth, and Quality Education. Globally, many countries including Malaysia, have adopted this 2030 Agenda for Sustainable Development.

The Public Bank Group is cognisant that as a major bank in the country, it can play an important part in contributing positively to the SDG. While the Group believes that its sustainability practices have placed the Group on the right path towards contributing positively to the SDG, the Group will put in more efforts to gain in-depth understanding on the 17 goals and 169 targets of the SDG, and how the Group can contribute more to the 2030 Agenda for Sustainable Development. THE WAY FORWARD 195

EXTERNAL RECOGNITIONS In 2018, Public Bank remained one of the top ten constituents in FTSE4Good Bursa Malaysia Index and FTSE4Good ASEAN 5 Index.

FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) confirms that Public Bank Bhd has been independently assessed according to the FTSE4GOOD criteria, and has satisfied the requirements to become a constituent of the FTSE4GOOD Index Series. Created by the global index provider FTSE Russell, the FTSE4GOOD Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (“ESG”) practices. The FTSE4GOOD indices are used by a wide variety of market participants to create and assess responsible investment funds and other products.

The Group was also accorded the following recognitions for its continuous efforts in promoting sustainability:

AA rating by MSCI The Asset Platinum The BrandLaureate CSR ESG Research Award 2018 – Excellence Brand Leadership Awards in Environmental, Social 2018 – Leadership in CSR and Corporate Governance 196 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

CREATING VALUE FOR STAKEHOLDERS

95% of customers rated loan delivery services as “Exceeded 93% conformance Expectation” and level for 10 minute- “Within Expectation” Standard Waiting Time

90% of customers CUSTOMER 74% conformance rated frontline services as SATISFACTION level for 2 minute- “Excellent” and “Good” Standard Waiting Time

DIGITALISATION INITIATIVES

√ PBe QR faster and more √ PB enterprise enhanced √ Virtual banking assistant powered flexible payment internet banking for corporate by Artificial Intelligence √ Electronic know your customer customers √ Enhanced Cyber Security (“eKYC”) digital identity √ Open Application Program Interfaces process (“API”) in Malaysian financial sector

FINANCIAL INCLUSION Granted new loans of RM16.18 billion for >42,000 home purchasers RM14.23 billion for >191,000 motor vehicle buyers RM11.05 billion for >41,000 SMEs

WOMEN EMPOWERMENT 45.8% of women in management STAFF DEVELOPMENT 48.5% of women in top 33 training hours per employee management Employee participation (headcount): • Classroom training: 48,408 • E-learning: 100,782 THE WAY FORWARD 197

CREATING VALUE FOR STAKEHOLDERS

GROSS IMPAIRED LOANS RATIO 0.5% LOAN MORATORIUM Granted 4,200 customers

Number of newly FINANCING registered customers for: ACCESSIBILITY 265 2,100 PBe: 21.2% Domestic Self Service PB engage: 44.6% Branches Machines

ICT SOURCING AND PROCUREMENT Emerged as Malaysian Graduates’ Top 3 Employer Choice 90% were sourced and spent on local companies for Banking by HRINCAMPUS 2018 Graduates’ Choice Award

LOW EMPLOYEE ATTRITION RATE Awarded 7.3% 170 BLOOD students under DONATION Star Achiever DRIVES 2018 INCOME TAX PAID Programme 330 donors RM1.53 billion

ENVIRONMENTAL CONSERVATION

• Designated car park bays for electric and hybrid cars • Charging station for electric cars at Menara Public Bank 2

• Solar system at Menara Public Bank 2 reduced 60.8 tCO2e carbon emission • Placement of recycling bins at Menara Public Bank 198 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

RESPONSIBLE BUSINESS THEME 1: RESPONSIBLE BUSINESS Financial institutions hold the responsibility to support the country’s development Data Security agenda by intermediating funds flow to spur economic growth and support the financing needs of consumers and businesses. It is imperative for financial institutions to act responsibly in growing their business. In the pursuit of driving business value, Customer Satisfaction safeguarding the interest of stakeholders and creating value to meet their needs are key paths to a sustainable future.

Responsible Lending I. Data Security At the Public Bank Group, keeping stakeholders’ data safe and using their data Financial Inclusion and in the right manner remain a high priority. The Group is mindful that data breach Accessibility will not only place stakeholders’ information at risk, it will also significantly erode trust and the sustainability of the business. In safeguarding both electronic Design and Marketing of and non-electronic data, the Group has an uncompromising stance of full Products and Services adherence by all staff to follow the relevant regulations and guidelines.

Digital Transformation and REGULATIONS AND GUIDELINES IN SAFEGUARDING STAKEHOLDERS’ IT Infrastructure INFORMATION • Sections 133 and 134 of the Financial Services Act (FSA) 2013 on Secrecy Sustainability in Supply • Section 145 of the Islamic Financial Services Act (IFSA) 2013 on Secrecy Chain • Personal Data Protection Act (PDPA) 2010 • Public Bank’s Code of Ethics • Public Bank’s Staff Conduct and Discipline • Public Bank’s Corporate Information Security Management Policy • Public Bank’s Information Security Policy • Public Bank’s Banking Secrecy Framework

Managing Cybersecurity In managing electronic data, the Public Bank Group has established the Cyber Resilience Framework to support the Group’s efforts in strengthening cyber security. The Framework is based on “fail-safe” to “safe-to-fail” principles aimed at defending against cyberattack and minimising the impact of security breach.

To guard against cyber risks, the Group has deployed multilayer security systems to protect against both internal and external threats. The systems comprise security devices of different makes and models to avoid common vulnerabilities. The corporate data network is also segmented to minimise exposure to cyberattack. Application development are adhered to secure coding practices, and services are screened with vulnerability tests. Further, the Group has formed the Public Bank Computer Emergency Response Team to manage response to cyber security incidents. THE WAY FORWARD 199

To validate and benchmark the Group’s security posture against international standards, the Group continued to engage security consultants and specialists to conduct assessments on the Group’s cyber security. The Group also worked closely with local regulatory and statutory bodies to obtain information of the Cyber Security is a top priority for latest development on potential threats and security fixes, and coordinated with the Public Bank Group international security vendors to help in removing any malicious sites targeting the Group.

To inculcate a culture of security vigilance among customers, the Group sought to educate customers through various channels on how to detect and avoid phishing attempts and, other cyber security risks. The Group also reinforced its An established training programmes to raise cyber awareness among employees. Cyber Resilience Framework As banking technology has also been widely deployed in the Group’s operations in Vietnam and Cambodia, the Group has been stringent in data protection, with continuous upgrading of technology infrastructure to enhance the security systems of banking services. Amongst the initiatives taken in 2018 for Campu Bank was the enhancement of security features of its ATM machines and point of sale terminals to strengthen cyber resilience. For PBVN, Data Leakage Protection System was deployed as a preventive measure to mitigate risk of data Deployed exposure. Multilayer Security Systems Inculcating a Culture of Strong Data Protection The Public Bank Group undertakes stringent data security measures and internal controls covering a wide spectrum of work processes of all business and support units. Through the Group’s Circular Management System, the Group sends out regular reminders to all staff on compliance with banking secrecy provisions, to remind all employees on the importance of safeguarding stakeholders’ information Formed the and documents, as well as the consequential penalties of any data breach. Public Bank Computer Employees are also required to confirm to have read the reminders by updating Emergency Response Team their staff circular database.

Apart from electronic data, staff are instructed to properly manage confidential physical records such as documents containing customers’ information. In Number of Participants Attended addition, staff are also required to practise cautious and mindful approach in any Cyber Security Awareness Training communication which involves customer data. Classroom training 16’ 1,245 17’ 2,436 18’ 1,257

E-learning 16’ 16,887 17’ 53,996 18’ 16,792 200 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

II. Customer Satisfaction With the financial sector becoming more competitive, complex and fast evolving, fostering a favourable customer experience has become more crucial than ever for a bank to solidify customer loyalty and trust. As most banks offer nearly identical products and services, superior service standards have become the key differentiator to compete in this highly competitive landscape.

Striving for Higher Service Standard Guided by the Customer Service Charter, the Public Bank Group continued to pursue excellence in its service delivery. As compared to the industry minimum standard of practice, the Group has set a higher bar for several service indicators set out in the Charter, to inspire its staff to strive for higher performance in customer service.

Service Performance Indicator Banking Industry

Customer waiting time at counter 2 minutes 80% of customers to be served within 10 minutes

Customer serving time at counter 80% of customers to be served within 2 minutes for simple transactions 5 minutes

5 minutes for complex transactions 20 minutes

Account application turnaround time Open basic savings account 8 minutes for new customer 15 minutes

8 minutes for existing customer 10 minutes

Open basic current account 10 minutes for new customer 20 minutes 10 minutes for existing customer 10 minutes

Close account 5 minutes for basic savings account 10 minutes 10 minutes for basic current account 20 minutes

Customer complaint management

No. of days to address the complaint/issue by 10 calendar days informing customer on the Bank’s decision 14 calendar days (from the date of the receipt of the complaint) THE WAY FORWARD 201

Customer waiting time at frontline branches is measured by the Queue Management System, with the target set for 80% of customers to be served within 2 minutes. In 2018, the Group recorded an achievement level of 74%. Although the 2018 performance lagged slightly behind the target, it was an improved conformance level as compared to 2016 and 2017. Further, when compared with the industry minimum standard for 80% of customers to be served within 10 minutes, the Group achieved a higher performance level of 93%. Customer Waiting Time > 74% of customers were > 80% of customers were > 87% of customers were > 93% of customers were served within 2 mins served within 3 mins served within 5 mins served within 10 mins

16’ 69% 16’ 75% 16’ 82% 16’ 90% 2 3 5 10 17’ 69% mins 17’ 75% mins 17’ 82% mins 17’ 90% mins 18’ 74% 18’ 80% 18’ 87% 18’ 93%

The Group has always paid attention to all complaints received. Prompt, efficient and professional complaint management is crucial to transform customer perception and helps in strengthening customer relationship. In 2018, the Group continued to achieve a 100% compliance rate in meeting the internal turnaround time of 10 days in processing complaints, reflecting another higher bar achieved by the Group in service delivery, as compared to the minimum industry standard of 14 days.

The Group’s operations in Vietnam and Cambodia have also implemented an internal standard in handling complaints. Both PBVN and Campu Bank have set a standard of 14 days to provide complaint resolution.

Measuring Customer Satisfaction The Group continued to carry out surveys to measure customer satisfaction level at the frontline counters and loan delivery. In 2018, 90% of customers rated overall customer experience at the branch frontline counters as “excellent” and “good”, while 95% rated the Group’s loan delivery services as “exceeded expectation” and “within expectation”.

Frontline Service Delivery Loan Delivery Service Customer Satisfaction level Customer Satisfaction level Rated 16’ NA* 16’ 92% Rated “Exceeded 17’ 91% “Excellent” 17’ 94% Expectation” and and “Within 18’ 90% 18’ 95% “Good” Expectation”

* Not available. The survey on customers’ satisfaction on frontline service delivery was launched in September 2016. In addition, the Group conducted a new customer engagement campaign in 2018, namely PB Listens & Rewards. It was an online programmed survey aimed to gather market feedback from both existing and potential customers, in which participants stood a chance to win attractive prizes for taking part in the survey. The 3-month survey had collected a total of 66,086 responses and enabled the Group to collect constructive and practical information on respondents’ views of the Group’s products and services.

ISO 9001 SERVICE STANDARD

The Group’s initiatives in providing customers compelling experience have continued to be validated by external recognition. In 2018, the Group’s customer service management continued to be certified, with the Group attaining the ISO 9001:2015 Standard Certification for its “Provision of Customer Service at the Front Office” and “Provision of Customer Service in Loan Delivery”. 202 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

III. Responsible Lending As the Public Bank Group grows its financing portfolio, the Group is cognisant of its duty to undertake prudent lending practices and act in customers’ best interest to prevent excessive debt by borrowers, hence helping to preserve the stability of the financial system. In the credit assessment process, the Group evaluates each loan application carefully by taking into consideration a wide range of factors including the applicant’s background, credit track record, repayment capacity and the availability of collateral or security.

As a responsible financier, the Group has established the Credit Policy setting out the lending directions, procedures, management of credit risks and minimum credit standards that commensurate with the Group’s risk appetite. In 2018, the Group further enhanced its Credit Policy to incorporate the relevant requirements specified in Bank Negara Malaysia’s Credit Risk Policy Document. In line with the requirements, the Group’s Risk Management Division has formulated a Credit Risk Strategy and established an independent credit review function to further enhance the Group’s credit evaluation.

During the year, alongside the existing statistical-based Credit Scoring System for housing loan and hire purchase loan applications, the Group extended the application of the credit risk rating tool to retail business and corporate loan applications. This quantitative System has enabled the Group to incorporate a more objective and effective way of assessing a borrower’s credit-worthiness.

Further, the Group undertakes periodic credit review to identify potential borrowers with early stress signs in repayment. This enables the Group to engage with the borrowers early for prompt remedial actions. Guided by the Group’s Policy on Rescheduling & Restructuring of Loans/Financing, the Group will carry out loan rescheduling or restructuring for borrowers with repayment difficulties. Where necessary, financially distressed borrowers are referred to seek assistance from Agensi Kaunseling dan Pengurusan Kredit (“AKPK”) or Small Debt Resolution Scheme for a tailored repayment plan and advice on financial planning.

No. of Financing Account Rescheduled & Restructured* No. of Financing Account referred to AKPK** 16’ 1,351 16’ 2,575 17’ 1,042 17’ 3,957 18’ 859 18’ 5,179

* For retail loan, hire purchase, credit card and corporate banking ** For retail loan, hire purchase and credit card Having a well-trained credit assessment team is essential to promote prudent lending practices and to ensure employees are equipped with credit skill and knowledge to assist borrowers. With this in mind, the Group’s Knowledge and Learning Centre often works closely with the financing units to tailor training for the enhancement of skills and knowledge of credit staff.

Training to enhance credit quality

No. of participants

2016 2017 2018 2,903 3,042 4,135 THE WAY FORWARD 203

The Group’s prudent approach in its lending practices have enabled the Group to continue achieving the lowest gross impaired loans ratio among peers in the domestic banking system. Both Campu Bank and PBVN also consistently achieved healthy gross impaired loans over the years, achieving gross impaired loans ratio of 1.3% and 1.2% respectively in 2018.

Gross Impaired Loans Ratio 1.7%

1.6% 1.6% 1.5% 1.5%

0.6% 0.5% 0.5% 0.5% 0.5%

14’ 15’ 16’ 17’ 18’ Gross impaired loans ratio - Industry Gross impaired loans ratio - Group

The Group does not lend solely for profit. While the Group exercises its Loan Moratorium Granted corporate citizen’s duty to lend responsibly, the Group is also considerate to No. of account Loan Amount customers affected by natural disasters and have difficulty in repaying their 16’ 65 RM10.5mil loans. Over the years, the Group has been granting repayment moratorium to alleviate the financial burden of customers who were hit by floods. 17’ 1,576 RM234.8mil

18’ 4,267 RM647.3mil

SUPPORTING GREEN FINANCING

To lend responsibly, the Public Bank Group also practices an EES lending approach which takes into consideration the impact of the project financed, from the economics, environmental and social aspects. As part of its initiatives to support eco-friendly investments, the Group provides financing to businesses involved in green projects. Going forward, the Group will continue to assess viable green projects to increase lending opportunities in support of environmental conservation. 204 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

IV. Financial Inclusion and Accessibility Financial inclusion plays a critical part in the national development agenda. An environment with easy access to financial services for every segment of society not only helps to improve the financial capability of citizens, but also promotes an inclusive national development.

In supporting this objective, the Public Bank Group has continued to play its part in expanding financial inclusion and supporting the broad range of the community’s financial needs. In addition to the Group’s wide network of 265 branches strategically located for customers’ needs, the Group has tapped on banking technology to enhance the use of banking services, expand convenient access of banking services and increase the scalability of financial services. These initiatives are taken to extend the reach of financial access to bridge the inclusion gap.

Public Bank’s Delivery Network

Malaysia Cambodia Vietnam

No. of branches 265 31 18

No. of self service machines 2,132 71 24

No. of registered users of internet banking 21.2% to 2,388,364* 1.3% to 16,261 47.0% to 6,970

No. of registered users of mobile banking 44.6% to 1,089,162* 61.3% to 24,827 N.A

N.A: Not available * Newly registered users

Financial Inclusion Granted new loans of

RM16.18 billion RM14.23 billion RM11.05 billion for for >42,000 for >191,000 >41,000 SMEs home purchasers motor vehicle buyers

The Group continued to play its role as a financial intermediary which supports the financing needs for home and vehicle ownerships, as well as SME growth. In 2018, the Group approved applications for housing loans totalling RM16.18 billion, benefitting more than 42,000 home purchasers. During the same period, the Group assisted more than 191,000 motor vehicle buyers by providing new loans totalling RM14.23 billion. The financing to home and motor vehicle purchasers represented 30.3% and 26.7% of the Group’s total approved loans respectively, during the year.

To support SMEs to grow their businesses, the Group had during the year provided RM11.05 billion of new financing to more than 41,000 SMEs. Adding to that, the Group also participated in Bank Negara Malaysia’s Fund for SMEs, and various SMEs financing guarantee schemes by the Government and Credit Guarantee Corporation Malaysia Berhad. THE WAY FORWARD 205

The Group’s support of financial inclusion is further reflected in its efforts to promote Bank Negara Malaysia’s Policy on Lending/Financing to the Priority Sector. During the year, the Group had again achieved its financing targets set for the purchase of affordable houses costing up to RM250,000 in Peninsular Malaysia and RM300,000 for Sabah/Sarawak for the lower to medium income segment. The Group also achieved more than two fold the target set for the financing to SMEs.

The Group continued to show its support for Bank Negara Malaysia’s School Adoption Programme to promote financial education and saving habits among young children. As at the end of 2018, the Group had adopted 860 schools. Also, as part of the Group’s efforts to support Bank Negara Malaysia’s Financial Inclusion Framework, the Group had initiated activities promoting financial educational and awareness programmes at selected adopted schools. These included financial education talks and essay writing contests, as well as providing complimentary gifts for the opening of children savings accounts at 38 adopted schools.

The Group initiated campaigns to promote cashless society and e-payment, with the launching of promotional packages to merchants, employees and students at secondary schools and higher learning centres, offering competitive deposit interest rates, attractive merchant discount rates and waiver of merchant terminal rental for up to five units of wireless contactless terminals.

Campu Bank also actively played a role in fostering financial literacy in the host country. During the year, Campu Bank sponsored 1,000 books for the Educational Campaign on Financial Education Book “Let’s Talk About Money”, which was organised by the National Bank of Cambodia and the Good Return Organisation.

V. Design and Marketing of Products and Services It is the Public Bank Group’s commitment to offer fair and responsible products and services, and to prevent any unfair and deceptive practices in its marketing communication. Prior to the launching of a new product or service, the Group takes affirmative measures and undertakes rigorous internal processes to ensure the product or service is aligned with the Group’s policies and comply with regulatory requirements. Alongside the policies and procedures in place to ensure a stringent product approval process, the various functions across the Group including compliance, risk management and business units are required to work closely to vet and review the features and impact of the new launch. The evaluation process for the new launch is carried out throughout the product life cycle from development to post implementation, with the Group continuing to undertake monitoring, risk assessment and reporting even after the launch.

The Group also adheres to stringent monitoring and compliance standards in marketing its products and services. The Group upholds the principles of fair and reasonable treatment to consumers, since it is important that the products and services offered are appropriate to the needs and financial capability of the customer. The Group ensures commitment to fair and responsible banking is clearly communicated to the marketing staff, and they are aware of the regulatory expectations. Staff are also responsible to provide clear and transparent information and risk disclosure to the customers during marketing activities, with the necessary documents such as prospectus, product highlight sheet, suitability assessment checklist and sales illustration being made available to customers at all times. 206 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

VI. Digital Transformation and IT Infrastructure Advancement of technologies has given rise to changes in customers’ expectation. In response to the shift in customers’ demand, the Public Bank Group has developed a 3-year Digital Roadmap which is focused on the deliverables based on an enterprise-wide fintech strategy. The primary goal is to enhance customers’ experience by making banking easier, faster and more reliable through the Group’s digital touch points. In particular, the Group has been proactively initiating the process to revamp its online and mobile banking channels for enhanced customer experience, in the aspects of convenience, efficiency, security and innovation.

Convenience • PBe QR Efficiency • All-in-one • Virtual assistant digital payment powered by artificial terminal intelligence • eKYC Digitalisation Efforts Security • Crisis Management Plan Innovation • User education • Open API

Convenience The Public Bank Group is redesigning more than 50 banking services in its digital banking channels based on human-centred design. The Group has designed the PBe QR which enables more flexible payments, hence facilitating immediate settlement with merchants who support QR payments. Having deployed QR acceptance terminals for AliPay and WeChat Pay, the Group is building a QR payment ecosystem, which will be well set for the implementation of PBe QR.

The Group has also launched an all-in-one digital payment terminal which simplifies the payment acceptance process by enabling retail merchants to accept both card and mobile wallet payments in a single digital payment terminal. The all-in-one digital payment terminal is compact and is powered by the Android operating platform for a wide range of connectivity including mobile, wifi and Bluetooth networks.

Adding to that, the Group is actively participating in the industry initiative to put in place the electronic know your customer (“eKYC”) system, a digital identity process which leverages on facial recognition and thumbprint biometrics technology. The eKYC is expected to foster a simpler, more intuitive and convenient customer on-boarding process.

Further, the Group will be deploying multi-lingual support including Malay, English and Mandarin in its digital channels. The Group is also working on a digital solution which enables online account opening through its digital channels, thus simplifying customer’s on-boarding process.

While in Cambodia, Campu Bank had during the year implemented new initiatives in enhancing its mobile banking features for the convenience of both individual and corporate customers. These included funds transfer, outward overseas remittance, payment, account inquiry, pre-paid top up, cheque management, placement of fixed deposits and loan calculator. Campu Bank also launched an official WeChat account to broadcast its products and services, as well as latest promotional events, for customers’ easy reference. THE WAY FORWARD 207

Efficiency Security In March 2018, the Group launched a new banking The Public Bank Group places great emphasis on platform for businesses, namely PB enterprise. It comes safeguarding cyber resilience. The Group is mindful that with enhanced cash management features which provides ensuring data privacy, protecting information asset and enhanced visibility, accessibility and control for corporate building strong defence against cyber security threats are customers. The platform provides corporate customers of top priority as the Group embraces digital banking. In with the administrative rights to manage their online addition to strengthening the infrastructure and resources banking via their authorised persons who are allowed to against cyberattack, the Group has set up a Crisis add or remove users of their banking platform without Management Plan to minimise the impact of a cyber having to visit a bank branch. incident, while at the same time quickly restoring operation and security. In addition, the Group has been In addition, the Group will be deploying a virtual assistant continuously providing education to raise the awareness to empower its digital channels. The virtual assistant will of its customers to adopt careful online practices. assist customers with multiple banking tasks, and will be powered by artificial intelligence to streamline and automate the back-end processes which would be faster, Innovation simpler and more efficient. The implementation is The Public Bank Group has been building a scalable, expected to provide customers a more personalised, reliable and resilient technology backbone which the efficient and interesting banking experience. Group can leverage on to deploy advanced technologies at the front-end. Related to this is the Group’s Open Application Programming Interfaces (“API”) middleware ACTIVE ENGAGEMENTS WITH FINTECH which will enable third parties such as fintech companies COMPANIES to build new innovative applications and services that leverage on the Group’s existing financial services and, to The Public Bank Group has been working tirelessly to facilitate instant access to published information such as source for top-of-the-line technology and innovation branch location, fixed deposit rates and foreign exchange providers in its endeavour to enhance the Group’s rates. The implementation of Open API is part of Bank fintech capacity. The Group engaged with Asia’s Negara Malaysia’s initiatives to drive innovation for the leading fintech accelerator to host the Public Bank development of a vibrant fintech ecosystem. Fintech Open Day which was attended by 10 leading fintech companies worldwide. The focus was on big data, artificial intelligence, process automation, robo- advisor and customer relationship management. In addition, the Group also hosted the Swedish Trade Commission to access the pool of fintech companies in the second largest fintech hub in Europe. 208 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

VII. Sustainability in Supply Chain The Public Bank Group is mindful that to build a sustainable future, the Group has to look into every aspect of the way it operates its business, including its supply chain. The Group can play a large part in contributing to the sustainability ecosystem by sharing responsible business principles and practices with its vendors.

In its sourcing practices, the Group carries out rigorous evaluation on the vendors. Apart from competitive pricing, reliability and quality of the products and services, and after sales support, the Group also emphasises on the vendors’ business ethics. The Group conducts yearly visits to the offices and factories of selected vendors dealing with security and general printing to gain a more in- depth understanding of their business conduct and assess the EES impact of their business practices. Further, the Group also communicates its EES expectations through sending out survey forms to suppliers for them to share their commitment towards EES practices.

On information and communications technology (“ICT”) sourcing, vendor due diligence (“VDD”) is mandatory in the engagement with ICT suppliers. Under the VDD process, the criteria imposed during the assessment include vendors’ financial strength, the background of its management and the company’s risk exposures. As part of the business continuity and sustainability plan, vendors of application system who do not supply source codes are required to sign an escrow agreement to ensure up-to-date source codes are readily accessible in the event of discontinued product support, or insolvency of the vendor. Maintenance and support service contracts with service level assurance stipulations are executed between the Group and the vendors to bind them to an expected standard of support. ICT Sourcing and Procurement The Group also promotes the development of local businesses by supporting and >90% working with local companies, which continue to form the majority of the were sourced and Group’s panel vendors and service providers. On ICT sourcing, local companies spent on local comprise 93% of the total ICT suppliers for the Group, while 97% of the total companies ICT procurement spent was on local vendors. THE WAY FORWARD 209

THEME 2: CONDUCT AND COMPLIANCE It is essential for a bank to uphold the highest compliance standard and good business conduct to safeguard the public’s financial assets. Breaches of rules and CONDUCT AND regulations can lead to the erosion of trust, weighing on the business and potentially COMPLIANCE the economy as a whole. The advancement of banking technology and the increasing complexity in the financial system have given rise to new risks, hence good business conduct and compliance are more important than ever for a financial institution to ensure sustainable financial stability.

I. Compliance Compliance The Public Bank Group has established a strong footing in the country and is committed to the highest standards of compliance to safeguard the interest of its more than six million customers and 70,000 shareholders. To achieve this, the Group’s Compliance Policy sets out the main areas, such as compliance governance, key compliance requirements as well as the roles and responsibilities of key management personnel and that of each employee in managing compliance risk. Anti-money Laundering and While the Chief Compliance Officer is appointed to undertake the compliance Counter Financing function to manage compliance risk, the Board and key management personnel of Terrorism hold the responsibility in the oversight and management of compliance risk of the Group.

Roles and Responsibilities

Board of Directors Anti-fraud Has overall responsibility to oversee the management of compliance risk Compliance Committee Assists the Board in discharging its responsibilities, and is responsible for oversight on compliance matters Shariah Committee Responsible to advise the Board on Shariah compliance matters pertaining to Islamic operations Senior Management Has overall responsibility for the effective management of compliance risk Operational Risk Management Committee Assists the Compliance Committee in discharging its responsibilities, and is responsible for total oversight on compliance risk management on adherence with legal and regulatory requirements as well as internal policies, guidelines and procedures 210 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

The effectiveness of the compliance environment is premised on collaboration from the three lines of defence, which are Business and Support Functions (first line), Compliance Function (second line), Risk Management Function (second line) and Internal Audit Function (third line). Compliance, Risk Management and Internal Audit, being the control functions of the Group, always work closely together to provide combined assurance in assisting the Board in the oversight of compliance responsibilities.

In the event of any non-compliance or suspected non-compliance, the Group has a structured escalation process which sets out the procedures to address the issues.

Compliance Committee Operational Risk Management Committee Other Control Functions: Compliance • Risk Management Function Function Compliance Reporting • Internal Audit Function

Local Compliance Officers

Whistleblowing Policy and Procedure

To further strengthen the check and balance system in the Group, the Group has established the Whistleblowing Policy and Procedure which outlines the avenues for all staff, interns, consultants, contractors, vendors, suppliers and/or customers to disclose any illegal, unethical, questionable practices or improper conduct committed or about to be committed within the Group. Reporting channels include the PBALERT Link at https://www.pbebank.com/Whistleblowing, and email [email protected].

As the Group proactively promotes a corporate culture that upholds zero tolerance for legal and regulatory non-compliance as well as promoting a strong culture of integrity and ethics in the conduct of business, the Group had in 2018 undertook new measures to ensure its compliance initiatives remain relevant and effective, while at the same time, strengthening self- regulation among all employees.

Compliance Risk Assessment As part of its risk-based approach, the Public Bank Group implements monthly Compliance Risk Assessment to identify, assess, rate and prioritise the risks of applicable legislation and regulations to the Group’s business. Compliance checklists and compliance self-assessment checklists are also developed as ongoing tools to monitor the level of compliance in key risk areas. The rating results of the Assessment are included as part of the key performance indicators in the Compliance Grading System to grade the compliance performance of all branches, hire purchase centres and divisions. This practice helps in promoting ongoing awareness of employees on their respective risk rating, therefore further strengthening an effective management of compliance responsibilities and risks. THE WAY FORWARD 211

Campu Bank and Public Bank Vietnam have adopted the best practices and measures implemented by the Group in Public Bank’s Code of Ethics Malaysia, including the following: The Public Bank Group has established the Code of • Implementation of monthly Compliance Risk Ethics, setting out the organisational values and Assessment to support a risk-based approach in ethical principles which mirror the professional and identifying, assessing and prioritising compliance risks; ethical standards set by the Financial Services • Implementation of Compliance Grading System to Professional Board. These include the ethical facilitate a structured system for assessing and grading standards of behaviour expected of all staff in the the branches; Group. The Group’s five fundamental ethical • Setting up mobile compliance team to conduct on-site principles are Competence, Integrity, Fairness, compliance visits to branches; and Confidentiality and Objectivity. By adhering to the • Development of self-compliance checklists by highest possible standards, the Group aims to build a Dedicated Compliance Officers. sustainable, ethical, strong, respected and profitable business. II. Anti-money Laundering and Counter Financing of Terrorism

Compliance Bulletin Money laundering and terrorism financing (“ML/TF”) has remained a major risk in the global financial landscape. In In March 2018, the Group began to issue the quarterly combating ML/TF, the Public Bank Group’s Anti-money Compliance Bulletin to keep staff informed of the latest Laundering and Counter Financing of Terrorism (“AML/ regulatory developments on compliance matters, while CFT”) Policy has been developed as a guiding framework also keeping them updated on the compliance issues for all staff to be informed of their role in preventing raised by regulatory authorities and the Group’s illicit financial activities, and to comply with all the AML/ Compliance, Risk Management and Internal Audit CFT requirements throughout the Group’s banking functions. The Compliance Bulletin is accessible to all staff operations and processes. The AML/CFT requirements are through the staff intranet and Circular Management outlined in five Guidelines in the Policy. System.

Guidelines in the AML/CFT Policy Conduct and Compliance in Campu Bank and Public Bank Vietnam The commitment to maintain a high standard of conduct Guidelines on Guidelines on Guidelines on Risk Profiling of Suspicious AML/CFT Staff and trust remains a top priority for the Public Bank Group Customers Transaction Training and at its overseas regional operations. The Group’s overseas Reporting Awareness operations are required to follow similar guiding principles Programme in the Group’s policies and guidelines, to the extent that Guidelines on Guidelines on host country laws and regulations permit, and suitable to Sanctions Employee Assessment their domestic operations. System To facilitate a more stringent and focused monitoring of AML/CFT matters, the Group has undertaken additional measures to strenghten AML/CFT governance, by appointing an AML Compliance Officer in Head Office, Branch AML Compliance Officers in branches and hire purchase centres, as well as AML Appointed Officers at Head Office divisions, to monitor and guide staff in AML/ CFT matters. The check and balance of the Group’s AML/ 212 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

CFT measures is further enhanced with the Independent anti-fraud matters are sent out regularly via Staff Circular Audit Function carrying out periodic audits and annual Management System for them to keep a pulse on the review on the adequacy and effectiveness of the AML/CFT latest updates. measures. Training on Anti-fraud Programme To ensure all branches are always alert on AML/CFT compliances, the Group’s Compliance Function conducts No. of participants 2016 2017 2018 regular on-site visit to branches, hire purchase centres Classroom training 3,866 4,896 3,637 and subsidiaries identified with vulnerability of ML/TF. and e-learning Staff training and awareness programmes are carried out regularly to equip employees with latest developments As at the end of 2018, a total and requirements in AML/CFT. To steer the professionalism of its employees, the Group is also targeting for all the of 12,704 staff had sat for the key personnel in AML/CFT function to attain the required e-learning course on certification in AML/CFT. anti-bribery and corruption

In 2018, as part of continuous integrity and ethics building Training on AML/CFT measures, the Group implemented a mandatory e-learning No. of participants 2016 2017 2018 Programme on Anti-Bribery and Corruption for all Classroom training 2,045 2,567 5,368 employees. Building on a wide coverage of contents including legislation on corruption, corruption offences, E-learning 34,859 36,577 33,824 penalty for corruption and failure to report, corruption red Quizzes 7,638 9,426 10,338 flags, as well as reporting channels, the Programme has AML/CFT provided a platform for employees to gain further 36 43 153 Certification understanding on anti-bribery and corruption, as well as their responsibility in combating frauds.

III. Anti-fraud Public Bank’s Policy Statement on The Public Bank Group’s Anti-fraud Policy sets out the Anti-fraud Group’s expectations and the requirements relating to the prohibition, recognition, reporting and investigation of Fraud in all its form is wrong and constitutes a suspected fraud, corruption, misappropriation and other fundamental breach to the Bank’s Code of Ethics and is similar irregularities. The scope of “fraud” covers but is therefore absolutely unacceptable to the Bank. The not limited to the following: Bank’s ultimate objective is to eliminate fraud from all its business activities. The Bank has zero-tolerance • Asset misappropriation towards any form of fraud. It is the Declared Policy of • Fraudulent Statement/Representation the Bank: • Corruption (a) To dismiss all staff proven to have been engaged • Fraudulent acts or attempted fraudulent acts in fraudulent acts or attempted fraudulent acts committed on but is not limited to assets, data, (b) Where appropriate, to report such cases to the records, document or other information relevant law enforcement agencies and/or regulatory authorities; which may result in civil/ While the Policy has set the tone for all employees to criminal proceedings/penalties for the staff adhere strictly to anti-fraud requirements, the Group (c) To recover from the persons involved, in whatever places great emphasis on promoting a strong compliance manner as legally permissible including civil suits, and self-regulation environment. Training programmes on the losses incurred by the Bank anti-fraud are conducted, and latest developments on THE WAY FORWARD 213

Employment Practices THEME 3: DEVELOPING EMPLOYEES Talent Attraction The Public Bank Group’s employees play a key role in supporting the Group’s mission and Retention to deliver continuous value to its stakeholders as it pursues sustainable business growth. With employees at the core of its mission, the Group is committed to caring for its employees, and is cognisant of the importance of workplace culture and creating values for them.

Building Capabilities for the Future At the Public Bank Group, digitisation is seen as a positive disrupter to business. It helps the Group to innovate and reimagine its business to better serve its customers. It also enables seamless lifelong learning journeys by allowing the Group to discover Developing Employees new opportunities like never before.

Alongside with technology, the Group believes mindsets, organisational structures, operating models and talent skill sets need to be changed. The Group is deeply Employee Education committed to preparing today’s workforce for tomorrow’s economy. and Development In line with that, the Group’s Knowledge and Learning team works closely with Employee Health and business units to discuss evolving business needs and collectively identify areas of Safety, and Well-being development to bridge skills gap. The Group also encourages its employees to take an active role in managing their career. In addition, the Group continuously reviews existing career and learning development programmes, and introduces new development programmes, to help employees acquire compatible skills for transition.

Over the years, the Public Bank Group has been embedding digital ambition into its conversations with employees. The Group’s challenge “Are You Ready For 4.0?” motivates employees to embark on their maiden journey to discover what digital disruptive innovation is all about and how it can impact them. The Group believes that these conversations help drive awareness among employees on the importance of lifelong learning and keep themselves relevant for the digital transformation the Group is embarking on.

“ARE YOU READY FOR 4.0?” The Public Bank Group’s challenge “Are You Ready For 4.0?” motivates staff to embark on their maiden journey to discover what digital disruptive innovation is all about and how it can impact them. 214 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

During the year 2018, Public Bank invested RM52.0 million on Invested employee training to keep everyone’s skills current and future RM52.0 million proof. on employee training The Group provides its people with the opportunities to manage their learning journey and career development, and it With that understanding in place across the organisation, the is their ownership of this freedom to learn that will see them Group then provides learning platforms to accelerate learning giving their best to the customers and business. with topics guided by the business roadmap. Apart from its intranet training platform, the Group also collaborated with Responsible Conduct and Culture third party content providers to facilitate digital learning through mobile web, enabling employees to enhance their The Public Bank Group continues to build a responsible, digital experience as they learn. The investment encompasses inclusive and diverse culture based on its values, which helps global learning partners, such as Coursera, Moody’s Analytics, its employees to consistently do the right thing for customers Leadapreneur and Retail Banking Academy. This helps the and the community. Group truly liberalises learning. Throughout the year the Group reinforced its values and behaviours As part of its digital learning journey, the Group is also embarking of its people through numerous initiatives and embedded the on the creation of learning communities and learning through behaviours in its processes, policies and training programmes. gamification. It has been proven that learning communities can increase learning effectiveness as the learning is through Staff Training collective responsibility and can be made timely and fun. These No. of participants 2016 2017 2018 opportunities empower the employees to not only get better in their current jobs, but also acquire capabilities that can help Employee participation in them transition to other jobs that are increasing in demand. training The employees are trained to think beyond banking in order to – Classroom (headcount) 36,722 41,498 48,408 compete and grow their competencies. Diversity of skill sets is – E-learning (headcount) 83,546 132,137 100,782 a tool to drive innovation within the Group. Average training budget 3,017 3,103 3,249 As the Group anticipates the needs of the new generation of per employee (RM) increasingly tech-savvy customers, the Group has also embarked Total hours of training 30 32 33 on its digital skills training programmes, such as Python skills. per employee The employees are equipped with better understanding of coding, and are able to speak the same language as the Staff training as percentage of salaries technology teams. Employees who have been trained are also 3.2 3.1 3.2 able to use Python when working with data; from arrays to (minimum statutory statistics to plotting results and self engineered work requirement of 2.5%) improvement at the workplace and business units. The Public Bank’s Code of Conduct sets out the Group’s As an organisation that is focused on keeping the customer at expectations of its people of their conduct and ethical the centre of all that it does, the Group has also been upgrading behaviour. Upon joining, all new employees are informed of, the thinking and human-centred design skills of its people. and signed up to, their obligations and rights under this Code. Employees from various functions have attended design New recruits also attended a one-day programme on thinking, business innovation, and strategic thinking workshops Introduction to Ethics in Banking. All existing employees are to equip themselves with the skills which would enable them required to refresh their knowledge and to renew their to develop focused creative solutions that meet and exceed commitment to the Code of Conduct through completing business and customer needs. e-learning module every year. THE WAY FORWARD 215

The Group equips and empowers employees to work in line Professional Qualification with the Public Bank values, Code of Ethics and all other Given the importance of banking in society, the Public Bank standards relevant to their role. The Group also encourages Group has a responsibility to protect its reputation, maintain them to speak up and act if they witness or suspect wrongdoing good customer trust in the Group and continue to be mindful by contacting its independent whistleblowing service ‘Speak of the public interest. Quality talent is essential in maintaining Up’. The Group works hard to create an environment in which high standards in the banking industry. people have an avenue to speak up. The Group operates a whistleblowing standard, PBB Confidential, which allows The Group continues to work closely with the Asian Institute individuals to report matters of concern confidentially. The of Chartered Bankers and other professional bodies to Group has a strict policy prohibiting retaliation against those professionalise its employees. The Group offers a sponsorship who raise concerns. scheme for various professional certification.

The Group aims to comply with all laws and regulations The Group’s core credit employees are placed under a credit wherever it operates and has comprehensive policies and certification programme namely the Professional Credit training through classroom and e-learning. Certification whilst its frontline employees undergo the Chartered Banker Pathway by the Asian Institute of Chartered The e-learning training programme covering areas, such as Bankers (“AICB”). Employees working in specific functions are ethics, anti-money laundering and anti-bribery and corruption also encouraged to become certified through applicable are mandatory for all employees. qualifications, such as the Certification for Bank Auditors, Certification in Anti-Money Laundering/Counter Financing of The Group values high ethical standards above all else. Its Terrorism, Certification in Regulatory Compliance, Certification commitment to high ethical standards defines the Group and in Bank Risk Management, Certified Financial Planner, Certified how it is managing, investing and innovating for the future. Documentary Credit Specialist, and Certification in Islamic Banking & Finance, among others.

Number of Participants for E-learning Programmes No. of AICB Graduates in Public Bank

2015 250 33,824 13,662 on Anti-Money on Public Bank’s Laundering/ Code of Ethics 2016 184 Counter Financing of Terrorism 2017 296 16,792 12,704 on Information on Anti-Bribery 2018 293 Security & Corruption Awareness 216 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

In 2018, the Group again achieved the highest number of graduates at the AICB Graduation. Public Bank had recorded the highest number of graduates for four consecutive years.

Making A PB Star Still Surging Making A Difference 4.0 Campaign Ahead Difference 2018 2016 2015 2014

The Group also places a strong focus on engagement with its customers and local communities. Customer Engagement Campaign – “PB Listens and Rewards” was successfully launched Sustainable Engagement in September 2018 and had garnered a total of 66,086 responses. The primary objective of the Customer Engagement To ensure Public Bank Group progresses forward as a unified Campaign was to acquire key insights on customer behaviours organisation, the Group continues to undertake employee and expectations. It is important that the Group captures what engagement activities that go a long way in helping to customers and the community are saying and converts these strengthen the camaraderie and esprit de corps within the data into opportunities to strengthen existing customer Public Bank Group. Over the years, Public Bank has been relationships and attract new customers. actively engaging employees through various campaigns. The Public Bank Group’s employees make the difference for its PBB - Campaigns customers. That is why the Group empowers its employees, provides them with the tools they need and encourages them Our people bring the Public Bank’s corporate goals to life. They to act on their own initiative and put the customer first. are instrumental in making banking joyful, and from their innovative ideas, they create the services they provide to The Group places emphasis on building a culture where respect colleagues and customers. and trust are the hallmarks of its people. This means equipping its people not only with the necessary technical skills but also In 2018, the “Making A Difference 4.0” (“MAD 4.0”) was with the right soft skills and business acumen to ensure the launched. The MAD 4.0 campaign provided an avenue for all Group does what is right for its customers. employees regardless of rank to participate. Throughout the organisation, employees were encouraged to work in teams, The Group believes that culture dictates results, and it is a where teams can be cross-functional, inter-branch, inter- culture of engagement that will create breakthrough results. In department or even involve collaboration between branch and building such a culture, it also taps on various communication head office to unleash their creativity. The campaign promoted channels in place within the Group to actively engage employees. innovation to generate new ideas for implementation. The Campaign had attracted about 200 teams to participate, with a Engagement Platforms (headcount) total of 1,088 ideas. 2016 2017 2018 As a responsible and caring employer, the Group appreciates Management Seminar 1,439 1,439 1,462 the immense contribution of its employees who form the core Sales Convention 1,160 1,270 1,249 driving force of the organisation. The Group’s aim is to ensure that its people are connected to the Group’s purpose, feel The Group also wants its employees to be engaged and be valued by the Group and are given opportunities to make a aware of the Group’s strategy, and business direction, as well difference. Regular feedback empowers the employees to reset as its culture. The Group regularly and systematically updates goals continuously, adapt to change and feel rewarded for the them on the Group’s performance and changes that affect the ‘work’, not just for their ‘job’. Group, and matters that concern their roles. THE WAY FORWARD 217

Creating A Pool of Future Leaders graduates. Since the Programme started in 2014, the Group Leadership development continues to be a key focus for the has hired 3,003 Management Trainees and 60.0% of them are Public Bank Group. As part of its continual efforts to build its still with the Public Bank Group, with many having progressed bench strength, the Group identifies and plans for talent well in their careers. In the 2018 Graduates’ Choice Award by development at middle and senior management levels. HRINCAMPUS, Public Bank emerged as the “Malaysian Individual Development Plans are created for each of its Graduates’ Top 3 Employer Choice for Banking”, reaffirming the identified talents and are updated on an annual basis. Bank as a top choice among undergraduates across the country.

In 2018, a series of leadership talks was carried out for all senior leaders and Board members to learn from the external business leaders and subject matter experts. At this learning platform, the latest in business practices, trends and thought leadership were shared. The speakers were given opportunities to interact with these leaders who have significant corporate experiences. Topics shared included mega trends and leadership responses, technology trends and how they are shaping business and corporate governance trends as well as regulatory updates.

The Group also continued to nurture its middle management through its Leadership Programmes. Middle managers went through a series of customised leadership modules which helped to sharpen their mindsets and strengthen their “Malaysian Graduates’ commitment to the Group. Besides enhancing the management Top 3 Employer Choice for Banking” skills of participants, it also provided participants with a platform to interact with fellow managers, exchange ideas, Further, the Group continued to reach out to potential pool of share experiences and learn from each other. talents at the very initial stage of the talent acquisition process by holding a series of on-campus engagement activities. The With the focus on grooming young talent, Public Bank’s Group had in the year continued to participate in employer increasingly popular 12-month PB TalentMax Programme for engagement activities with several premier universities in Management Trainees, incorporating classroom training, on- Malaysia. the-job training, projects or learning assignments as well as mentoring and attachments at relevant Head Office divisions, has groomed a large pool of talented young employees.

This practice enables the Group’s talents to pick up essential technical skills, provides them with the opportunity to hone leadership competencies and business awareness; preparing them for the right job fit in the organisation. The Group has also enhanced and aligned existing PB TalentMax programmes with market trends to attract the best fresh graduates in the market. In 2018, the Group successfully recruited 715 fresh 218 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

Campus Engagement Activities Group’s panel clinics to provide and advise on their health status and to facilitate early detection and treatment of any illness. 2016 2017 2018 Career fairs/events 43 36 34 On-campus interviews 8 10 6 PUBLIC BANK SAFETY AND HEALTH POLICY On-campus career talks 4 9 8 The Public Bank Group has established the Safety and Career/Group interview 3 2 2 Health Policy to provide and maintain a safe, healthy and workshops conducive work environment within its premises. The Policy outlines the Bank’s commitment to ensure that the Employer-Student network 1 1 2 way in which the Bank conducts its business and sessions operations does not put the health and safety of any Student visits to Menara person at risk. 7 9 11 Public Bank Regular meetings and inspections are carried out to identify and evaluate control factors which may pose any Encouraging Healthier Lifestyle and Well-being risk to the health, safety and security of its staff, customers, visitors and business partners. Well-being is a strong pillar for businesses and employees to thrive. The Public Bank Group is a great place to work in as wellness and a healthy lifestyle is a cornerstone policy of the In 2018, the Group had made available inoculation against Group to attract and keep the talents of the future. In 2018, influenza to all employees in Head Office as a precautionary the Group’s well-being programme successfully delivered on 3 measure to curb the spread of influenza among employees. well-being pillars: Physical, Mental and Financial Well-being. Arrangement was made with 3 panel clinics to provide onsite mass inoculation for a total of 2,758 employees. During the No. of Staff Attended Total Wellness Workshops year, the Group had also trained a total of 113 certified first aiders in order to ensure prompt and professional response to 2016 2017 2018 any safety and health incidents at the workplace. Physical & mental 364 2,613 1,703 workshops At the Public Bank Group, succeeding financially is not just a Financial well-being goal for the Group’s customers - it is also a goal for all its 106 97 129 workshops employees. The Group offers workshops on Managing Your Finances, covering a wide range of topics, including financial The Group encourages its employees to participate in the basics, managing credit, financing and education, owning a company’s organised sports and recreation activities. To home and retirement planning. This is to help them to manage enhance the health and well-being of the employees, the Group their finances and make smart financial decisions; an important continues to co-ordinate with health service providers including component of overall well-being which also prepares them for specialist hospitals to conduct health related talks and fitness the future. programmes for employees’ participation. Fitness classes such as aerobic and yoga are conducted after office hours and The Group understands the stress imposed when employees’ during lunchtime. Besides improving the health and well-being personal commitments overlap with their professional roles. of its people, these sessions also help to build a greater sense Being a considerate employer, the Group grants sabbatical of belonging among its employees. leave to enable its employees to realign their perspectives and fulfil their domestic obligations or professional aspirations. The Group also provides a comprehensive medical benefits scheme including specialist treatment and hospitalisation for employees and their immediate families. In addition, employees are also eligible to attend biennial medical examinations at the THE WAY FORWARD 219

No. of Staff Granted Sabbatical Leave

2016 2017 2018 Domestic obligation 31 54 43 Health and Well-being 8 17 19 Further studies 2 1 1

Inclusion and Diversity “The Public Bank Group’s At the end of the day, what matters to the Public Bank Group most is that all 52 years of excellence employees who work with the Group, although from different backgrounds, thoughts, was built on deep and experiences and perspectives, can feel good and proud about their differences and lasting relationships with diversity. That is why the Group is committed to building and sustaining an inclusive and supportive culture where all employees feel valued, respected for who they are, its customers and all and are empowered to contribute and succeed. stakeholders through the efforts of its people. In The Group believes that a diverse organisation outperforms a homogenous organisation each phase of the Group’s every time. Therefore, the Group is committed to develop the most diverse mix of talent. journey, the Group has The Group’s human capital management policies and processes support the diversity and inclusion approach, whereby it practices equal employment opportunity, non-discrimination communicated its goals towards race, gender, religion, age and disability. As a bank, the more it reflects and and strategies to establish mirrors the customers it serves, the better equipped it is to serve its customers. and reinforce a common culture that solidifies its The Group is proud that over 45.0% of its management and more than 48.0% of its corporate identity and top management are women. The Group hires men and women equally at entry level, it provides equal pay, equal benefits and opportunities. Regardless of gender, all the PB Brand. The employees have fair and equitable employment terms and equal opportunities for Group’s seamless career advancement based on merit. teamwork across business lines has also always been The Group’s diversity and inclusion philosophy clearly provides equal opportunities to a key factor in its everyone, everywhere, and ensures that all its employees feel uniquely valued and safe to contribute their best. success. Gender Composition of Employees The Group believes in 2017 2018 treasuring its human capital. As such the Female (%) Male (%) Female (%) Male (%) Group has crafted a Malaysia (%) 60.0 40.0 60.1 39.9 human capital strategy Campu Bank (%) 56.4 43.6 58.3 41.7 not only to attract the PBVN (%) 60.0 40.0 63.0 37.0 desired talents but also to retain and develop these talents to their greatest potential.” 220 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

Performance Data

Human Resource Malaysia 2018 2017 Human Resource Malaysia 2018 2017

WORKPLACE Employee turnover breakdown by non-supervisory age group (%) Supervisory (%) 68.8 67.6 < 30 64.8 63.5 Non-supervisory (%) 31.2 32.4 30 to < 40 18.4 27.0 Female (%) 60.1 60.0 40 to < 50 12.8 8.8 Male (%) 39.9 40.0 50 and above 4.0 0.7 Age group (%) < 30 26.4 29.0 PERFORMANCE MANAGEMENT 30 to < 40 32.1 31.3 Total number of employees 96.5 97.2 40 to < 50 29.9 28.7 appraised (%) 50 and above 11.6 11.0 Total number of staff awarded 95.9 96.6 Diversity (%) bonus (%) Malay 37.9 37.8 Chinese 55.2 55.4 STAFF DEVELOPMENT Indian 6.6 6.5 Employee participation in training: Others 0.3 0.3 Classroom (Headcount) 48,408 41,498 Service in the Group (%) E-learning (Headcount) 100,782 132,137 < 1 year 6.3 5.0 Average no. of participants per 26 25 1 to < 5 years 14.1 16.5 training programme 5 to < 15 years 34.5 33.5 Average training budget per 3,249 3,103 45.1 45.0 15 years and above employee (RM) Women in management (%) 45.8 45.8 Total hours of training per employee 33 32 Women in top management (%) 48.5 48.8 Staff training as percentage of 3.18 3.05 salaries cost (minimum statutory Total no. of recruitment (Headcount) requirement of 2.5%) Supervisory 1,220 923

Non-supervisory 59 108 EMPLOYEE WELFARE Total no. of promotion (Headcount) Supervisory 1,220 769 Total amount of staff loans 262,022 288,375 Non-supervisory 109 103 approved (RM’000) Total outstanding amount of 1,908,373 1,836,884 staff loans (RM’000) EMPLOYEE TURNOVER Benefits paid under the Group’s Supervisory (%) 9.5 9.3 protection insurance policies: Non-supervisory (%) 2.6 2.9 (i) Personal Accident Insurance 143 803 Employee turnover breakdown (RM’000) by supervisory age group (%) (ii) Group Term Life Insurance 2,072 2,896 < 30 79.7 77.8 (RM’000) 30 to < 40 11.8 13.6 40 to < 50 6.2 6.5 50 and above 2.3 2.1 THE WAY FORWARD 221

THEME 4: CORPORATE CITIZENSHIP The Public Bank Group believes that it is important to embrace shared value with the community, and give back to the stakeholders in the environment it works and lives in. To support this cause, the Group has been a good corporate citizen fulfiling its responsibility to pay tax for the nation’s well-being and development, with a total income tax payment of RM1.53 billion made by the Group in 2018.

In contributing to the community, the Group focuses on two main priorities:

CORPORATE CITIZENSHIP Community Contribution To nurture future generations for nation development

To strengthen communities through volunteerism and charitable donations 222 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

NURTURING FUTURE GENERATIONS

Financial Industry Collective Outreach (“FINCO”) FINCO is the largest collective impact initiative, supported by 107 Malaysian financial institutions including the Public Bank Group, to build a better future for children. It was set up by Bank Negara Malaysia and currently has two flagship programmes: • FINCO Reads: An initiative to improve English proficiency in public schools through fun learning programmes for children and creating easy to use toolkits for teachers • FINCO Mentor: A portal to bring in volunteers as mentors to share their wide ranging career experience with students

In 2018, Public Bank joined FINCO Reads Activity Fair held at schools in Kota Belud, Papar, Keningau and Kinarut, in Sabah. The Group worked proactively in assisting teachers to conduct the specially designed programmes which aimed to increase students’ aptitude for English. The Group has been actively Provided financial support and volunteerism to promote supporting the activity by consistently sending volunteers to FINCO corporate social FINCO Reads since the activity commenced. responsibility activities

Star Achiever Programme To nurture academic excellence and inculcate savings habit among children, Public Bank has set up the yearly Star Achiever Programme to reward PB Bright Star Savings Account holders who excel in their UPSR, PT3 and SPM examination.

In 2018, Public Bank awarded a total of RM25,450 to 49 UPSR students, 30 PT3 students and 100 SPM students. Awarded RM25,450 to > 170 students

Asia School of Business’s MBA Endowed Scholarship Asia School of Business (“ASB”) is established by Bank Negara Malaysia in collaboration with MIT Sloan, to be a premier business school that develops transformative and principled leaders who will contribute to a better future and advance the emerging world.

In support of educational and professional development, the Public Bank Group has contributed to the ASB MBA Endowed Scholarship. The Group’s contribution goes towards an endowment fund which generates income to provide scholarship support to students of the MBA programme. The Scholarship will cover student’s expenses, including tuition fee, accommodation and, books and supplies on a continuous basis. As the Scholarship is an endowment which generates ongoing income, it will provide long term support to students of the programme.

The Public Bank Group contributed USD1.25 million for ASB MBA Endowed Scholarship to support and benefit students of USD1.25 million to ASB MBA the MBA programme. Endowed Scholarship THE WAY FORWARD 223

Educational Visit The Public Bank Group often collaborates with various universities to host field trips for students to visit the Bank. Besides giving students the opportunity to visit real life work environment in a bank, the Group also conducts talks to give them first-hand knowledge about banking operations and career opportunities with Public Bank. These initiatives enable students to gain more extensive understanding on banking culture and the operating environment.

In 2018, the Group hosted educational visits for undergraduates from the following universities and college: • University of Malaya • Universiti Sains Malaysia • Sunway University • Sunway College • UCSI University • Curtin University Malaysia • Heriot-Watt University Malaysia • University of Nottingham Malaysia • Universiti Teknologi MARA • Monash University Malaysia Hosted education visits for 460 undergraduates from • Multimedia University 11 educational institutions

Vietnam Sri Lanka

Universiti Teknologi MARA Skills Development Fund Ltd of Sri Lanka On 6 April 2018, PBVN’s Head Office and Hanoi Branch hosted On 26 April 2018, Public Bank hosted a visit by a delegation of a group of 17 students from Universiti Teknologi MARA for an 32 participants comprising Government officials from Central international academic trip, “Discovering Vietnam’s Business and Bank of Sri Lanka and several ministries, as well as employees of Culture”. Students were briefed on PBVN’s history, vision, private organisations including banking institutions and products and services, and the banking sector in Vietnam. universities. 224 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

Financial Literacy The Public Bank Group actively promotes financial literacy to the wider community. Higher awareness and literacy on financial management of the nation will not only increase financial wellness of the community, but will also spur economic growth and national productivity.

School Adoption Programme The School Adoption Programme was initiated by Bank Negara Malaysia, and is aimed at promoting the savings habit among school children. In 2018, the Group continued to support the School Adoption Programme, with 860 schools under adoption by Public Bank. Under the Programme, Buku Wang Saku were distributed to students in the adopted schools throughout Malaysia.

Adopted 860 schools to raise financial awareness and literacy of school children

Inculcating the Savings Habit On 11 March 2018, Public Bank Batu Pahat Branch in collaboration with Sekolah Rendah Sri Bengkal, Batu Pahat, Johor, co-organised a programme entitled “Inculcate Savings Habit with Public Bank”. The Programme was aimed to educate young students on the importance of savings. The event was attended by 128 students and 5 senior teachers from the school.

Cambodia – Let’s Talk About Money Campaign The National Bank of Cambodia and the Good Return Organisation had co-organised an educational campaign “Let’s Talk About Money” to improve financial literacy of the Cambodian nation. Cambodian Public Bank showed support by sponsoring 1,000 books to school Karnival Kewangan Kedah, Labuan, Jerantut and Taiping in 2018 children across the country. The finance carnivals were organised by Bank Negara Malaysia, aimed at creating financial awareness and education to the public including the lower income group, youths and small and medium enterprises. The Group gave its support towards the initiatives by taking up premium booth and sponsored goodies, lucky draws and cash prizes. THE WAY FORWARD 225

CSX Stock Market Exhibition “My First Stock 2018” On 4 March 2018, Campu Securities participated and co-sponsored “My First Stock 2018” exhibition organised by Cambodia Securities Exchange (“CSX”) in Phnom Penh, Cambodia. The main objective of the event was to raise awareness of potential investors on Cambodia’s securities market. The day ended successfully with a huge turnout especially from the younger age segment. The staff played their part in answering queries from the visitors on investment and share trading.

Sponsorships for Educational and Professional Development

EDUCATION PROFESSIONAL DEVELOPMENT

• RM5,000 to the Tarcian Alumni • RM6,500 to the Malaysian Press Association Institute for its 38th Malaysian Press Night and for the production of the Media • RM16,000 to UTAR Education Directory 2018 Foundation for the UTAR 13th National Mathematics Competition and • RM20,000 to the Malaysian Institute Investment Game 2018 of Management for the Inaugural Tun Dr. Mahathir Mohamad Leadership series 226 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

COMMUNITY WELL-BEING

Donated >RM125,000 under the Festive Charity Programme

SPREADING THE CHINESE NEW YEAR FORTUNE AND JOY Donated RM32,000 to Rumah Bakti Ci Hang and SHARING HARI RAYA CHEER Wan Hing Homecare Donated RM48,300 to Hospital Kajang

GRANTING A CHRISTMAS WISH DEEPAVALI HAPPINESS Donated RM23,100 to Donated RM22,580 to • Desa Amal Jireh • Pertubuhan Kebajikan Yesuvian Mahligai Selangor • Pertubuhan Kebajikan Kanak-kanak Home of Peace • Persatuan Kebajikan Anak Sai Pandian Selangor Kuala Lumpur

Contributed Volunteerism under the PB RM10,000 to IJN Foundation TalentMax Programme

This is in support of the Institut Jantung Negara (“IJN”) to raise PB TalentMax Programme is a talent development programme funds for its Patient Assistance Programme which provides to expose fresh graduates to the different facets of banking financial assistance to needy adults and pediatric patients to operations and management skills. The Programme is specially pay for their treatment and surgery cost. designed to provide opportunities for the candidates to realise their potential, while building the right social skills and workplace behaviour. It also emphasises on inculcating a culture of giving through encouraging the fresh graduates to contribute to the community through various social works. THE WAY FORWARD 227

Visited Projects Donated Free Tree Society’s nursery Tree Planting >RM290,000 since 2004 Pusat Jagaan Beribuan Kasih Orphanage under the Public Bank Group Sports Club Food Staff Donation Programme Kechara Soup Kitchen Society Distribution Food This Programme was introduced in 2004, with the objective of Full Gospel Assembly Church Distribution soliciting voluntary donations from staff to assist fellow colleagues Rumah Bakti AlKausar, Bangi Orphanage in times of need, e.g. family medical expenses, death or other House of Love, Klang Orphanage calamities. Since the Programme was initiated, approximately RM293,000 had been donated to more than 180 staff. BRDB Rotary Children’s Residence, Orphanage Semenyih Old Folks Rumah Caring, Kajang Home Cambodia Chastity Home, Kajang Orphanage Donated Rumah Anak Yatim Sungai Kantan, Kajang Orphanage USD5,000 to Cambodia Kantha Bopha Foundation Old Folks Pusat Jagaan Siti Nor Aini The Kantha Bopha Foundation was officially launched on Home 1 March 2018 with the objective to raise funds for poor Old Folks Precious Gem Home Cambodian families and underprivileged children with Home healthcare needs. Clean up Taman Rimba Bukit Kerinchi Campaign Donated USD5,000 to Cambodian Red Cross The funds raised were to assist Cambodian Red Cross to carry Granted loan moratorium to out its year-long activities to help the poor especially in rural > 4,200 customers areas afflicted by natural disasters such as floods and droughts.

Donated This is to provide assistance for customers who are affected by USD5,000 to Association of Chinese Teo Chew Cambodia This is in support of educational development as the Association natural disasters. A 6-month moratorium on monthly is building a new campus with teaching facilities, as well as instalment/deferred loan repayment were granted to alleviate hostel for teachers and students the financial burden of the affected customers. Restructuring and rescheduling of loans and financing, as well as waivers on certain bank charges are offered. In 2018, a total of Sri Lanka RM647.3 million moratorium were provided to customers. Donated Organised LKR150,000 to Dawson Disease patient 2 blood donation drives Vietnam

The blood donation exercise has been a yearly affair since 1994. In 2018, more than 330 donors comprising staff, customers and Donated members of the public turned up for this noble effort by donating VND30,000,000 to Hai Duong Social Welfare Center The charity event “Make A Wish This Christmas 2018” was their blood to save the lives of those in need. organised by PBVN to assist the Center which adopted 600 children. PBVN staff also contributed items such as clothing and books for the children. 228 2018 ANNUAL REPORT PUBLIC BANK BERHAD SUSTAINABILITY STATEMENT

THEME 5: MANAGING ENVIRONMENTAL IMPACT The Public Bank Group recognises the impact of depleting natural resources and ecological threats on the sustainability of the environment we live in. Being part of the ecosystem, it is imperative to integrate these environmental considerations into MANAGING the Group’s day-to-day operation. ENVIRONMENTAL IMPACT Managing Environmental Footprint In 2018, the Public Bank Group continued to work towards improving and tracking its impact in energy consumption and greenhouse gas (“GHG”) emissions. During the year, the Group has completed replacing all the T8 fluorescent tubes and light bulbs at all its 138 branches in Kuala Lumpur and Selangor. Going forward, this exercise is targeted to be completed at the remaining branches in West Malaysia by the end of Energy 2019. The Group’s energy efficiency initiatives were further validated by the reduction Management of GHG emission at Menara Public Bank 2, an internationally certified green building by the Group, with the solar system installed at the building harvesting a total solar energy of 88,800 kWh over the last two years, reducing a total GHG emission of

about 60.8 tCO2e.

Earth Hour On 24 March 2018, Public Bank continued to show its support for environmental conservation by turning off the lights of Menara Public Bank for an hour.

Waste Management The development of sustainable technologies has risen in recent years, amid increasing awareness of the harm to the environment caused by GHG emissions associated with fuel combustion in automobiles. In support of sustainable technologies, the Group has played a part in encouraging the use of electric and hybrid car. Public Bank has assigned designated car park bays for energy efficient vehicles at its Corporate Head Office, locating these bays at prominent and convenient areas of the car park. Besides, Menara Public Bank 2 has also allocated parking bays for electric cars with charging stations available.

Greenhouse Energy Conservation Efforts in Campu Bank Gas Emission The Group’s initiatives to protect the environment has further expanded to its operations in Cambodia, with the replacement of lighting with LED bulbs completed in its Campu Bank Building. The efforts will continue to be carried out at branches across the country going forward. THE WAY FORWARD 229

As part of the Group’s Go Green initiatives, the Group makes continuous efforts to move towards a paperless environment and promote recycling. The Group proactively encourages the migration to electronic payment and the use of digital reports and documents to avoid unnecessary paper consumption and waste generation. To support the cause, a fee is imposed on branches for cheques issued for Public Bank’s own payments. Targets had also been set for the reduction of other cheques such as eSPICK cheques, house cheques, and cheques collected for card and loan repayments. To promote online transactions, the Group has waived all service fee for Interbank GIRO and Instant Transfer transactions performed, regardless of the amount. The Group has been strongly encouraging its employees to reduce printing and to maximise the usage of electronic documents across the Bank’s business and operation units. Regular communication is made to remind employees to reduce printings, and staff are advised to monitor paper purchases.

Go Green Initiative As part of Go Green initiatives, the Group’s branches and hire purchase centres are required to cease printing out the hire purchase compressed application for accommodation (“A/A”) form after approval, effective May 2018. It is estimated that this paperless initiative has reduced the consumption of paper by 5.3 million sheets which is equivalent to 11,000 reams of paper.

On waste management, the Group continues to ensure waste management practices is in place for paper collection, recycling and disposal. During the year, the Group has expanded its recycling efforts to reduce material directed to landfill by placing recycling bins for cans and tins, as well as plastic items at each office floor of Menara Public Bank to promote sustainable environmental practices at the work place.

Further, the Group adopts a stringent electronic waste (“e-waste”) management. The Group is aware that if disposal protocols are not meticulously managed, the e-waste can leave an impact contaminating the environment and threatening human health. To exercise this responsibility, the Group only appoints e-waste vendors which are licensed by the Department of Environment and certified with relevant ISO standard in Environmental Management System to manage its e-waste.

2018/2017 Change Environmental Footprint 2016 – 20181 2016 2017 2018 (%)

Consumption Electricity (kWh) 28,655,795 26,183,262 24,489,201 6.5 Greenhouse Gas Emission Associated with Electricity Consumption2 19,629.22 17,935.53 16,775.10 6.5 (Metric Tonne CO2e) Water (m3) 226,117 213,119 176,554 17.2 Waste Total Paper Recycled (kg)3 160,420 151,255 144,375 4.5 E-Procurement Average Number of Electronic Purchase Orders 374 442 668 51.1 via E-procurement (per month)

1 The scope of the information includes Menara Public Bank, Information Technology & Training Centre in Bangi, and Bangunan Public Bank 2 Calculation is based on International Energy Agency’s emission factor related to electricity consumption for Asia (excluding China), 2014, -4 6.85 x 10 tCO2e 3 Total waste papers collected at Menara Public Bank and nearby branches in Kuala Lumpur 230 2018 ANNUAL REPORT PUBLIC BANK BERHAD

CORPORATE CALENDAR OF

SIGNIFICANT 14 APRIL

EVENTS Public Bank (Hong Kong) held its annual Business Forum at BP International House, Kowloon, 2018 attended by 509 staff from all levels.

29 JANUARY

More than 1,200 Public Bank Group sales force gathered at the Sunway Pyramid Convention Centre for the National Sales Convention 2018 with the theme ‘Forging A Sustainable Future’.

14-15 APRIL 2 FEBRUARY 12 JANUARY Public Bank and Public Islamic Bank Public Bank opened the Bandar participated in a Karnival Kewangan Public Bank opened the Bandar st Menjalara Branch, its 261 branch in Labuan 2018 organised by Bank Sungai Long Branch, its 260th Malaysia. Negara Malaysia at the Financial Park branch in Malaysia. Labuan Shopping Mall, Labuan.

10 MARCH

The Public Bank Management Seminar 2018 was held at the Sunway Resort Hotel & Spa Ballroom to present and discuss the Bank’s performance and business strategies for the year.

19 JANUARY 20 APRIL 23 MARCH Public Bank participated in the th Karnival Kewangan Kedah organised Public Financial Holdings Limited Public Bank opened its 6 Red Carpet th by Bank Negara Malaysia at the held its 27 Annual General Meeting Banking Centre at Menara Public Bank Tabung Haji Hotel & Convention at the Kowloon Shangri-La Hotel, 2, Jalan Raja Chulan, Kuala Lumpur to Centre, Alor Setar, Kedah. Hong Kong. serve its high-net-worth customers. THE WAY FORWARD 231

23 APRIL

Public Bank held its 52nd Annual General Meeting at Shangri-La Hotel, Kuala Lumpur.

28 APRIL 25 JUNE

Public Mutual held its 29th National Sales Convention at the Sunway Resort Hotel & Spa, attended by Public Bank (Hong Kong) Aberdeen 3,000 unit trust consultants. Branch relocated to Kong Kai Building at Aberdeen Main Road.

29 APRIL

The Public Mutual Annual Awards 29 JUNE Nite 2018 was held at the MINES International Exhibition and Convention Centre. Cambodian Public Bank opened its 31st branch at Sensokh, Phnom Penh. 12 MAY

A total of 275 Public Bank staff 3 JULY received their certifications in various disciplines at the Asian st Institute of Chartered Bankers 21 Public Bank received full accreditation for seven of its training programmes Graduation Ceremony held at the from The Finance Accreditation Agency in a certification ceremony held Kuala Lumpur Convention Centre. at the Sasana Kijang, Kuala Lumpur. 232 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

5 OCTOBER

Public Bank opened its 7th Red Carpet Banking Centre located at Mont Kiara Branch, Kuala Lumpur.

16 AUGUST

16 JULY Public Bank participated in the 14 DECEMBER Karnival Kewangan Taiping organised Public Mutual moved to its new by Bank Negara Malaysia at the Public Bank opened the Bukit Jalil headquarters located at Menara Taiping Sentral Mall, Taiping, Perak. rd Public Bank 2, Jalan Raja Chulan, Branch, its 263 branch in Malaysia. Kuala Lumpur.

21 AUGUST

26 JULY Public Bank Vietnam entered into a 5-year Distribution Agreement with AIA (Vietnam) Life Insurance Company Public Bank coordinated a seminar Limited to become an exclusive agent entitled ‘Promising Investment for the distribution of life insurance Spotlight – Why Vietnam Now’ products in Vietnam. which was held at the InterContinental Hotel, Kuala Lumpur. The seminar was organised 11 SEPTEMBER 21 DECEMBER by the Vietnam Singapore Industrial Park, a leading industrial park and Public Bank Vietnam participated in township developer from Vietnam. the World Economic Forum on Public Bank opened the Bandar Setia th ASEAN 2018 organised by Alam Branch, its 264 MATRADE Vietnam. branch in Malaysia. 4 AUGUST

Public Bank participated in the 28 SEPTEMBER 28 DECEMBER Karnival Kewangan Jerantut organised by Bank Negara Malaysia Public Bank opened the Bandar Public Bank opened the Kota at the Dewan Majlis Daerah Kinrara Branch, its 262nd branch Kemuning Branch, its 265th Jerantut, Pahang. in Malaysia. branch in Malaysia. THE WAY FORWARD 233

CORPORATE SOCIAL RESPONSIBILITY

11 MARCH 11 JANUARY

An activity entitled ‘Inculcate Savings Habit with Public Bank’ was The ‘Make A Wish This Christmas organised by Public Bank Batu Pahat 2017’ charity drive successfully Branch at Sekolah Rendah Sri raised RM40,000 which was Bengkal, Batu Pahat, Johor to distributed to the Society of St. educate young pupils on the Vincent De Paul, Saint Barnabas importance of savings. Home, YS Charity Foundation and 3 FEBRUARY Rumah KIDS.

Staff from the Public Bank Group subsidiaries in Hong Kong participated in the ‘Green Power Hike’ Bank Cup 20 JANUARY Challenge for the third consecutive year to raise funds for various environmental projects. 24 MARCH Public Bank Management Trainees from the PB TalentMax Credit Twenty children from Rumah Amal volunteered at the Free Tree Society Baitul Kasih, Kundang, Rawang were to learn about suburban and city treated to an educational trip at the greenscape and the right ways to Pusat Sains Negara, Kuala Lumpur by plant and care for trees and the the Public Mutual Community ecosystem. Outreach team.

13 FEBRUARY 24 MARCH

Public Bank joined the global Public Bank donated RM12,000 each communities to observe the Earth to two welfare homes, Rumah Bakti Hour, a world-wide campaign to Ci Hang and Wan Hing Homecare in raise awareness on the environment conjunction with the Bank’s annual by switching off all lights at Festive Charity Programme during Menara Public Bank for an hour Chinese New Year. from 8.30 p.m.

22 JANUARY 1 MARCH 4 APRIL

Public Bank hosted an educational visit Public Bank hosted an educational Public Bank hosted an educational by undergraduates from the Faculty of visit by undergraduates from the visit by undergraduates from the Business and Accountancy, University School of Management, Universiti Actuarial and Financial Excellence of Malaya at Menara Public Bank, Sains Malaysia at Menara Society, Sunway University at Kuala Lumpur. Public Bank, Kuala Lumpur. Menara Public Bank, Kuala Lumpur. 234 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

6 APRIL

Public Bank Vietnam hosted a visit by students from the Faculty of Business Management, University Teknologi MARA Malaysia during their international academic trip to Vietnam.

21 APRIL

As part of their CSR initiatives, Public 5 JUNE Bank Management Trainees from the PB TalentMax Programme volunteered at the Kechara Soup Kitchen Society to The Kajang Hospital received a help the poor and homeless. donation of RM48,300 from Public Bank under its Festive Charity Programme in conjunction with the Hari Raya Festival to assist the hospital with its daily operations and to purchase hospital beds as well as equipment to cater for its increasing number of patients.

26 APRIL

Public Bank received a visit by a delegation from the Skills Development Fund Ltd of Sri Lanka at Menara Public Bank, Kuala Lumpur. They were briefed on the Bank’s history and operations.

8 MAY

Cambodian Public Bank donated USD5,000 to the Cambodian Red Cross to fund its activities to help the poor in the rural areas. 28 JUNE

17 MAY 4 JUNE

Cambodian Public Bank donated The first of the bi-annual blood Public Bank hosted an educational USD5,000 to the Cambodian Kantha donation drive in collaboration with visit by students from UCSI Bopha Foundation to help poor the National Blood Centre was held at University Kuala Lumpur at Menara Cambodian families and the Grand Lobby of Menara Public Public Bank, Kuala Lumpur. underprivileged children with Bank, Kuala Lumpur. health issues. THE WAY FORWARD 235

10 AUGUST

Public Bank (Hong Kong) organised a Waste Electrical and Electronic Equipment (“WEEE”) Recycling Campaign in conjunction with the Hong Kong government’s legislation for “Producer Responsibility Scheme on WEEE” to promote environmental protection.

28 AUGUST

30 JUNE Public Bank (Hong Kong) was awarded the 2018 Platinum Award of Charter on External Lighting by the Environment Bureau of Hong Kong Public Bank Management Trainees for the second consecutive year in recognition of the Bank’s compliance from the PB TalentMax Programme with regulations to switch off external lightings at its 26 branches to volunteered at a soup kitchen located minimise light and energy wastage. in Pudu, Kuala Lumpur to help feed the poor and homeless.

4 JULY

Public Bank hosted an educational visit by 15 SEPTEMBER undergraduates from the Curtin University Malaysia at The PB We Care Team of volunteers from Public Bank (Hong Kong) Menara Public Bank, participated in the ‘Love and Care Mid-Autumn Festival Celebration with the Kuala Lumpur. Elderly’ organised by the Yang Memorial Methodist Social Service by making home visits to the elderlies who are living alone.

21 JULY

Public Mutual visited the Kirtash Handicapped and Disabled Children’s Home in Bukit Beruntung, Rawang to 28 SEPTEMBER present essential items, books and stationery donated Public Bank hosted an educational visit by undergraduates from the Sunway CPA by its staff. Australia Student Charter, Sunway College at Menara Public Bank, Kuala Lumpur. 236 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

2 NOVEMBER

Public Bank sponsored RM10,000 for the IJN Foundation charity dinner 26 NOVEMBER which was organised to raise funds 29 SEPTEMBER for the Foundation’s Patient The Public Bank Sri Lanka Operations Assistance Program. Sports & Recreation Club presented a donation of LKR150,000 (equivalent Staff from Public Mutual conducted a to RM3,500) to Ms. Harshaniu Kumari money management workshop for the Nawarathna, a ‘Dawson Disease’ children of Ephratha Home, Rawang patient to assist with her medical on basic money management skills. 12 NOVEMBER expenses.

5 OCTOBER Public Bank hosted an educational visit by undergraduates from the Public Bank hosted an educational University Teknologi MARA visit by undergraduates from the Segamat Branch at Menara Faculty of Accounting and Business Public Bank, Kuala Lumpur. 19 DECEMBER Finance, Heriot-Watt University Malaysia at Menara Public Bank, Kuala Lumpur. Public Bank sponsored RM20,000 for the Inaugural Dr. Mahathir Mohamad Leadership Series organised by the 16 NOVEMBER Malaysian Institute of Management.

Public Bank hosted an educational visit by undergraduates from the University of Nottingham Malaysia Campus at Menara Public Bank, Kuala Lumpur.

28 DECEMBER 31 OCTOBER Public Bank donated RM10,000 to 22 NOVEMBER Pertubuhan Kebajikan Yesuvian Desa Amal Jireh and RM5,000 to Mahligai Selangor and Persatuan Pertubuhan Kebajikan Kanak-Kanak Kebajikan Anak Sai Pandian Selangor The second of the bi-annual blood Home of Peace Kuala Lumpur whilst received RM12,500 and RM11,500 donation drive in collaboration with the Bank’s staff rallied to contribute respectively from Public Bank under the National Blood Centre was held presents to the children of both its Festive Charity Programme in at the Grand Lobby of Menara homes in a Grant-A-Wish this X’mas conjunction with the Public Bank, Kuala Lumpur. drive under the Festive Charity Deepavali festival. Programme. THE WAY FORWARD 237

STAFF RELATIONS

20 JANUARY

The Public Bank Group Sports Club organised a Futsal Tournament 2018 18 FEBRUARY which was held at the Sports Planet, Subang Jaya, Selangor. The Public Bank Group Board of Directors and Management staff from its domestic and overseas operations attended a Chinese New Year Open House dinner hosted by the Founder and Chairman, Tan Sri Dato’ Sri Dr. Teh Hong Piow at the Sunway Resort Hotel & Spa, Selangor.

26 FEBRUARY Public Bank Southern Region II Regional Office held its Chinese 27 JANUARY New Year gathering at The Pines Hotel, Melaka to foster and enhance The Public Bank Group Sports Club esprit de corp amongst its Sales & held a ‘Talent Quest 2018’ singing Marketing Executives. competition to give opportunities to staff in the Group to showcase their talent. 3 MARCH With increasing foreign direct 1 FEBRUARY investments from the People’s Republic of China in Cambodia, Cambodian Public Bank launched the Cambodian Public Bank organised a Customer Care Campaign weekly ‘Basic Chinese Conversation Phase 3 to promote customer Classes’ for all staff to be service excellence amongst its staff. conversant in the Chinese language.

10 MARCH 2 FEBRUARY

Top performing branches in the Public The first group of 98 Financial Bank Group were recognised at the Executives who qualified for the annual Branch Performance Award annual ‘Incentive Trip Challenge presentation ceremony. Taman Desa 2017’ enjoyed an 8-day trip to Finland, one of the two incentive Cemerlang Branch won the best holiday destinations under the overall branch for 2017 and received 2017 Challenge. the Founder & Chairman trophy. 238 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

12 MARCH 5 APRIL

The Sports and Recreation Club Public Bank Vietnam’s management Public Bank Sri Lanka organised a staff attended a two-day team two-day Carom Tournament building training at Genting for its staff. Highlands, Pahang.

26 MAY

The winners of the Public Bank (Hong Kong) AIA Circle of Excellence Award 24 MARCH 2017 and the Million Dollar Round Table Award 2017 enjoyed a two-day Cambodian Public Bank’s top staff 1 MAY incentive trip to Macau and attended performers in life insurance policies the PBHK-AIA Macau Business were recognised at the ‘CAMPU-AIA Conference 2018. Appreciation Night’ jointly organised The second group of 128 Financial by Cambodian Public Bank and AIA Executives who qualified for the (Cambodia) Life Insurance Plc. annual ‘Incentive Trip Challenge 2017’ headed for Perth, Australia, one of the 8 JUNE two incentive destinations under the 24 MARCH 2017 Challenge.

Public Bank Central Region Public Bank (Hong Kong) held participated in an Inter-Bank Bowling its annual dinner 2018 at the Tournament organised by the Kowloon Bay International Association of Banks in Malaysia Trade & Exhibition Centre. (Perak Branch).

28 MARCH

30 JUNE The top bancassurance sales 12 MAY performers and branches from Public Bank (Hong Kong) were recognised for their contribution in achieving Public Bank Vietnam Danang Branch Public Bank Southern Region II the 2017 Circle of Excellence Award emerged as the champion in a tennis held its annual gathering for its and the Million Dollars Round Table competition organised by the State Sales & Marketing Executives and Award at a Sales Rally held at the Bank of Vietnam held at the Danang Financial Executives to boost and AIA Central Tower. Complex Sports Area. instil team spirit. THE WAY FORWARD 239

22 SEPTEMBER

14 JULY The Public Bank Group Sports Club held a bowling tournament A badminton tournament was at Wangsa Bowl, IOI City Mall, organised by the Public Bank Central Putrajaya. Region for the Perak Region Branch staff which was held at the Master Badminton Club, Ipoh, Perak.

4 AUGUST

Public Bank celebrated its 52nd Anniversary Banquet with the theme ‘Cultural Splendour’ which was held at the MINES International Exhibition and Convention Centre, Selangor.

11 AUGUST

Cambodian Public Bank, Campu Lonpac Insurance and Campu Securities held its 26th Anniversary Dinner at Sokha Phnom Penh Hotel, Phnom Penh.

18 AUGUST

The Public Bank Sri Lanka Operations Sports 27 OCTOBER and Recreation Club organised its Annual Inter-Branch Six-A-Side Cricket Tournament Public Bank Wilayah Persekutuan/Selangor Regions held it 52nd Country Head’s Challenge Trophy 2018. Anniversary Dinner at the MINES International Exhibition and Convention Centre, Selangor. 31 AUGUST

In conjunction with Malaysia’s 61st National 8 DECEMBER Day, Public Bank’s staff joined 12,000 other participants in the National Day Parade The Public Bank Group Sports Club organised a badminton tournament which was held in Putrajaya. at Uptown Sports, Bandar Baru Bangi, Selangor. 240 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

PRODUCTS AND SERVICES

1 JANUARY 28 FEBRUARY

Public Bank launched the ‘PB Golden Fortune Campaign’ with two plans Public Bank launched a new Islamic namely, the PB Golden Plan and PB unit trust fund, the PB Islamic Fortune Plan. The ‘Auspicious Double Dynamic Allocation Fund under the Crane’ and ‘Scroll of the Golden Koi’ PB Series of Unit Trust Funds were gift items offered during the managed by Public Mutual. promotional period. 21 MAY Public Bank commenced the distribution of PB WealthElite, a regular premium investment-linked insurance plan underwritten by AIA Bhd.

27 MAY

11 JANUARY The grand winner of the joint Cambodian Public Bank and AIA (Cambodia) Life Insurance ‘Kid Public Bank and Lonpac Insurance Colouring Contest – Junior Art Talent’ Berhad jointly held a briefing and received her prize of a trip to Sunway dialogue session with the Malaysia 4 MARCH Lagoon, Malaysia. The one-month My Second Home (“MM2H”) contest was organised to promote the Authorised Agents at Menara Public BrightStar Children savings account Bank, Kuala Lumpur to promote the Campu Securities participated and and the AIA bancassurance products. Bank’s products and services as well co-sponsored the ‘My First Stock as Lonpac’s medical insurance to the 2018’ exhibition organised by the MM2H participants. Cambodia Securities Exchange.

3 APRIL 19 JANUARY 1 JUNE Public Bank commenced the distribution and sales of the Public In conjunction with the International Public Mutual launched the Public e-Islamic Flexi Allocation Fund Children’s Day, a roadshow was held India-Global Equity Fund, the first aimed at achieving capital growth by Public Bank Vietnam Ho Chi Minh unit trust fund to invest in the over the medium- to long-term Branch to promote the BrightStar global markets focusing on India. investment in Syariah-compliant Savings Account at Nowzone equities or sukuk. Shopping Centre, . THE WAY FORWARD 241

6 JUNE 4 OCTOBER

Public Bank Vietnam Northern Sales Public Bank and Mastercard Team participated in the Vietnam jointly arranged an exclusive AutoExpo 2018 which was held at movie screening and cinematic the National Convention Centre, dining experience at the Hanoi to promote the Bank’s INDULGE, TGV Cinema, Sunway products and services. Velocity Mall, Kuala Lumpur for valued Public Bank Mastercard Cardmembers. 13 JUNE

A SME Financing Roadshow was 13 NOVEMBER organised by the Public Bank Central Region at Syuen Hotel, Ipoh, Perak to create awareness of the various financial solutions available to small A new fund, the and medium enterprises. Public U.S. Equity Fund was launched by 21 JUNE 9 AUGUST Public Mutual to capitalise on the Public Mutual launched the Public U.S. equity Islamic ASEAN Growth Fund which market. will invest up to 98% of its net asset Public Bank and Public Islamic value in a portfolio of Syariah- Bank participated in the Malaysia Compliant investments primarily in My Second Home (“MM2H”) National the ASEAN markets. Workshop organised by the MM2H Agents Association which was held at the Ministry of Tourism, 26 JULY Arts and Culture Malaysia, to promote the Banks’ Public Mutual launched the PB products and services. Asia-30 Equity Fund which seeks to achieve capital appreciation over the medium- to long-term by investing mainly in blue chip stocks, index 7 DECEMBER stocks and growth stocks. 26 AUGUST

Public Bank launched its new premier 26 JULY Cambodian Public Bank banking programme, the Red Carpet organised the ‘Campu BrightStar Banking (“RCB”) Exclusives together Public Bank and Visa International Hidden Talent Colouring Contest’ with two new RCB Mastercard Premier organised a Public Bank Visa Infinite to promote the BrightStar Debit Cards – the RCB Elite Debit Golf Tournament 2018 at the Kota savings account and to Card and the RCB Gold Debit Card - Permai Golf & Country Club, inculcate savings habit to further grow its high-net-worth Selangor exclusively for valued Visa amongst children. customer base. Credit Cardmembers. 242 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

AWARDS AND ACCOLADES

16 JANUARY 8 FEBRUARY

Public Bank Vietnam Danang Branch was awarded the Certificate of Merit by the State Bank of Vietnam for Public Bank was accorded the Corporate Social Security and inaugural The BrandLaureate SMEs Non-Performing Loan Strategic Business Partner Award Settlement 2017. 2017-2018 by the Asia Pacific Brands Foundation.

1 MARCH

Public Bank received the Best Tax Payer Award 2017 organised by the Inland Revenue Board of Malaysia.

20 JANUARY

Tan Sri Dato’ Sri Dr. Teh Hong Piow, Founder and Chairman of Public Bank received the Asian Corporate Director Recognition Award 2017 10 MARCH for Malaysia for the eighth consecutive year. Public Bank was Founder and Chairman, Tan Sri conferred the Corporate Governance Dato’ Sri Dr. Teh Hong Piow was Asia Recognition Award 2017 named The Greatest Malaysian for Malaysia (Icon on Corporate Banker of All Time by the Asia Governance) for the Pacific Brands Foundation. 13th consecutive year by Corporate Governance Asia.

7 FEBRUARY

Public Bank was awarded the 2018 Frost & Sullivan Malaysia Excellence 23 MARCH Award in Customer Experience for Public Mutual won two awards at the 2018 Asia Asset Management Online Experience in Retail Banking Awards namely, the Malaysia Islamic Retail House of the Year and the by Frost & Sullivan. Malaysia Best Retail House. THE WAY FORWARD 243

11 APRIL 3 MAY

Public Bank bagged five awards at the Malaysian e-Payments The Asia Pacific Brands Excellence Awards 2018 organised Foundation presented the by Payments Network Malaysia inaugural The BrandLaureate (PayNet) for the Best IBG Bank, BESTBRANDS Award Most Iconic Best MyDebit Bank, Outstanding 26 MARCH Brand - Banking Award 2017- Contributions to FPX, Outstanding 2018 to Public Bank and The Contribution to MyDebit and Public Mutual clinched 14 awards BrandLaureate BESTBRANDS MyDebit Top Acquirer. at the Edge I Thomson Reuters Award 2017-2018 for Brand of Lipper Malaysia Fund Awards 2018 the Year Award for Financial and for Best Overall Group Award - Wealth Planning - Unit Trust to Malaysia Provident Funds, Public Public Mutual. Far-East Alpha-30 Fund, Public Islamic Asia Leaders Equity Fund, PB China ASEAN Equity Fund, Public Islamic Asia Strategic Sector Fund for 3 years, Public Far-East Balanced Fund, Public Tactical Allocation Fund, Public Bond Fund, PB China Pacific Equity Fund, PB China ASEAN Equity Fund, Public Islamic Asia Equity Fund for 5 years, Public Dividend Select Fund, 17 APRIL Public Global Select Fund and Public Bond Fund for 10 years. The Bank of America Merrill Lynch presented Public Bank with the 15 MAY Straight-Through Processing Award for achieving outstanding Straight- Through Processing rate in the Cambodian Public Bank was awarded commercial, trade and treasury the USD 2017 Straight-Through- payment transactions in 2017. Processing Excellence Award by the Bank of America Merrill Lynch. 6 APRIL 30 APRIL Cambodian Public Bank received 7 JUNE five awards from Visa International Public Mutual was awarded the for Leadership in Merchant Sales Thomson Reuters Lipper Global Volume, Leadership in Payment Islamic Fund Awards 2018 for Public Australia and New Zealand Banking Volume, Leadership in Credit Islamic Asia Leaders Equity Fund – Group Ltd presented Public Bank Payment Volume, Leadership for Best Fund Over 3 Years, Equity Asia with the Straight-Through Processing Average Spend Visa Affluent Credit Pacific Ex Japan category. Excellence Award 2018. and Champion Security Award. 244 2018 ANNUAL REPORT PUBLIC BANK BERHAD CALENDAR OF SIGNIFICANT EVENTS 2018

8 JUNE 12 JULY 20 SEPTEMBER

The Chulalongkorn Business Founder and Chairman, Tan Sri Dato’ Cambodian Public Bank was awarded School, Chulalongkorn University, Sri Dr. Teh Hong Piow was again the Best Retail Bank in Cambodia Thailand and the Stock Exchange recognised as Asia’s Best CEO 2017 by the Asian Banking & Finance (Investor Relations) 2018 for of Thailand honoured Public Bank magazine for the second time. Malaysia for the eighth consecutive with the ASEAN’s Top Corporate year. Public Bank was recognised as Brand Value 2018 in Malaysia for the Best Investor Relations Company having the highest corporate for Malaysia also for eight 18 JULY brand value in Bursa Malaysia. consecutive years by Corporate Public Bank won the Malaysia’s Best Governance Asia in the Corporate Bank Award 2018 by the Euromoney 26 SEPTEMBER Governance Asia’s 8th Asian magazine for the 14th time. Excellence Recognition Awards 2018. Public Bank was awarded The BrandLaureate Prominent Business 29 AUGUST BestBrands Awards 2018 in Banking & Finance and Public Mutual was Public Bank maintained the awarded The BrandLaureate Prominent outstanding straight-through Business BestBrands Awards 2018 for processing rates in payment transfer Best Choice Brand in Financial & operations in 2017 and was Wealth Planning - Unit Trust by the recognised with the MT103 and Asia Pacific Brands Foundation. MT202 Elite Quality Recognition Award by J.P. Morgan Chase Bank 26 SEPTEMBER for the 16th consecutive year. The Bank of New York Mellon presented Public Bank with the 4 JULY Straight-Through Processing Award 2017 for the 8th consecutive year. Public Bank was presented the Reader’s Digest Trusted Brands Gold Award 2018 in the Bank category in Malaysia for the 15th consecutive year whilst Public Mutual was awarded the Reader’s Digest Trusted Brands Platinum Award 2018 for the Investment Fund Company category in Malaysia for the ninth 27 SEPTEMBER consecutive year. The Asia Pacific Brands Foundation 18 SEPTEMBER awarded Public Islamic Bank with The BrandLaureate World Halal 10 JULY Public Bank received two awards, BestBrands Awards 2018 for namely the Best Bank in Malaysia for BestBrands in Islamic Banking and Public Mutual was accorded The th the 12 consecutive year and the Public Mutual with The BrandLaureate Asset Triple A Islamic Finance Awards inaugural Best Retail Bank in the World Halal BestBrands Awards 2018 2018 for the Islamic Asset Manager Alpha Southeast Asia Best Financial for BestBrands in Islamic Fund (Public of the Year – Malaysia (Retail). Institution Awards 2018. Islamic Asia Leaders Equity Fund). THE WAY FORWARD 245

6 DECEMBER 20 NOVEMBER

Founder and Chairman, The Public Bank 2017 Annual Report Tan Sri Dato’ Sri Dr. was acknowledged with a Silver award Teh Hong Piow was for Best Annual Report in Bahasa conferred the Grand Malaysia at the National Annual Prix D’Excellence Brand Corporate Report Awards 2018 Leadership Award in (“NACRA”) presentation ceremony. Banking and Public Bank Vietnam was 11 DECEMBER accorded the Premier Corporate Brands – Public Bank was the Banking Solution recipient of the The Edge Award by the Asia 16 OCTOBER Billion Ringgit Club Pacific Brands Corporate Awards 2018 Foundation at the BrandLaureate Founder and Chairman, Tan Sri for Highest Return on Special Edition World Awards 2018 Dato’ Sri Dr. Teh Hong Piow was Equity Over Three Years held in Hanoi, Vietnam. honoured with The BrandLaureate in the Financial Services Hall of Fame - Lifetime Sector for the category Achievement Award 2018 - Man 26 NOVEMBER of RM10 Billion and of the Year and Public Bank was above market the recipient of The BrandLaureate The Asia Pacific Brands capitalisation. Brand of the Year Award 2018 in Foundation presented The Banking by the Asia Pacific BrandLaureate Industry Champion Brands Foundation. Brand Icon Leadership Award 20 DECEMBER 2018 to Public Bank. Founder and Chairman, 23 OCTOBER Tan Sri Dato’ Sri Dr. Teh 29 NOVEMBER Hong Piow’s sterling leadership was The Asian Banker accorded Public Public Bank received the 2017 EUR recognised with The Bank with The Strongest Bank by Operational Excellence Award for Best of Best Brand Balance Sheet in Malaysia 2018 for achieving best-in-class straight- Leadership Award 2018 the fifth time. through processing rates in payment – Overall Championship transfer operations from Deutsche whislt Public Bank was Bank for the 8th consecutive year. the recipient of the The BrandLaureate 26 OCTOBER CSR BrandLeadership Awards 2018 – 29 NOVEMBER Leadership in CSR by the Asia Pacific Brands Foundation. Public Bank won the Silver award at the Putra Brand Awards 2018 for the category of Banking, Investment Cambodia Public Bank 28 DECEMBER & Insurance by the Association of was declared the Bank Cambodia Public Bank was named Accredited Advertising of the Year 2018 by the Best Domestic Bank and the Agents Malaysia. The Banker of London. Best Bank for SMEs by Asiamoney. 246 2018 ANNUAL REPORT PUBLIC BANK BERHAD BURSA MALAYSIA LISTING REQUIREMENTS COMPLIANCE INFORMATION

The information set out below is disclosed in compliance with (ii) Audit and Non-audit Fees the Listing Requirements of Bursa Malaysia Securities Berhad The amount of audit fees paid to external auditors by the (“Bursa Malaysia”): Group and by the Bank for the financial year ended 31 December 2018 amounted to RM6,735,000 and (i) Utilisation of Proceeds Raised from Corporate Proposals RM3,395,000 respectively. During the year, the following issuances were made by the Public Bank Group: The amount of non-audit fees paid to external auditors or a firm or corporation affiliated to the external auditors by (a) On 9 April 2018, Public Bank issued RM1.8 billion the Group and by the Bank for the financial year ended Senior Medium Term Notes under its RM20.0 billion 31 December 2018 amounted to RM1,007,000 and Senior Medium Term Notes Programme. RM490,000 respectively.

(b) On 26 June 2018, Public Bank issued the first Disclosed in accordance with Appendix 9C, Part A, item 18 tranche of RM100.0 million Basel III Compliant of the Listing Requirements of Bursa Malaysia. Additional Tier 1 Capital Securities (“AT1CS”) under its inaugural RM10.0 billion Basel III Compliant (iii) Material Contracts AT1CS Programme which was established on There were no material contracts entered into by Public 7 March 2018. Bank and its subsidiary companies involving the interests of directors or major shareholders, which subsisted at the (c) On 27 July 2018, Public Islamic Bank Berhad issued end of the financial year ended 31 December 2018 or, if RM520 million Senior Sukuk Murabahah under its not then subsisting, entered into since the end of the RM5.0 billion Sukuk Murabahah Programme. previous financial year.

(d) On 29 October 2018, Public Bank issued RM1.0 billion Disclosed in accordance with Appendix 9C, Part A, item 21 Subordinated Notes under its RM10.0 billion of the Listing Requirements of Bursa Malaysia. Subordinated Medium Term Notes Programme. (iv) Recurrent Related Party Transaction of a Revenue or The salient features of the Senior Medium Term Notes Programme, Basel III Compliant AT1CS Programme, Senior Trading Nature Sukuk Murabahah Programme and Subordinated Medium Public Bank did not seek any mandate from its shareholders Term Notes Programme are as disclosed in Note 27 to the as required under Paragraph 10.09(2)(b), Part E of Chapter financial statements. The proceeds raised from the Senior 10 of the Listing Requirements of Bursa Malaysia as the Medium Term Notes, Basel III Compliant AT1CS, Senior recurrent related party transactions of a revenue or Sukuk Murabahah and Subordinated Notes have been trading nature entered into by the Public Bank Group used for working capital, general banking and other qualified as exempted transactions as defined under corporate purposes. Paragraph 10.08(11)(e), Part E of Chapter 10 of the Listing Requirements of Bursa Malaysia. The proceeds raised from corporate proposals in prior years have been used for working capital, general banking Disclosed in accordance with Paragraph 10.09(2)(b) of the and other corporate purposes, as intended. Listing Requirements of Bursa Malaysia.

Disclosed in accordance with Appendix 9C, Part A, item 13 of the Listing Requirements of Bursa Malaysia. THE WAY FORWARD 247 MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

I. GLOBAL PERSPECTIVE summer of 2019. The ECB extended the quantitative easing (“QE”) programme through the end of 2018, while The global economy grew modestly in 2018, after the monthly purchase was reduced to EUR15 billion a registering a strong growth in 2017. The expansion month for October to December 2018, from EUR30 continued, albeit the increased divergence across billion a month in January to September 2018. In the UK, economies. In the advanced economies, labour markets the Bank of England raised its Bank Rate by 25 bps to remained supportive of private consumption as 0.50% – 0.75% in August 2018. Meanwhile, the Bank of unemployment rates declined amid a steady increase in Japan (“BOJ”) kept its key policy rate unchanged at -0.10% wage growth. Elsewhere, growth in Asia slowed, mainly since January 2016 and maintained its purchases of 10- due to the slowdown in China. Domestic demand in other year government bonds at an annual pace of JPY80 trillion parts of Asia remained stable, supported by policy to ensure that yields remain around 0%. accommodation. Domestic demand in Asia remained resilient, partly aided Among advanced economies, the United States (“US”) by ongoing policy support and higher infrastructure grew in 2018 as the labour market continued to strengthen spending. Nevertheless, regional growth and exports while economic activity rose steadily and household trended lower as China slowed amid gradual economic spending grew. On the other hand, economic activity in restructuring. the euro area registered a broad-based expansion, supported by domestic demand. In the United Kingdom (“UK”), growth moderated due to uncertainties arising from the UK’s exit from the European Union (“Brexit”). In II. MALAYSIAN ECONOMY: REVIEW Japan, the economy expanded moderately amid income The Malaysian economy registered a moderate growth of growth. 4.7% year-on-year (“y-o-y”) in 2018 (2017: 5.9%). Private sector activity led growth supported by household In 2018, the US and other advanced economies continued spending but was offset by lower public sector spending. to normalise monetary policies. In the US, the Federal On the supply side, mining and quarrying as well as Reserve (“Fed”) lifted the federal funds rate by 25 basis agriculture sectors had contracted. points (“bps”) during the policy meetings in March, June, September and December 2018, respectively. Policy rate In the fourth quarter of 2018, the Malaysian economy was 2.25% - 2.50% by the end of the year. In addition, grew by 4.7% y-o-y, supported by improvement in net the Fed continued to unwind its balance sheet by gradually exports (Table 1). Exports of goods and services grew, reducing its existing asset purchase programme of following a contraction in the third quarter. Private reinvesting principle payment from securities held in the consumption remained strong despite the frontloading System Open Market Account effective October 2017. purchases in the previous quarter.

In the euro area, the European Central Bank (“ECB”) maintained its main refinancing rate at 0% and deposit rate at -0.4% throughout the year and expects key interest rates to remain at present levels at least through the 248 2018 ANNUAL REPORT PUBLIC BANK BERHAD MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Table 1 Malaysia: GDP by Expenditure Components, 2017 – 2018 (at constant 2010 prices)

% Annual Change

2018

2017 2018 1Q 2Q 3Q 4Q

Aggregate Domestic Demand 6.5 5.6 4.1 5.6 6.9 5.6 Private Sector 7.5 7.2 5.2 7.5 8.5 7.7 Consumption 7.0 8.1 6.9 8.0 9.0 8.5 Investment 9.3 4.5 0.5 6.1 6.9 4.4 Public Sector 3.3 0.1 -0.1 -1.4 1.1 0.4 Consumption 5.4 3.3 0.4 3.1 5.2 4.0 Investment 0.1 -5.2 -1.0 -9.8 -5.5 -4.9 Net Exports -1.9 13.4 62.4 1.7 -7.5 9.9 Exports of Goods and Services 9.4 1.5 3.7 2.0 -0.8 1.3 Imports of Goods and Services 10.9 0.1 -2.0 2.1 0.1 0.2

GDP 5.9 4.7 5.4 4.5 4.4 4.7

Source: Department of Statistics, Malaysia, Gross Domestic Product, various issues.

On the supply side, growth in the commodity-related sectors had improved in the fourth quarter of 2018 (Table 2). The mining sector grew, buoyed by the recovery in production of oil and natural gas. Services sector was largely supported by the wholesale and retail trade sub-sectors. Manufacturing sector was driven by electrical and electronics as well as transport- related productions. Meanwhile, slower growth in the construction sector was due to softer activities in the civil engineering and special trade subsectors. The agriculture sector had declined, albeit at a softer pace. Palm oil harvesting and rubber tapping activities continued to be affected by the adverse weather conditions.

Table 2 Malaysia: GDP by Economic Activity, 2017 – 2018 (at constant 2010 prices)

% Annual Change

2018

2017 2018 1Q 2Q 3Q 4Q

Services 6.2 6.8 6.5 6.5 7.2 6.9 Manufacturing 6.0 5.0 5.3 4.9 5.0 4.7 Mining & Quarrying 1.0 -1.5 0.1 -2.2 -4.6 0.5 Agriculture 7.2 -0.4 2.8 -2.5 -1.4 -0.4 Construction 6.7 4.2 4.9 4.7 4.6 2.6

GDP 5.9 4.7 5.4 4.5 4.4 4.7

Source: Department of Statistics, Malaysia, Gross Domestic Product, various issues. THE WAY FORWARD 249 MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

In 2018, headline inflation registered 1.0%, compared to Banking System 3.7% in 2017. Mainly, the index of transport slowed The domestic financial system remains stable and broadly drastically amid stable domestic fuel prices (Graph 1). The intact, although financial market is susceptible to external labour market has been operating under full employment development, including geopolitical and trade tensions. for the last two decades, with the unemployment rate The industry maintained strong capital position, which is hovering below 4%. In 2018, the unemployment rate was well above the Basel III minimum regulatory levels. As at 3.3%, compared to 3.4% in 2017 (Graph 2). end-December 2018, the industry’s common equity tier 1 (“CET1”), tier 1 and total capital ratios remained healthy Graph 1 at 13.1%, 13.9% and 17.4%, respectively (Graph 3). Gross Malaysia: Headline Inflation, 2018 impaired loans ratio remained broadly stable throughout the year (Graph 4), while loan to fund ratio stood at . 82.7% (Graph 5). . . Graph 3 Banking System: Capital Strength, 2018 .

. 

change , y-o-y .  .  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec  Source: Department of Statistics, Malaysia, Consumer Price Index,  various issues.  Graph 2  Malaysia: Unemployment Rate, 2018 .  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

. Common Equity Tier Total . Tier Captital Ratio Capital Ratio Capital Ratio

Source: Bank Negara Malaysia, Monthly Statistical Bulletin, . of labour force December 2018.

. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Department of Statistics, Malaysia, Labour Force Statistics, various issues. 250 2018 ANNUAL REPORT PUBLIC BANK BERHAD MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Graph 4 Graph 6 Banking System: Gross Impaired Loans Ratio, 2018 Banking System: Loans Growth, 2018

. 

 . 

. 

. 

change , y-o-y  . Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 

Source: Bank Negara Malaysia, Monthly Statistical Bulletin, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec December 2018.

Graph 5 Total Households Businesses Banking System: Loan to Fund Ratio, 2018 Source: Bank Negara Malaysia, Monthly Statistical Bulletin, . December 2018.

. Graph 7 . Banking System: Deposits Growth, 2018

.

. . . . . . . Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec . . Source: Bank Negara Malaysia, Monthly Statistical Bulletin, December 2018. .

change , y-o-y . In 2018, lending activities improved, partly due to the tax holiday of zero-rated goods and services tax (“GST”) from . June to August 2018. Total outstanding loans in the . banking system rose by 5.6% y-o-y, underpinned by . lending to households and businesses (Graph 6). Similarly, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec total deposits in the banking system grew by 7.5% y-o-y, supported by the annual increase in deposits by all holders Source: Bank Negara Malaysia, Monthly Statistical Bulletin, except State Government (Graph 7). December 2018. THE WAY FORWARD 251 MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Monetary Policy Graph 9 The monetary policy remained supportive of growth in a Banking System: Deposit Rates of Commercial Banks, 2018 stable price environment. On 25 January 2018, the . Overnight Policy Rate (“OPR”) was raised by 25 basis points to 3.25% and was kept unchanged throughout the . year. As a result, interest rates in the banking system rose . in tandem with the OPR hike in January 2018. As at end- . December 2018, the base lending rate stood at 6.91%, . average lending rate was 5.02% and weighted base rate stood at 3.91% (Graph 8). Similarly, interest rate of saving . deposits of commercial banks increased to 1.07% and the . 3-month fixed deposits rate rose to 3.15% (Graph 9). . Meanwhile, the Statutory Reserve Requirement remained . steady at 3.50% since 2016. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Graph 8 -mth Fixed Deposits Saving Deposits Banking System: Lending Rates of Commercial Banks, 2018 Source: Bank Negara Malaysia, Monthly Statistical Bulletin, December 2018. .

. Fiscal Policy

. In 2018, the Government had fine-tuned its fiscal policy due to the narrow revenue base, additional provision for . off-budget items and tax refunds. As a result, the budget deficit stood at 3.7% of GDP in 2018, from 3.0% in 2017 . (Graph 10), as the Government addressed short-term adjustments in tandem with its policy direction. Also, the . Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Federal Government debt, which stood at 51.8% of GDP as at end-2018, remained below the Government’s self- Average Base Weighted imposed threshold of 55% of GDP. Lending Rate Lending Rate Base Rate Graph 10 Source: Bank Negara Malaysia, Monthly Statistical Bulletin, Malaysia: Federal Government Fiscal Balance, 2016 – 2018 December 2018.    

-

-  of GDP -. -. - -.

-

Sources: Ministry of Finance, Malaysia Fiscal Outlook 2019 and Bank Negara Malaysia, Quarterly Bulletin, Fourth Quarter 2018. 252 2018 ANNUAL REPORT PUBLIC BANK BERHAD MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Monetary Aggregates Monetary aggregates remained stable in 2018. In December 2018, narrow money (or “M1”) slowed to 1.1% y-o-y amid moderation in both currency in circulation and demand deposits. Broad money (“M3”) rose by 8.0% y-o-y, amid higher credit extended to the private sector, net claims on Government and net foreign assets (Graph 11).

Graph 11 Malaysia: Monetary Aggregates, 2018









 change, y-o-y



Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

M M

Source: Bank Negara Malaysia, Monthly Statistical Bulletin, December 2018.

External Position Malaysia’s current account surplus narrowed in 2018, as surplus in the goods account was offset by deficits in the services and income accounts. Current account surplus narrowed to RM33.5 billion or 2.4% of gross national income, compared to RM40.3 billion in 2017 (Table 3). Malaysia’s international reserves stood at USD101.4 billion as at end-December 2018 (Graph 12), which is sufficient to finance 7.4 months of retained imports and 1.0 time the short-term external debt.

Table 3 Malaysia: Current Account Balance, 2017 – 2018

2018

2017 2018 1Q 2Q 3Q 4Q

Current Account Balance (RM billion) 40.3 33.5 15.0 3.9 3.8 10.8 % of Gross National Income 3.1 2.4 4.5 1.2 1.1 3.0

Source: Bank Negara Malaysia, Quarterly Bulletin, various issues. THE WAY FORWARD 253 MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Graph 12 Table 4 Malaysia: International Reserves, 2018 Malaysia: Performance of Ringgit, 2018

 End-period % change* RM/Foreign  Currency 2017 2018 2018/2017

 AUD 3.1607 2.9227 7.53

 GBP 5.4666 5.2672 3.65 100 IDR 0.0298 0.0288 3.36  USD billion CNY 0.6216 0.6013 3.27  100 PHP 8.1183 7.8766 2.98

 EUR 4.8440 4.7279 2.40 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 100 KRW 0.3798 0.3714 2.21

Source: Bank Negara Malaysia, Press Statements on International SGD 3.0293 3.0355 -0.20 Reserves. USD 4.0475 4.1360 -2.19 100 THB 12.4156 12.6930 -2.23 Malaysia’s total external debt stood at RM924.9 billion, which is equivalent to USD221.0 billion or 64.7% of GDP 100 JPY 3.5954 3.7569 -4.49 as at end-December 2018 (end-December 2017: 65.4% of Note: * Positive territory indicates appreciation of the ringgit against GDP). Risks to Malaysia’s external debt (including short- foreign currencies and negative territory indicates term external debt) remained manageable anchored by a depreciation. favourable external debt profile and borrowers’ resilient Source: Bank Negara Malaysia, website. repayment capacity.

Ringgit Exchange Rate III. PROSPECTS, 2019 As at end-2018, the Malaysian ringgit fell against the US dollar (“USD”) along with other regional currencies, as Global Economy: Moderation of growth investors turned to safe haven currencies (Table 4). The Global economic conditions are expected to moderate in ringgit closed at 4.1360 against the USD, which is a 2019, with varying pace of growth across countries. depreciation of 2.2% compared to end-2017. External Downside risk to the global economy intensifies with factors had affected the ringgit, among which include the geopolitical uncertainties as a primary concern. In faster pace of monetary policy normalisation in the US, particular, the trade tension poses challenges for export global trade tension and lower-than-expected commodity related businesses and global trades. Also, financial market prices. adjustments and further capital outflows in emerging economies are expected to continue, owing to the monetary policy normalisation in the advanced economies. 254 2018 ANNUAL REPORT PUBLIC BANK BERHAD MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

The US economy is expected to be supported by domestic On the supply side, growth is expected to be driven growth. Stable labour market, wage growth and robust mainly by the services and manufacturing sectors business sentiment should fuel consumption and (Table 6). Among the various sectors that are expected to investments in the US. However, trade protectionism and spur growth are tourism, information and communication significant policy uncertainty pose downside risks to the technology, transport and finance. Manufacturing sector is economy. projected to remain steady, in line with developments in the global semiconductor industry. The agriculture and Economic prospects in the euro area is expected to mining sectors are expected to recover, driven by slow down. Uncertainty surrounding Brexit negotiations production of crude palm oil (“CPO”) and liquefied natural and heavy exposure of major European banks in Turkey gas (“LNG”). Growth in the construction sector is expected could weigh on growth. to be partly supported by the development of affordable housing, which could partially offset the drag due to the In Japan, while the impending consumption tax hike and review of several infrastructure projects. rising trade tensions may temper growth, a modest expansion is expected for 2019 supported by favourable Underlying inflation is expected to remain contained in labour market and accommodative policies. 2019 in the absence of strong demand pressure while cost pressure stays subdued. Growth in Asia is projected to remain steady in 2019, albeit at a more moderate pace. Strong domestic demand In addressing the country’s fiscal concerns, the Government will continue to drive growth, but is likely to be offset by is expected to be proactive in its fiscal reform initiatives. slowing exports amid trade tensions and moderate growth Reflecting its firm commitment towards strengthening in China. Despite policy support, growth in China is public finance, the Government will resume its fiscal expected to slow gradually owing to the economic consolidation plan in 2019. Fiscal deficit is expected to be rebalancing. 3.4% of GDP in 2019 (2018: -3.7% of GDP).

As for monetary policies, the US is likely to pause interest Monetary policy is expected to remain accommodative and rate hikes amid financial market and economic supportive of economic growth while ensuring price uncertainties, while policies in the euro area and Japan are stability. Considerations for adjustments will depend on likely to remain accommodative. In Asia, vigilant policies risks surrounding the outlook of domestic growth and among central banks are expected to be supportive of inflation. Also, the domestic financial system is supported growth in a stable price environment. by a deep and liquid financial market as well as sound financial institutions. Credit intermediation will continue to Malaysia: Challenging environment be underpinned by healthy funding profile of banks and sustained liquidity surplus in the banking system. The Malaysian economy is expected to be driven by sustained private sector activity in 2019 (Table 5). Stable That said, risks are tilted to the downside due to employment outlook, implementation of higher minimum heightened global uncertainties including trade conflict, wages and accommodative financing condition will volatility in global financial markets, oil price fluctuations continue to support private consumption. Private and geopolitical tensions. Regional currencies will continue investment is projected to expand with capital outlays to be influenced by external developments and trajectory mainly channelled into technology-intensive manufacturing of the US dollar. Meanwhile, the trend of the ringgit will and services sectors, owing to digitalisation in tandem continue to reflect the underlying economic fundamentals. with Industry 4.0. Public sector spending, however, is expected to weigh on growth with the Government’s expenditure reprioritisation and fiscal recalibration. THE WAY FORWARD 255 MALAYSIAN ECONOMY: REVIEW AND OUTLOOK

Table 5 Malaysia: GDP by Expenditure Components, 2017 – 2019f (at constant 2010 prices)

% Annual Change

2017 2018 2019f

Aggregate Domestic Demand 6.5 5.6 4.8 Private Sector 7.5 7.2 6.4 Consumption 7.0 8.1 6.8 Investment 9.3 4.5 5.0 Public Sector 3.3 0.1 -0.9 Consumption 5.4 3.3 1.8 Investment 0.1 -5.2 -5.4 Net Exports -1.9 13.4 0.7 Exports of Goods and Services 9.4 1.5 1.6 Imports of Goods and Services 10.9 0.1 1.8

GDP 5.9 4.7 4.9

Note : f Forecast. Sources : Ministry of Finance Malaysia, Economic Outlook 2019 and Department of Statistics, Malaysia, Gross Domestic Product, Fourth Quarter 2018.

Table 6 Malaysia: GDP by Economic Activity, 2017 – 2019f (at constant 2010 prices)

% Annual Change

2017 2018 2019f

Services 6.2 6.8 5.9 Manufacturing 6.0 5.0 4.7 Mining & Quarrying 1.0 -1.5 0.7 Agriculture 7.2 -0.4 3.1 Construction 6.7 4.2 4.7

GDP 5.9 4.7 4.9

Note : f Forecast. Sources : Ministry of Finance Malaysia, Economic Outlook 2019 and Department of Statistics, Malaysia, Gross Domestic Product, Fourth Quarter 2018.

256 2018 ANNUAL REPORT PUBLIC BANK BERHAD INVESTOR INFORMATION

STOCK MARKET PERFORMANCE IN 2018 • The FBM KLCI rebounded in the third quarter of 2018, increasing by 6.0% to close at 1,793.15 points. This was due • During the first quarter of 2018, the FTSE Bursa Malaysia to bargain-hunting by domestic institutional and retail Composite Index (“FBM KLCI”) gradually ascended for most investors, driven by positive domestic sentiment despite the part of the quarter, to close 3.7% higher at 1,863.46 points. announcement of a weaker GDP growth of 4.5% in the The domestic equity market experienced strong buying second quarter of 2018. However, investor sentiment activities underpinned by higher participation from foreign continued to be affected by lingering downside risks, resulting institutional investors. Bank Negara Malaysia announced a in continued foreign-led selling during the period. In pre-emptive hike of the Overnight Policy Rate by 25 basis September 2018, the US Fed hiked interest rate by another points (“bps”) in January 2018. In March 2018, the US 25bps. Federal Reserve (“US Fed”) raised interest rate by 25 bps. The announcement of Malaysia’s Gross Domestic Product • The FBM KLCI declined by 5.7% during the fourth quarter of (“GDP”) for the fourth quarter of 2017 of 5.9% further 2018, as the escalation of trade-related tension between the strengthened the positive sentiment. US and China as well as the slump in prices of commodities (i.e. crude palm oil and crude oil) dampened investor • However, market conditions changed in the second quarter sentiment. The announcement of a slower third quarter GDP of the year due to a confluence of external and domestic growth of 4.4% coupled with the government’s constrained factors. Foreign institutional investors turned net sellers in fiscal position heightened levels of wariness. Other issues the lead-up to and after Malaysia’s 14th General Election. that had further exacerbated jittery conditions included Externally, trade tension between the United States of political developments in Europe and the US. America (“US”) and the rest of the world added to the volatility. Meanwhile, the US Fed hiked interest rate by a • For the full year of 2018, the benchmark FBM KLCI fell by further 25 bps in June 2018. The announcement of Malaysia’s 106.23 points or 5.9% to close at 1,690.58 points. The US GDP growth for the first quarter of 2018 which slowed to Fed hiked interest rate by another 25 bps in December 2018. 5.4%, further added to the prevailing negative sentiment. During the quarter, the benchmark FBM KLCI fell by 9.2% to close at 1,691.50 points. THE WAY FORWARD 257

PUBLIC BANK SHARE PRICE PERFORMANCE IN 2018

HIGHLIGHTS

MARKET SHARE PRICE RM24.76 CAPITALISATION RM96.12 Bil

2017: RM20.78 2017: RM80.67 Bil

EARNINGS DIVIDEND 144.4 sen PER SHARE PER SHARE 69 sen

2017: 141.7 sen 2017: 61 sen

• Despite a volatile year for the local stock market, the Public • As at the end of 2018, Public Bank’s share price ended at Bank Group’s ability to deliver superior returns to RM24.76, an increase of 19.2% from RM20.78 as at the end shareholders clearly demonstrates its standing as a blue-chip of 2017, compared to the FBM KLCI’s 5.9% decline to stock. Public Bank’s share price appreciation of 19.2% in 1,690.58 points. 2018 and the cumulative 66 sen single-tier dividend paid in 2018, comprising 2017 second interim dividend of 34 sen • Public Bank’s market capitalisation rose to RM96.12 billion and 2018 first interim dividend of 32 sen, saw shareholders as at the end of 2018, an increase of RM15.45 billion or making a commendable 22.3% gain on their investments, 19.2% from RM80.67 billion as at the end of 2017. outperforming the FBM KLCI which fell by 5.9%. • The average daily volume and value of Public Bank shares • In the first quarter of 2018, Public Bank’s share price rose traded in 2018 stood at 5.4 million shares (2017: 4.5 million strongly by 15.5% as compared to the FBM KLCI’s 3.7% gain. shares) and RM127.4 million (2017: RM90.8 million), While the FBM KLCI declined by 9.2% in the second quarter respectively. 2018, Public Bank’s share price only slipped slightly by 2.7%. The decline was in line with the downward trend in the regional equity markets. The FBM KLCI rebounded and registered a 6.0% gain in the third quarter of 2018. Whereas, the increase in Public Bank’s share price was higher at 7.0% underpinned by the announcement of the Public Bank Group’s cumulative first half 2018 net profit growth of 8.6% to RM2.80 billion. In the final quarter of 2018, despite the benchmark FBM KLCI falling by 5.7%, Public Bank’s share price only marginally declined by 1.0% supported by the announcement of a cumulative nine-month net profit growth of 5.0% to RM4.19 billion during the period. In all quarters of 2018 Public Bank’s share price performed better than the broader market. 258 2018 ANNUAL REPORT PUBLIC BANK BERHAD INVESTOR INFORMATION

PUBLIC BANK SHARE PRICE AND TRANSACTIONS IN 2018

Share Price Daily Trading Volume (RM) (million shares) ƒ .€€ ƒ‚

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.€€ € Jan-  Feb-  Mar-  Apr-  May-  Jun-  Jul-  Aug-  Sep-  Oct-  Nov-  Dec-  Public Bank Share Daily Trading Volume (million shares) Public Bank Share Price (RM)

Public Bank 1Q 2Q 3Q 4Q FY2018

Share Price (RM): High 24.12 22 Mar 25.78 14 May 26.16 12 Sep 25.06 3 Oct 26.16 12 Sep

Low 20.62 2 Jan 22.36 21 Jun 22.34 7 Jun 24.10 19 Dec 20.62 2 Jan

Close 24.00 30 Mar 23.36 29 Jun 25.00 28 Sep 24.76 31 Dec 24.76 31 Dec

Trading Range 3.50 3.42 3.82 0.96 5.54

Average Daily Trading 5.64 6.38 5.49 4.09 5.38 Volume (million shares) THE WAY FORWARD 259

RELATIVE PERFORMANCE OF PUBLIC BANK’S SHARE PRICE VS BENCHMARK INDICES IN 2018

Relative Performance  of change  Q Change () Q Change () Q Change () ŒQ Change ()  PBB : . PBB : -.Š‰ PBB : ‰. PBB : -.‹Š KLCI : .‰ KLCI : -‹. KLCI : Š. KLCI : -.‰ KLFIN : . KLFIN : -.ŠŠ KLFIN : Š.‹ KLFIN : -. 



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-

- FY Change () PBB : ‹. - KLCI : -.‹ KLFIN : . - Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Public Bank Share (PB Share) FBM KLCI Kuala Lumpur Finance Index (KLFIN) 260 2018 ANNUAL REPORT PUBLIC BANK BERHAD ANALYSIS OF SHAREHOLDINGS AS AT 21 FEBRUARY 2019

Number of Issued Shares : 3,882,138,347 ordinary shares Class of Shares : Ordinary shares Voting Rights : One vote per ordinary share

ANALYSIS BY SIZE OF SHAREHOLDINGS BASED ON RECORD OF DEPOSITORS

Shareholders No. of Shares Held

Malaysian Foreigner Malaysian Foreigner

Size of shareholdings No. % No. % No. % No. %

Less than 100 8,432 11.85 237 0.33 245,280 0.01 8,172 *

100 – 1,000 shares 15,245 21.42 437 0.61 6,912,598 0.18 211,109 0.01

1,001 – 10,000 shares 33,116 46.52 2,148 3.02 109,044,570 2.81 9,254,809 0.24

10,001 – 100,000 shares 8,163 11.47 1,582 2.22 210,753,833 5.43 50,224,301 1.29

100,001 – 194,106,916 (less than 5% of issued shares) 840 1.18 981 1.38 845,523,597 21.78 1,390,278,603 35.81

194,106,917 (5% of issued shares) and above 2 * – – 1,259,681,475 32.44 ––

Total 65,798 92.44 5,385 7.56 2,432,161,353 62.65 1,449,976,994 37.35

Grand Total 71,183 3,882,138,347

Note: * Less than 0.01%. THE WAY FORWARD 261

DIRECTORS’ DIRECT AND DEEMED INTERESTS IN SHARES IN THE COMPANY AND IN SUBSIDIARY COMPANY BASED ON REGISTER OF DIRECTORS’ SHAREHOLDINGS

Shares Held in the Company

Direct Interests Deemed Interests Total Interests

No. of Shares % of Issued No. of Shares % of Issued No. of Shares % of Issued Name Held Shares Held Shares Held Shares

Tan Sri Dato’ Sri 24,711,282 0.64 884,194,971*1 22.77 908,906,253 23.41 Dr. Teh Hong Piow Lai Wan – – 18,654*2 *4 18,654 *4 Tan Sri Dato’ Sri 4,888,845 0.13 1,389,745*3 0.03 6,278,590 0.16 Tay Ah Lek Cheah Kim Ling – – 10,392*2 *4 10,392 *4 Lee Chin Guan 200,030 *4 – – 200,030 *4

Notes: *1 Deemed to have interests in PBB shares held by other corporations by virtue of Section 8(4) of the Companies Act, 2016. *2 These shares are held by his/her spouse. *3 Deemed to have interests in PBB shares held by his spouse and held by other corporations by virtue of Section 8(4) of the Companies Act, 2016. *4 Less than 0.01%.

Shares Held in Subsidiary Company – Shares Held in Public Financial Holdings Limited

Direct Interests

No. of Shares % of Issued Name Held Shares

Tan Sri Dato’ Sri Tay Ah Lek 350,000 0.03

Tan Sri Dato’ Sri Dr. Teh Hong Piow, by virtue of his total direct and deemed interests of 908,906,253 shares in PBB, and pursuant to Section 8(4)(c) of the Companies Act, 2016, is deemed interested in the shares in all of PBB’s subsidiary and associated companies to the extent that PBB has interests. 262 2018 ANNUAL REPORT PUBLIC BANK BERHAD ANALYSIS OF SHAREHOLDINGS AS AT 21 FEBRUARY 2019

SUBSTANTIAL SHAREHOLDERS BASED ON REGISTER OF SUBSTANTIAL SHAREHOLDERS

Direct Interests Deemed Interests Total Interests

No. of Shares % of Issued No. of Shares % of Issued No. of Shares % of Issued Name Held Shares Held Shares Held Shares

Tan Sri Dato’ Sri Dr. 24,711,282 0.64 884,194,971* 22.77 908,906,253 23.41 Teh Hong Piow Consolidated Teh 840,136,075 21.64 44,058,896* 1.13 884,194,971 22.77 Holdings Sdn Bhd Employees Provident 456,890,700 11.77 – – 456,890,700 11.77 Fund Board

Note: * Deemed to have interests in PBB shares held by other corporations by virtue of Section 8(4) of the Companies Act, 2016.

TOP THIRTY SECURITIES ACCOUNT HOLDERS BASED ON RECORD OF DEPOSITORS (Without aggregating the securities from different securities accounts belonging to the same Depositor)

No. of Shares % of Issued Name Held Shares 1. Consolidated Teh Holdings Sdn Berhad 840,136,075 21.64 2. Citigroup Nominees (Tempatan) Sdn Bhd 419,545,400 10.81 Employees Provident Fund Board 3. Kumpulan Wang Persaraan (Diperbadankan) 121,311,300 3.13 4. Cartaban Nominees (Asing) Sdn Bhd 84,964,860 2.19 Exempt An For State Street Bank & Trust Company (West CLT OD67) 5. Cartaban Nominees (Asing) Sdn Bhd 52,919,028 1.36 GIC Private Limited For Government Of Singapore (C) 6. HSBC Nominees (Asing) Sdn Bhd 48,776,958 1.26 JPMCB NA For Vanguard Emerging Markets Stock Index Fund 7. HSBC Nominees (Asing) Sdn Bhd 47,395,025 1.22 JPMCB NA For Vanguard Total International Stock Index Fund 8. Amanahraya Trustees Berhad 43,578,800 1.12 Amanah Saham Malaysia 9. Malaysia Nominees (Tempatan) Sendirian Berhad 43,266,821 1.11 Great Eastern Life Assurance (Malaysia) Berhad (Par 1) 10. LPI Capital Bhd 42,520,704 1.10 11. Cartaban Nominees (Tempatan) Sdn Bhd 36,456,005 0.94 PAMB For Prulink Equity Fund THE WAY FORWARD 263

No. of Shares % of Issued Name Held Shares 12. Citigroup Nominees (Tempatan) Sdn Bhd 29,172,251 0.75 Exempt An For AIA Bhd 13. HSBC Nominees (Asing) Sdn Bhd 29,116,094 0.75 BBH And Co Boston For Matthews Pacific Tiger Fund 14. UOB Kay Hian Nominees (Asing) Sdn Bhd 25,267,048 0.65 Exempt An For UOB Kay Hian Pte Ltd (A/C Clients) 15. Tan Sri Dato’ Sri Dr. Teh Hong Piow 24,711,282 0.64 16. HSBC Nominees (Asing) Sdn Bhd 22,846,190 0.59 JPMCB NA For Stichting Depositary APG Emerging Markets Equity Pool 17. Nominees (Tempatan) Sdn Bhd 17,216,973 0.44 Maybank Trustees Berhad For Public Regular Savings Fund (N14011940100) 18. Citigroup Nominees (Tempatan) Sdn Bhd 17,041,300 0.44 Employees Provident Fund Board (Nomura) 19. Malaysia Nominees (Tempatan) Sendirian Berhad 16,819,136 0.43 Great Eastern Life Assurance (Malaysia) Berhad (Par 3) 20. HSBC Nominees (Asing) Sdn Bhd 16,575,446 0.43 JPMCB NA For MSCI Equity Index Fund B - Malaysia 21. DB (Malaysia) Nominee (Asing) Sdn Bhd 15,595,900 0.40 BNYM SA/NV For People’s Bank Of China (SICL ASIA EM) 22. Amanahraya Trustees Berhad 15,000,000 0.39 Amanah Saham Malaysia 2 - Wawasan 23. Citigroup Nominees (Asing) Sdn Bhd 14,678,999 0.38 UBS AG 24. Amanahraya Trustees Berhad 14,000,000 0.36 Amanah Saham Bumiputera 2 25. Public Invest Nominees (Tempatan) Sdn Bhd 12,580,832 0.32 Public Bank Group Officers’ Retirement Benefits Fund 26. DB (Malaysia) Nominee (Asing) Sdn Bhd 12,474,900 0.32 SSBT Fund DRNA For Aberdeen Emerging Markets Fund 27. HSBC Nominees (Asing) Sdn Bhd 12,425,860 0.32 JPMCB NA For Blackrock Institutional Trust Company, N.A. Investment Funds For Employee Benefit Trusts 28. DB (Malaysia) Nominee (Asing) Sdn Bhd 12,044,100 0.31 The Bank Of New York Mellon For Virtus Vontobel Emerging Markets Opportunities Fund 29. HSBC Nominees (Asing) Sdn Bhd 11,809,140 0.30 JPMBL SA For Robeco Capital Growth Funds 30. Citigroup Nominees (Asing) Sdn Bhd 11,077,811 0.29 CBNY For Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc 2,111,324,238 54.39 264 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

The total number of issued shares as at 21 February 2019 stands at 3,882,138,347 ordinary shares. The changes in the number of issued shares are as follows: Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares

Up to 30.08.1966 16,000,000 Cash 16,000,000 15.11.1978 4,000,000 Capitalisation of general reserve account (Bonus Issue 1:4) 20,000,000 22.07.1981 5,000,000 Capitalisation of general reserve account (Bonus Issue 1:4) 25,000,000 07.01.1982 10,000,000 Capitalisation of capital reserve account and general reserve account 35,000,000 (Bonus Issue 2:5) 11.02.1982 35,000,000 Rights Issue 1:1 at RM2.00 per share 70,000,000 22.06.1983 42,000,000 Capitalisation of share premium account and general reserve account 112,000,000 (Bonus Issue 3:5) 22.08.1983 56,000,000 Rights Issue 1:2 at RM2.00 per share 168,000,000 05.07.1984 42,000,000 Capitalisation of share premium account and general reserve account 210,000,000 (Bonus Issue 1:4) 05.02.1988 42,000,000 Capitalisation of share premium account and general reserve account 252,000,000 (Bonus Issue 1:5) 03.08.1988 105,000,000 Rights Issue 1:2 at RM1.60 per share 357,000,000 11.10.1989 218,500 Exercise of share options under Public Bank Berhad Employees’ 357,218,500 Share Option Scheme (PBB ESOS) at option price of RM3.80 per share 02.05.1990 1,237,500 Exercise of share options under PBB ESOS at option price of RM3.80 358,456,000 per share 15.06.1990 119,485,333 Capitalisation of share premium account and general reserve account 477,941,333 (Bonus Issue 1:3) 06.08.1990 71,691,200 Rights Issue 1:5 at RM2.20 per share 549,632,533 08.10.1990 138,500 Exercise of share options under PBB ESOS at option price of RM2.76 549,771,033 per share 12.04.1991 3,828,850 Exercise of share options under PBB ESOS at option price of RM2.76 553,599,883 per share 24.09.1991 334,300 Exercise of share options under PBB ESOS at option price of RM2.76 553,934,183 per share 25.03.1992 114,700 Exercise of share options under PBB ESOS at option price of RM2.76 554,048,883 per share THE WAY FORWARD 265

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares

15.04.1993 1,038,701 Exercise of share options under PBB ESOS at option price of RM2.76 555,087,584 per share 01.10.1993 9,912,337 Exercise of share options under PBB ESOS at option price of RM2.76 564,999,921 per share 20.04.1994 3,434,479 Exercise of share options under PBB ESOS at option price of RM2.76 568,434,400 per share 05.10.1994 1,113,000 Exercise of share options under PBB ESOS at option price of RM7.84 569,547,400 per share 27.12.1994 50,000,000 Issue and private placement of 50,000,000 new shares as follows: 619,547,400 – 35,000,000 PBB local shares at RM8.28 per share – 15,000,000 PBB foreign shares at RM10.62 per share 18.04.1996 25,500 Exercise of share options under PBB ESOS at option price of RM7.84 619,572,900 per share 07.08.1996 206,524,300 Capitalisation of share premium account (Bonus Issue 1:3) 826,097,200 25.10.1996 143,541 Exercise of share options under PBB ESOS at option price of RM5.88 826,240,741 per share 12.05.1997 358,850 Exercise of share options under PBB ESOS at option price of RM5.88 826,599,591 per share 06.01.1998 165,319,918 Capitalisation of share premium account (Bonus Issue 1:5) 991,919,509 09.03.1998 165,319,918 Rights Issue 1:5 at RM2.00 per PBB local share and at RM2.28 per 1,157,239,427 PBB foreign share 11.02.1999 8,007,750 Exercise of share options under PBB ESOS at option price of RM3.32 1,165,247,177 per share 11.05.1999 35,500 Exercise of share options under PBB ESOS at option price of RM4.48 1,165,282,677 per share 19.05.1999 4,736,865 Exercise of share options under PBB ESOS at option price of RM4.48 1,170,019,542 per share 07.06.1999 1,077,950 Exercise of share options under PBB ESOS at option price of RM4.48 1,171,097,492 per share 02.07.1999 12,063,250 Exercise of share options under PBB ESOS at option price of RM3.32 1,183,160,742 per share 08.12.2000 11,899,125 Exercise of share options under PBB ESOS at option price of RM3.32 1,195,059,867 per share 15.02.2001 1,662,500 Exercise of share options under PBB ESOS at option price of RM3.32 1,196,722,367 per share 266 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 31.03.2001 213,140,892 New PBB local shares issued in exchange for 125,377,000 ordinary 1,409,863,259 shares of RM1.00 each in Hock Hua Bank Bhd (HHB) pursuant to terms of merger of PBB and HHB 23.04.2001 422,958,977 Capitalisation of share premium account and retained profits (Bonus 1,832,822,236 Issue 3:10) 11.12.2001 996,387 Exercise of share options under PBB ESOS at option price of RM2.54 1,833,818,623 per share 12.03.2002 1,025,362 Exercise of share options under PBB ESOS at option price of RM2.54 1,834,843,985 per share 12.07.2002 458,710,997 Capitalisation of share premium account (Bonus Issue 1:4) 2,293,554,982 13.09.2002 13,570,954 Exercise of share options under PBB ESOS as follows: 2,307,125,936 – 1,488,329 shares at option price of RM2.04 per share – 12,082,625 shares at option price of RM4.44 per share 08.10.2002 7,153,442 Exercise of share options under PBB ESOS as follows: 2,314,279,378 – 412,567 shares at option price of RM2.04 per share – 6,740,875 shares at option price of RM4.44 per share 12.12.2002 247,675 Exercise of share options under PBB ESOS as follows: 2,314,527,053 – 130,050 shares at option price of RM2.04 per share – 117,625 shares at option price of RM4.44 per share 14.03.2003 153,158 Exercise of share options under PBB ESOS as follows: 2,314,680,211 – 112,408 shares at option price of RM2.04 per share – 40,750 shares at option price of RM4.44 per share 09.04.2003 37,907 Exercise of share options under PBB ESOS at option price of RM2.04 2,314,718,118 per share 13.06.2003 202,598,923 New PBB local shares issued in exchange for 135,065,949 ordinary 2,517,317,041 shares of RM1.00 each in Public Finance Bhd (PFB) pursuant to terms of privatisation of PFB 16.07.2003 629,329,261 Capitalisation of share premium account (Bonus Issue 1:4) 3,146,646,302 14.08.2003 8,337,798 Exercise of share options under PBB ESOS as follows: 3,154,984,100 – 250,423 shares at option price of RM1.64 per share – 8,087,375 shares at option price of RM3.56 per share 05.09.2003 2,804,031 Exercise of share options under PBB ESOS as follows: 3,157,788,131 – 75,156 shares at option price of RM1.64 per share – 2,728,875 shares at option price of RM3.56 per share 08.09.2003 2,902,623 Exercise of share options under PBB ESOS as follows: 3,160,690,754 – 67,856 shares at option price of RM1.64 per share – 1,595,142 shares at option price of RM3.56 per share – 1,239,625 shares at option price of RM3.40 per share THE WAY FORWARD 267

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 12.09.2003 7,001,644 Exercise of share options under PBB ESOS as follows: 3,167,692,398 – 54,489 shares at option price of RM1.64 per share – 4,948,530 shares at option price of RM3.56 per share – 1,998,625 shares at option price of RM3.40 per share 24.09.2003 1,216,063 Exercise of share options under PBB ESOS as follows: 3,168,908,461 – 6,250 shares at option price of RM1.64 per share – 915,688 shares at option price of RM3.56 per share – 294,125 shares at option price of RM3.40 per share 15.10.2003 3,518,818 Exercise of share options under PBB ESOS as follows: 3,172,427,279 – 15,169 shares at option price of RM1.64 per share – 2,515,399 shares at option price of RM3.56 per share – 988,250 shares at option price of RM3.40 per share 27.10.2003 2,054,251 Exercise of share options under PBB ESOS as follows: 3,174,481,530 – 3,313 shares at option price of RM1.64 per share – 1,457,938 shares at option price of RM3.56 per share – 593,000 shares at option price of RM3.40 per share 29.10.2003 6,748,111 Exercise of share options under PBB ESOS as follows: 3,181,229,641 – 32,993 shares at option price of RM1.64 per share – 3,781,268 shares at option price of RM3.56 per share – 2,933,850 shares at option price of RM3.40 per share 06.11.2003 4,913,239 Exercise of share options under PBB ESOS as follows: 3,186,142,880 – 39,115 shares at option price of RM1.64 per share – 3,806,374 shares at option price of RM3.56 per share – 1,067,750 shares at option price of RM3.40 per share 13.11.2003 1,202,135 Exercise of share options under PBB ESOS as follows: 3,187,345,015 – 5,040 shares at option price of RM1.64 per share – 961,220 shares at option price of RM3.56 per share – 235,875 shares at option price of RM3.40 per share 18.11.2003 455,750 Exercise of share options under PBB ESOS as follows: 3,187,800,765 – 406,250 shares at option price of RM3.56 per share – 49,500 shares at option price of RM3.40 per share 21.11.2003 5,801,710 Exercise of share options under PBB ESOS as follows: 3,193,602,475 – 33,297 shares at option price of RM1.64 per share – 2,989,788 shares at option price of RM3.56 per share – 2,778,625 shares at option price of RM3.40 per share 01.12.2003 1,417,894 Exercise of share options under PBB ESOS as follows: 3,195,020,369 – 16,324 shares at option price of RM1.64 per share – 1,062,070 shares at option price of RM3.56 per share – 339,500 shares at option price of RM3.40 per share 04.12.2003 68,000 Exercise of share options under PBB ESOS at option price 3,195,088,369 of RM3.56 per share 268 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 22.12.2003 2,297,250 Exercise of share options under PBB ESOS as follows: 3,197,385,619 – 13,484 shares at option price of RM1.64 per share – 1,889,391 shares at option price of RM3.56 per share – 394,375 shares at option price of RM3.40 per share 26.12.2003 9,214,108 Exercise of share options under PBB ESOS as follows: 3,206,599,727 – 20,525 shares at option price of RM1.64 per share – 6,642,458 shares at option price of RM3.56 per share – 2,551,125 shares at option price of RM3.40 per share 27.01.2004 1,883,267 Exercise of share options under PBB ESOS as follows: 3,208,482,994 – 4,547 shares at option price of RM1.64 per share – 1,680,345 shares at option price of RM3.56 per share – 198,375 shares at option price of RM3.40 per share 20.02.2004 483,813 Exercise of share options under PBB ESOS as follows: 3,208,966,807 – 457,313 shares at option price of RM3.56 per share – 26,500 shares at option price of RM3.40 per share 01.03.2004 1,024,066 Exercise of share options under PBB ESOS as follows: 3,209,990,873 – 886,316 shares at option price of RM3.56 per share – 137,750 shares at option price of RM3.40 per share 03.03.2004 13,717,282 Exercise of share options under PBB ESOS as follows: 3,223,708,155 – 38,231 shares at option price of RM1.64 per share – 10,718,176 shares at option price of RM3.56 per share – 1,647,375 shares at option price of RM3.40 per share – 1,313,500 shares at option price of RM4.60 per share 05.03.2004 28,660,157 Exercise of share options under PBB ESOS as follows: 3,252,368,312 – 253,907 shares at option price of RM1.64 per share – 28,406,250 shares at option price of RM3.56 per share 11.03.2004 13,177,700 Exercise of share options under PBB ESOS as follows: 3,265,546,012 – 36,366 shares at option price of RM1.64 per share – 10,361,459 shares at option price of RM3.56 per share – 940,875 shares at option price of RM3.40 per share – 1,839,000 shares at option price of RM4.60 per share 17.03.2004 12,271,286 Exercise of share options under PBB ESOS as follows: 3,277,817,298 – 46,892 shares at option price of RM1.64 per share – 10,183,769 shares at option price of RM3.56 per share – 597,125 shares at option price of RM3.40 per share – 1,443,500 shares at option price of RM4.60 per share 23.03.2004 8,575,825 Exercise of share options under PBB ESOS as follows: 3,286,393,123 – 38,252 shares at option price of RM1.64 per share – 6,166,723 shares at option price of RM3.56 per share – 867,350 shares at option price of RM3.40 per share – 1,503,500 shares at option price of RM4.60 per share 06.04.2004 1,919,157 Exercise of share options under PBB ESOS as follows: 3,288,312,280 – 1,703,532 shares at option price of RM3.56 per share – 69,625 shares at option price of RM3.40 per share – 146,000 shares at option price of RM4.60 per share THE WAY FORWARD 269

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 13.04.2004 4,016,890 Exercise of share options under PBB ESOS as follows: 3,292,329,170 – 3,078,890 shares at option price of RM3.56 per share – 405,000 shares at option price of RM3.40 per share – 533,000 shares at option price of RM4.60 per share 16.04.2004 1,233,902 Exercise of share options under PBB ESOS as follows: 3,293,563,072 – 10,500 shares at option price of RM1.64 per share – 1,017,652 shares at option price of RM3.56 per share – 85,750 shares at option price of RM3.40 per share – 120,000 shares at option price of RM4.60 per share 17.08.2004 11,152,166 Exercise of share options under PBB ESOS as follows: 3,304,715,238 – 13,349 shares at option price of RM1.64 per share – 6,270,567 shares at option price of RM3.56 per share – 857,550 shares at option price of RM3.40 per share – 2,299,700 shares at option price of RM4.60 per share – 1,711,000 shares at option price of RM4.92 per share 30.08.2004 12,767,404 Exercise of share options under PBB ESOS as follows: 3,317,482,642 – 57,078 shares at option price of RM1.64 per share – 7,127,076 shares at option price of RM3.56 per share – 618,450 shares at option price of RM3.40 per share – 2,372,800 shares at option price of RM4.60 per share – 2,592,000 shares at option price of RM4.92 per share 09.09.2004 1,649,681 Exercise of share options under PBB ESOS as follows: 3,319,132,323 – 908,831 shares at option price of RM3.56 per share – 67,350 shares at option price of RM3.40 per share – 260,500 shares at option price of RM4.60 per share – 413,000 shares at option price of RM4.92 per share 27.09.2004 623,819 Exercise of share options under PBB ESOS as follows: 3,319,756,142 – 8,125 shares at option price of RM1.64 per share – 344,819 shares at option price of RM3.56 per share – 63,375 shares at option price of RM3.40 per share – 136,000 shares at option price of RM4.60 per share – 71,500 shares at option price of RM4.92 per share 28.09.2004 1,737,912 Exercise of share options under PBB ESOS as follows: 3,321,494,054 – 795,637 shares at option price of RM3.56 per share – 120,875 shares at option price of RM3.40 per share – 347,900 shares at option price of RM4.60 per share – 473,500 shares at option price of RM4.92 per share 04.10.2004 4,621,593 Exercise of share options under PBB ESOS as follows: 3,326,115,647 – 33,767 shares at option price of RM1.64 per share – 2,569,876 shares at option price of RM3.56 per share – 267,650 shares at option price of RM3.40 per share – 1,187,300 shares at option price of RM4.60 per share – 563,000 shares at option price of RM4.92 per share 270 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 26.10.2004 1,755,048 Exercise of share options under PBB ESOS as follows: 3,327,870,695 – 665,498 shares at option price of RM3.56 per share – 71,650 shares at option price of RM3.40 per share – 527,400 shares at option price of RM4.60 per share – 490,500 shares at option price of RM4.92 per share 19.11.2004 4,569,277 Exercise of share options under PBB ESOS as follows: 3,332,439,972 – 187,546 shares at option price of RM1.64 per share – 2,491,856 shares at option price of RM3.56 per share – 289,375 shares at option price of RM3.40 per share – 1,212,000 shares at option price of RM4.60 per share – 388,500 shares at option price of RM4.92 per share 25.11.2004 20,935,350 Exercise of share options under PBB ESOS as follows: 3,353,375,322 – 31,710 shares at option price of RM1.64 per share – 9,479,777 shares at option price of RM3.56 per share – 653,600 shares at option price of RM3.40 per share – 4,162,263 shares at option price of RM4.60 per share – 6,608,000 shares at option price of RM4.92 per share 03.12.2004 2,392,002 Exercise of share options under PBB ESOS as follows: 3,355,767,324 – 1,183,077 shares at option price of RM3.56 per share – 140,300 shares at option price of RM3.40 per share – 604,125 shares at option price of RM4.60 per share – 464,500 shares at option price of RM4.92 per share 28.01.2005 20,743,000 Exercise of share options under PBB ESOS at option price 3,376,510,324 of RM4.92 per share 31.01.2005 2,415,001 Exercise of share options under PBB ESOS as follows: 3,378,925,325 – 15,475 shares at option price of RM1.64 per share – 985,926 shares at option price of RM3.56 per share – 104,200 shares at option price of RM3.40 per share – 954,400 shares at option price of RM4.60 per share – 355,000 shares at option price of RM4.92 per share 07.02.2005 10,466,250 Exercise of share options under PBB ESOS as follows: 3,389,391,575 – 2,406,250 shares at option price of RM3.56 per share – 2,250,000 shares at option price of RM4.60 per share – 5,810,000 shares at option price of RM4.92 per share 21.02.2005 7,511,743 Exercise of share options under PBB ESOS as follows: 3,396,903,318 – 26,106 shares at option price of RM1.64 per share – 3,364,187 shares at option price of RM3.56 per share – 377,950 shares at option price of RM3.40 per share – 2,883,000 shares at option price of RM4.60 per share – 860,500 shares at option price of RM4.92 per share 25.02.2005 639,342 Exercise of share options under PBB ESOS as follows: 3,397,542,660 – 6,094 shares at option price of RM1.64 per share – 236,373 shares at option price of RM3.56 per share – 14,875 shares at option price of RM3.40 per share – 291,000 shares at option price of RM4.60 per share – 91,000 shares at option price of RM4.92 per share THE WAY FORWARD 271

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 01.08.2005 12,813,748 Exercise of share options under PBB ESOS as follows: 3,410,356,408 – 14,482 shares at option price of RM1.64 per share – 1,382,291 shares at option price of RM3.56 per share – 194,275 shares at option price of RM3.40 per share – 1,397,700 shares at option price of RM4.60 per share – 6,670,000 shares at option price of RM4.92 per share – 3,155,000 shares at option price of RM6.37 per share 31.10.2005 2,114,074 Exercise of share options under PBB ESOS as follows: 3,412,470,482 – 1,063 shares at option price of RM1.64 per share – 442,561 shares at option price of RM3.56 per share – 96,950 shares at option price of RM3.40 per share – 424,800 shares at option price of RM4.60 per share – 1,014,500 shares at option price of RM4.92 per share – 134,200 shares at option price of RM6.37 per share 09.11.2005 3,737,523 Exercise of share options under PBB ESOS as follows: 3,416,208,005 – 1,269 shares at option price of RM1.64 per share – 1,429,354 shares at option price of RM3.56 per share – 238,525 shares at option price of RM3.40 per share – 1,537,875 shares at option price of RM4.60 per share – 204,000 shares at option price of RM4.92 per share – 326,500 shares at option price of RM6.37 per share 15.11.2005 660,400 Exercise of share options under PBB ESOS as follows: 3,416,868,405 – 163,100 shares at option price of RM3.56 per share – 61,700 shares at option price of RM3.40 per share – 390,100 shares at option price of RM4.60 per share – 45,500 shares at option price of RM4.92 per share 05.12.2005 504,684 Exercise of share options under PBB ESOS as follows: 3,417,373,089 – 217,309 shares at option price of RM3.56 per share – 35,375 shares at option price of RM3.40 per share – 202,500 shares at option price of RM4.60 per share – 23,500 shares at option price of RM4.92 per share – 26,000 shares at option price of RM6.37 per share 13.01.2006 3,553,363 Exercise of share options under PBB ESOS as follows: 3,420,926,452 – 2,587 shares at option price of RM1.64 per share – 391,750 shares at option price of RM3.56 per share – 77,325 shares at option price of RM3.40 per share – 519,300 shares at option price of RM4.60 per share – 71,000 shares at option price of RM4.92 per share – 86,000 shares at option price of RM6.37 per share – 2,405,401 shares at option price of RM5.67 per share 18.01.2006 115,100 Exercise of share options under PBB ESOS as follows: 3,421,041,552 – 8,600 shares at option price of RM3.56 per share – 83,500 shares at option price of RM4.60 per share – 23,000 shares at option price of RM4.92 per share 272 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 08.02.2006 329,363 Exercise of share options under PBB ESOS as follows: 3,421,370,915 – 45,938 shares at option price of RM3.56 per share – 2,425 shares at option price of RM3.40 per share – 27,500 shares at option price of RM4.60 per share – 7,500 shares at option price of RM4.92 per share – 7,000 shares at option price of RM6.37 per share – 239,000 shares at option price of RM5.67 per share 28.02.2006 3,922,364 Exercise of share options under PBB ESOS as follows: 3,425,293,279 – 302 shares at option price of RM1.64 per share – 234,931 shares at option price of RM3.56 per share – 20,125 shares at option price of RM3.40 per share – 293,500 shares at option price of RM4.60 per share – 63,500 shares at option price of RM4.92 per share – 255,000 shares at option price of RM6.37 per share – 3,055,006 shares at option price of RM5.67 per share 09.03.2006 8,050,287 Exercise of share options under PBB ESOS as follows: 3,433,343,566 – 1,282 shares at option price of RM1.64 per share – 296,195 shares at option price of RM3.56 per share – 3,125 shares at option price of RM3.40 per share – 314,600 shares at option price of RM4.60 per share – 108,000 shares at option price of RM4.92 per share – 402,390 shares at option price of RM6.37 per share – 6,924,695 shares at option price of RM5.67 per share 14.03.2006 12,000 Exercise of share options under PBB ESOS at option price 3,433,355,566 of RM5.67 per share 14.08.2006 1,960,920 Exercise of share options under PBB ESOS as follows: 3,435,316,486 – 2,094 shares at option price of RM1.64 per share – 94,596 shares at option price of RM3.56 per share – 11,625 shares at option price of RM3.40 per share – 212,500 shares at option price of RM4.60 per share – 40,000 shares at option price of RM4.92 per share – 115,000 shares at option price of RM6.37 per share – 1,485,105 shares at option price of RM5.67 per share 22.08.2006 13,588,150 Exercise of share options under PBB ESOS as follows: 3,448,904,636 – 17,923 shares at option price of RM1.64 per share – 411,452 shares at option price of RM3.56 per share – 44,250 shares at option price of RM3.40 per share – 555,000 shares at option price of RM4.60 per share – 72,900 shares at option price of RM4.92 per share – 319,000 shares at option price of RM6.37 per share – 12,167,625 shares at option price of RM5.67 per share 04.09.2006 1,147,600 Exercise of share options under PBB ESOS as follows: 3,450,052,236 – 34,600 shares at option price of RM3.56 per share – 83,500 shares at option price of RM4.60 per share – 51,500 shares at option price of RM4.92 per share – 978,000 shares at option price of RM5.67 per share THE WAY FORWARD 273

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 22.09.2006 754,127 Exercise of share options under PBB ESOS as follows: 3,450,806,363 – 16,127 shares at option price of RM3.56 per share – 22,000 shares at option price of RM4.60 per share – 7,000 shares at option price of RM4.92 per share – 16,000 shares at option price of RM6.37 per share – 693,000 shares at option price of RM5.67 per share 20.11.2006 1,735,884 Exercise of share options under PBB ESOS as follows: 3,452,542,247 – 2,698 shares at option price of RM1.64 per share – 31,886 shares at option price of RM3.56 per share – 6,500 shares at option price of RM3.40 per share – 130,500 shares at option price of RM4.60 per share – 19,000 shares at option price of RM4.92 per share – 542,500 shares at option price of RM6.37 per share – 1,002,800 shares at option price of RM5.67 per share 30.11.2006 3,142,529 Exercise of share options under PBB ESOS as follows: 3,455,684,776 – 1,358 shares at option price of RM1.64 per share – 90,371 shares at option price of RM3.56 per share – 4,000 shares at option price of RM3.40 per share – 188,500 shares at option price of RM4.60 per share – 43,500 shares at option price of RM4.92 per share – 1,083,300 shares at option price of RM6.37 per share – 1,731,500 shares at option price of RM5.67 per share 05.12.2006 4,553,096 Exercise of share options under PBB ESOS as follows: 3,460,237,872 – 4,092 shares at option price of RM1.64 per share – 161,211 shares at option price of RM3.56 per share – 18,793 shares at option price of RM3.40 per share – 349,600 shares at option price of RM4.60 per share – 78,000 shares at option price of RM4.92 per share – 1,655,200 shares at option price of RM6.37 per share – 2,286,200 shares at option price of RM5.67 per share 15.12.2006 2,407,500 Exercise of share options under PBB ESOS as follows: 3,462,645,372 – 30,700 shares at option price of RM3.56 per share – 1,800 shares at option price of RM3.40 per share – 82,200 shares at option price of RM4.60 per share – 59,000 shares at option price of RM4.92 per share – 729,000 shares at option price of RM6.37 per share – 1,504,800 shares at option price of RM5.67 per share 22.12.2006 179,500 Exercise of share options under PBB ESOS as follows: 3,462,824,872 – 17,500 shares at option price of RM4.60 per share – 50,000 shares at option price of RM6.37 per share – 112,000 shares at option price of RM5.67 per share 25.01.2007 7,252,589 Exercise of share options under PBB ESOS as follows: 3,470,077,461 – 473 shares at option price of RM1.64 per share – 184,208 shares at option price of RM3.56 per share – 14,800 shares at option price of RM3.40 per share – 234,500 shares at option price of RM4.60 per share – 43,500 shares at option price of RM4.92 per share – 3,230,108 shares at option price of RM6.37 per share – 3,545,000 shares at option price of RM5.67 per share 274 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 30.01.2007 16,102,248 Exercise of share options under PBB ESOS as follows: 3,486,179,709 – 5,228 shares at option price of RM1.64 per share – 68,187 shares at option price of RM3.56 per share – 29,000 shares at option price of RM3.40 per share – 254,031 shares at option price of RM4.60 per share – 60,200 shares at option price of RM4.92 per share – 11,004,802 shares at option price of RM6.37 per share – 4,680,800 shares at option price of RM5.67 per share 05.02.2007 2,798,614 Exercise of share options under PBB ESOS as follows: 3,488,978,323 – 16,239 shares at option price of RM3.56 per share – 775 shares at option price of RM3.40 per share – 35,100 shares at option price of RM4.60 per share – 11,000 shares at option price of RM4.92 per share – 1,971,000 shares at option price of RM6.37 per share – 764,500 shares at option price of RM5.67 per share 15.02.2007 3,449,000 Exercise of share options under PBB ESOS as follows: 3,492,427,323 – 8,000 shares at option price of RM3.56 per share – 1,000 shares at option price of RM3.40 per share – 48,500 shares at option price of RM4.60 per share – 25,500 shares at option price of RM4.92 per share – 2,387,000 shares at option price of RM6.37 per share – 979,000 shares at option price of RM5.67 per share 23.02.2007 118,000 Exercise of share options under PBB ESOS as follows: 3,492,545,323 – 3,500 shares at option price of RM4.60 per share – 49,000 shares at option price of RM6.37 per share – 65,500 shares at option price of RM5.67 per share 14.05.2007 5,659,529 Exercise of share options under PBB ESOS as follows: 3,498,204,852 – 22,492 shares at option price of RM1.64 per share – 75,283 shares at option price of RM3.56 per share – 24,350 shares at option price of RM3.40 per share – 185,000 shares at option price of RM4.60 per share – 43,500 shares at option price of RM4.92 per share – 3,516,279 shares at option price of RM6.37 per share – 1,792,625 shares at option price of RM5.67 per share 17.05.2007 7,553,346 Exercise of share options under PBB ESOS as follows: 3,505,758,198 – 3,371 shares at option price of RM1.64 per share – 114,070 shares at option price of RM3.56 per share – 31,507 shares at option price of RM3.40 per share – 216,500 shares at option price of RM4.60 per share – 54,300 shares at option price of RM4.92 per share – 4,608,696 shares at option price of RM6.37 per share – 2,524,902 shares at option price of RM5.67 per share 30.05.2007 224,369 Exercise of share options under PBB ESOS as follows: 3,505,982,567 – 9,369 shares at option price of RM3.56 per share – 6,500 shares at option price of RM4.60 per share – 2,500 shares at option price of RM4.92 per share – 128,000 shares at option price of RM6.37 per share – 78,000 shares at option price of RM5.67 per share THE WAY FORWARD 275

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 04.06.2007 2,962,800 Exercise of share options under PBB ESOS as follows: 3,508,945,367 – 43,000 shares at option price of RM3.56 per share – 1,000 shares at option price of RM3.40 per share – 117,000 shares at option price of RM4.60 per share – 34,000 shares at option price of RM4.92 per share – 1,931,000 shares at option price of RM6.37 per share – 836,800 shares at option price of RM5.67 per share 07.06.2007 33,900 Exercise of share options under PBB ESOS as follows: 3,508,979,267 – 400 shares at option price of RM3.56 per share – 1,500 shares at option price of RM4.60 per share – 25,000 shares at option price of RM6.37 per share – 7,000 shares at option price of RM5.67 per share 10.07.2007 1,974,411 Exercise of share options under PBB ESOS as follows: 3,510,953,678 – 379 shares at option price of RM1.64 per share – 47,133 shares at option price of RM3.56 per share – 91,000 shares at option price of RM4.60 per share – 15,500 shares at option price of RM4.92 per share – 1,201,900 shares at option price of RM6.37 per share – 618,499 shares at option price of RM5.67 per share 17.07.2007 7,444,206 Exercise of share options under PBB ESOS as follows: 3,518,397,884 – 82,283 shares at option price of RM3.56 per share – 19,925 shares at option price of RM3.40 per share – 95,575 shares at option price of RM4.60 per share – 16,100 shares at option price of RM4.92 per share – 6,428,923 shares at option price of RM6.37 per share – 801,400 shares at option price of RM5.67 per share 20.07.2007 727,500 Exercise of share options under PBB ESOS as follows: 3,519,125,384 – 3,000 shares at option price of RM3.56 per share – 21,000 shares at option price of RM4.60 per share – 10,000 shares at option price of RM4.92 per share – 512,000 shares at option price of RM6.37 per share – 181,500 shares at option price of RM5.67 per share 14.11.2007 6,071,344 Exercise of share options under PBB ESOS as follows: 3,525,196,728 – 727 shares at option price of RM1.64 per share – 68,822 shares at option price of RM3.56 per share – 450 shares at option price of RM3.40 per share – 138,900 shares at option price of RM4.60 per share – 26,000 shares at option price of RM4.92 per share – 4,763,700 shares at option price of RM6.37 per share – 1,072,745 shares at option price of RM5.67 per share 16.11.2007 1,834,280 Exercise of share options under PBB ESOS as follows: 3,527,031,008 – 32,006 shares at option price of RM3.56 per share – 29,075 shares at option price of RM3.40 per share – 86,969 shares at option price of RM4.60 per share – 16,000 shares at option price of RM4.92 per share – 1,117,231 shares at option price of RM6.37 per share – 552,999 shares at option price of RM5.67 per share 276 2018 ANNUAL REPORT PUBLIC BANK BERHAD SHARE CAPITAL AS AT 21 FEBRUARY 2019

Total Date of No. of Shares Number of Allotment Allotted Consideration Issued Shares 26.11.2007 849,375 Exercise of share options under PBB ESOS as follows: 3,527,880,383 – 9,700 shares at option price of RM3.56 per share – 19,075 shares at option price of RM3.40 per share – 38,000 shares at option price of RM4.60 per share – 19,500 shares at option price of RM4.92 per share – 479,800 shares at option price of RM6.37 per share – 283,300 shares at option price of RM5.67 per share 17.12.2007 11,000 Exercise of share options under PBB ESOS at option price 3,527,891,383 of RM6.37 per share 21.01.2008 701,527 Exercise of share options under PBB ESOS as follows: 3,528,592,910 – 46,600 shares at option price of RM3.56 per share – 125 shares at option price of RM3.40 per share – 19,000 shares at option price of RM4.60 per share – 8,500 shares at option price of RM4.92 per share – 481,302 shares at option price of RM6.37 per share – 146,000 shares at option price of RM5.67 per share 05.02.2008 710,476 Exercise of share options under PBB ESOS as follows: 3,529,303,386 – 11,109 shares at option price of RM3.56 per share – 4,700 shares at option price of RM4.60 per share – 8,000 shares at option price of RM4.92 per share – 502,167 shares at option price of RM6.37 per share – 184,500 shares at option price of RM5.67 per share 18.02.2008 1,595,474 Exercise of share options under PBB ESOS as follows: 3,530,898,860 – 10,262 shares at option price of RM3.56 per share – 50 shares at option price of RM3.40 per share – 61,862 shares at option price of RM4.60 per share – 10,500 shares at option price of RM4.92 per share – 1,090,800 shares at option price of RM6.37 per share – 422,000 shares at option price of RM5.67 per share 21.02.2008 65,000 Exercise of share options under PBB ESOS as follows: 3,530,963,860 – 2,500 shares at option price of RM4.60 per share – 41,500 shares at option price of RM6.37 per share – 21,000 shares at option price of RM5.67 per share 05.03.2008 748,792 Exercise of share options under PBB ESOS as follows: 3,531,712,652 – 2,121 shares at option price of RM1.64 per share – 23,221 shares at option price of RM3.56 per share – 4,750 shares at option price of RM3.40 per share – 37,700 shares at option price of RM4.60 per share – 17,500 shares at option price of RM4.92 per share – 462,400 shares at option price of RM6.37 per share – 201,100 shares at option price of RM5.67 per share 12.03.2008 213,182 Exercise of share options under PBB ESOS as follows: 3,531,925,834 – 18,982 shares at option price of RM3.56 per share – 11,500 shares at option price of RM4.60 per share – 5,500 shares at option price of RM4.92 per share – 123,000 shares at option price of RM6.37 per share – 54,200 shares at option price of RM5.67 per share 01.08.2014 350,212,513 Rights Issue 1:10 at RM13.80 per share 3,882,138,347 THE WAY FORWARD 277 SUMMARY OF PROPERTIES OWNED BY PUBLIC BANK GROUP AS AT 31 DECEMBER 2018

No. of Properties

Net Book Value Area Freehold Leasehold RM’000

DOMESTIC PUBLIC BANK BERHAD Kuala Lumpur 2 – 221,968 Perak Darul Ridzuan 1 – 222 Sarawak – 1 121 PUBLIC MUTUAL BERHAD Kuala Lumpur 1 1 8,037 Johor Darul Takzim – 1 710 Pahang Darul Makmur 1 – 1,528 Pulau Pinang 1 – 1,648 Sarawak – 2 2,237 Selangor Darul Ehsan 1 1 5,181 PUBLIC HOLDINGS SDN BHD Kuala Lumpur 5 4 697,895 Johor Darul Takzim 4 – 69,306 Kedah Darul Aman 1 – 1,401 Melaka – 2 989 Pahang Darul Makmur 1 – 82 Perak Darul Ridzuan 3 1 4,491 Pulau Pinang 8 1 5,015 Sabah – 2 2,750 Sarawak 1 3 4,078 Selangor Darul Ehsan 1 2 35,932

OVERSEAS CAMBODIAN PUBLIC BANK PLC Phnom Penh 1 – 53,483 PUBLIC FINANCIAL HOLDINGS GROUP Hong Kong – 33 557,078

Note: The details of the top 10 properties as included in the above summary are disclosed in the following page. 278 2018 ANNUAL REPORT PUBLIC BANK BERHAD TOP 10 LIST OF PROPERTIES OWNED BY PUBLIC BANK GROUP AS AT 31 DECEMBER 2018

Remaining Built-up Date of Last Net Book Lease Period Age of Area Revaluation/ Value Location Description Current Use Tenure (Expiry Date) Property (sq m) Acquisition RM’000

Menara Public Bank 2 40-storey office block Public Bank’s Jalan Freehold – 2 Years 58,865 19-11-2018 634,505 No. 78, including a 4-level Raja Chulan CCC (gross) (R) Jalan Raja Chulan commercial podium branch and Public issued on Net 50200 Kuala Lumpur with a 6-level Mutual’s Head 01-01-2017 lettable Malaysia basement carpark Quarters 42,816

Menara Public Bank 36-storey office tower Public Bank’s Freehold – 24 Years 46,436 02-01-1995 221,794 146 Jalan Ampang and 5-storey podium Head Office and 50450 Kuala Lumpur (L/B) Kuala Lumpur City Malaysia Main Office; business premises of subsidiary and associated companies

Basement, A shop unit on Public Bank (HK) Leasehold 824 Years 41 Years 5,451 30-05-2006** 130,919 Ground Floor 1st-12th ground floor and Ltd’s Main Branch 999 Years (26-06-2842) floor, Flat A & B on basement; and office and administrative 14th Floor, 17th Floor floors of a 23-storey office Flat A on 19th Floor commercial building 21st Floor and Main Roof Public Bank Centre 120 Des Voeux Road Central Central Hong Kong

11th Floor Office space on the Public Financial Leasehold 42 Years 36 Years 1,465 02-05-1994 112,336 Argyle Centre Phase 1 11th floor of a Holdings Group 150 Years (18-02-2060) (R) 688 Nathan Road 21-storey commercial office; part of 65 Argyle Street building office space Mongkok Kowloon leased to third Hong Kong parties

Public Bank Tower 30-storey office tower Public Bank’s Freehold – 24 Years 36,222 19-11-2018 66,351 19 Jalan Wong (L/B) Johor Bahru (R) Ah Fook Branch; office 80000 Johor Bahru space rented to Johor Darul Takzim third parties and Malaysia a related party THE WAY FORWARD 279

Remaining Built-up Date of Last Net Book Lease Period Age of Area Revaluation/ Value Location Description Current Use Tenure (Expiry Date) Property (sq m) Acquisition RM’000

Shop B Ground A shop unit on Public Bank (HK) Leasehold 32 Years 31 Years 2,215 30-06-1994 54,200 Floor and Office B ground floor and all B Ltd. & Public 150 Years (27-05-2050) (R) 1st to 17th Floor units for 1st to 17th Finance Ltd.’s JCG Building floors of an 18-storey Mongkok Branch; 16 Mongkok Road commercial building storeroom of Mongkok Kowloon with shops and Public Financial Hong Kong offices Holdings Group; office space leased to third parties

Campu Bank Building 10 storey building Head Office and Freehold – 9 Years 18,149 14-10-2009 53,483 No. 23 2 1/2 Basement on Phnom Penh Karmuon Sar Avenue lot 23 & 24 Main Branch, (Street no. 114) Campu Properties Sangkat Phsar Thmey 2 Co. Ltd., Campu Phnom Penh Securities Plc and Kingdom of Cambodia Campu Lonpac Insurance

11th Floor 11th floor of a Office of Public Leasehold 884 Years 51 Years 1,464 11-06-1993 46,211 Wing On House 31-storey office Financial Holdings 999 Years (14-08-2902) 71 Des Voeux building built on a Group Road Central 2-storey podium Central Hong Kong

1 Jalan Air Hitam 5 blocks of integrated Public Bank’s IT & Leasehold 78 Years 21 Years 31,669 19-11-2018 29,655 Kawasan Institusi muti-storey building Training Centre 99 Years (02-09-2096) (R) Bandar Baru Bangi (L/B) 43000 Kajang Selangor Darul Ehsan Malaysia

Shop B, Ground Floor A shop unit on Public Bank (HK) Leasehold 841 Years 28 Years 105 16-04-2016 27,830 Kong Kai Building ground floor of a Ltd’s Aberdeen 999 Years (26-12-2859) (R) No. 184 22-storey residential Branch Aberdeen Main Road building Hong Kong

Notes: (L/B) Land and building (R) Revaluation was performed as at 31 December 2018 ** The acquisition date of 30 May 2006 is the date such property was acquired upon acquisition of Public Bank (Hong Kong) Limited by Public Financial Holdings Group Public Financial Holdings Group hold the land portion of all properties by means of leases, in Hong Kong SAR 280 2018 ANNUAL REPORT PUBLIC BANK BERHAD INTERNATIONAL NETWORK

China

Hong Kong Vietnam

Laos

Cambodia

Sri Lanka MALAYSIA THE WAY FORWARD 281 GROUP CORPORATE DIRECTORY

HEAD OFFICE

PUBLIC BANK BERHAD (6463-H) Head Office Menara Public Bank 146 Jalan Ampang 50450 Kuala Lumpur, Malaysia Tel : 03-2176 6000, 03-2176 6666, 03-2163 8888, 03-2163 8899 Fax : 03-2163 9917 Swift : PBBEMYKL Cable : “PBBKLCITY” Kuala Lumpur www.publicbankgroup.com

03-2036 8828 03-6252 6636 FEDERAL TERRITORY Jalan Raja Chulan Segambut 03-2036 8888 03-6252 7052 Branch Telephone 03-2614 7228 03-6120 5099 Jalan Raja Laut Selayang 03-6287 0988 03-2614 7388 03-6136 8644 Bandar Menjalara 03-6287 0990 03-2054 1700 03-4042 1509 Jalan Sultan Sulaiman Sentul 03-6272 5694 03-2054 1788 03-4042 1652 Bandar Sri Damansara 03-6272 5741 03-9221 4771 03-9057 3154 Jalan Sungei Besi Seri Petaling 03-9171 9966 03-9221 5650 03-9057 3157 Bandar Sri Permaisuri 03-9172 6388 03-2070 2121 03-4021 9341 Jalan Tun H.S. Lee Setapak 03-2282 8929 03-2070 2234 03-4021 9343 Bangsar 03-2282 8930 03-2272 5930 03-4143 2888 Jalan Tun Sambanthan Starparc Point 03-2142 7833 03-2273 6494 03-4143 6988 Bintang Walk 03-2142 7886 03-6243 1000 03-9130 7840 Jinjang Taman Cheras 03-2095 1757 03-6243 1088 03-9131 3466 Bukit Damansara 03-2095 4278 03-6254 7999 03-9101 7152 Kepong Taman Connaught 03-8082 9900 03-6257 3300 03-9102 3649 Bukit Jalil 03-8082 9922 03-2163 8866 03-7983 7811 KL City Main Office Taman Desa Changkat Thambi 03-2145 4492 03-2176 7888 03-7983 7812 Dollah 03-2145 4498 087-414 278 03-9205 7888 Labuan Taman Maluri 03-2144 5755 087-414 373 03-9285 9998 Jalan Bukit Bintang 03-2144 5759 03-4023 4467 03-4105 2003 Medan Idaman Taman Melawati 03-2078 1115 03-4023 4468 03-4105 2004 Jalan Hang Lekiu 03-2078 7077 03-6203 6363 03-9130 0234 Mont’ Kiara Taman Midah 03-4042 1836 03-6203 6787 03-9130 0533 Jalan Ipoh 03-4042 7487 03-7785 6409 03-7729 4672 Overseas Union Garden Taman Tun Dr. Ismail 03-7985 5850 03-7785 6410 03-7729 6670 Jalan Kelang Lama 03-7985 5851 03-9274 2495 03-2693 9526 Pandan Indah Tiong Nam 03-7980 4377 03-9274 2496 03-2693 9528 Jalan Kuchai Lama 03-7980 4575 03-9281 2199 03-4142 8577 Pandan Jaya Wangsa Maju 03-2142 9215 03-9286 3149 03-4142 8579 Jalan Pasar 03-2143 1426 03-7980 2921 Salak South 03-7980 4293 282 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP CORPORATE DIRECTORY

07-755 0510 04-782 2000 JOHOR Simpang Renggam Pokok Sena 07-755 0511 04-782 2008 Branch Telephone 07-556 4625 04-966 7372 Skudai Pulau Langkawi Bandar Baru Permas 07-388 3252 07-556 8670 04-966 7373 Jaya 07-388 3253 07-557 6299 04-469 5691 Sutera Utama Sik 07-436 7666 07-559 1788 04-469 5764 Batu Pahat 07-436 7667 07-353 1122 04-421 7622 Taman Daya Sungai Petani 07-238 2878 07-353 4335 04-421 7623 Bukit Indah 07-238 3966 07-861 0096 Taman Desa Cemerlang 06-985 6878 07-861 6450 Bukit Pasir KELANTAN 06-985 7261 07-356 5688 Taman Johor Jaya 07-926 2001 07-356 5715 Branch Telephone Chaah 07-926 2002 07-234 6697 09-912 2600 Taman Munsyi Ibrahim Gua Musang 07-794 4051 07-234 6820 09-912 2602 Endau 07-794 4155 07-234 4608 09-726 3888 Taman Perling Kota Bharu 06-951 8753 07-234 4919 09-726 3899 Jalan Abdullah 06-951 8760 07-331 2266 Taman Sentosa 09-966 4027 07-218 6888 07-331 6521 Kuala Krai Johor Bahru 09-966 4028 07-223 9918 07-237 7184 Tampoi 09-955 6139 07-788 2294 07-237 7519 Tanah Merah Kahang 09-955 6244 07-788 2295 06-978 2123 Tangkak 09-746 1881 07-773 5112 06-978 2124 Wakaf Siku Kluang 09-747 0111 07-773 5113 07-861 3291 Ulu Tiram 07-883 4192 07-861 3292 Kota Tinggi 07-883 4195 MELAKA 07-661 8588 Kulai KEDAH Branch Telephone 07-661 8599 Branch Telephone 06-232 7208 07-251 1846 Air Keroh Masai 06-232 7209 07-251 1849 04-731 5411 Alor Setar 04-731 5412 06-317 6200 07-799 2477 Batu Berendam Mersing 06-319 1811 07-799 2478 04-924 1085 Changlun 06-951 7505 04-924 1457 06-384 7712 Muar Masjid Tanah 06-951 7520 04-468 6143 06-384 7713 Gurun 04-468 6325 07-454 2855 06-279 7000 Parit Raja Melaka 07-454 2857 04-731 0559 06-283 0233 Jalan Kota 04-731 1384 07-699 5352 06-334 6397 Pekan Nenas Taman Malim Jaya 07-699 5594 04-917 4926 06-334 6404 Jitra 07-687 9601 04-917 4927 Pontian Kecil 06-281 7527 07-687 9602 04-416 3010 Taman Melaka Raya Kuala Ketil 06-281 7528 07-935 3802 04-416 3278 Segamat 06-283 2052 07-935 3888 04-490 1090 Tengkera Kulim 06-283 2054 04-490 1096 THE WAY FORWARD 283

09-312 1722 05-808 1110 NEGERI SEMBILAN Kuala Lipis Kamunting 09-312 1723 05-808 1112 Branch Telephone 09-511 8601 05-776 9894 Kuantan Kuala Kangsar 06-454 4102 09-511 8632 05-776 9895 Bahau 06-454 4103 09-277 5800 05-281 1014 Mentakab Menglembu 07-948 1770 09-277 5801 05-281 4978 Gemas 07-948 1780 09-355 3471 05-677 1251 Raub Pantai Remis 06-613 6925 09-355 3502 05-677 1252 Kuala Kelawang 06-613 6926 09-296 5652 05-716 0078 Temerloh Parit Buntar 06-481 2277 09-296 5653 05-716 0079 Kuala Pilah 06-481 2288 09-255 3480 05-288 4077 Triang Pusing 06-799 1066 09-255 3481 05-288 4078 Nilai 06-799 1067 05-688 2927 Seri Manjung 06-647 2942 05-688 2987 Port Dickson PERAK 06-647 2943 05-357 5360 Simpang Pulai 06-762 0823 Branch Telephone 05-357 5361 Rasah 06-768 6688 05-672 6399 05-691 3526 Ayer Tawar Sitiawan 06-763 0661 05-672 6400 05-691 3527 Seremban 06-763 0662 05-721 2842 05-598 4114 Bagan Serai Sungai Siput 06-441 2511 05-721 2843 05-598 6116 Tampin 06-441 2512 05-546 8140 05-807 2551 Bercham Taiping 05-548 3888 05-807 5527

PAHANG 05-434 1252 05-459 7602 Bidor Tanjong Malim 05-434 1253 05-459 7603 Branch Telephone 05-201 1124 05-725 5327 Chemor Tanjong Piandang 09-323 8621 05-201 1125 05-725 7941 Benta 09-323 8622 05-313 1646 05-621 2325 Gunung Rapat Teluk Intan 09-222 5653 05-313 1649 05-622 3282 Bentong 09-222 5659 05-548 0951 Ipoh Garden 05-491 1590 05-548 2592 Brinchang PERLIS 05-491 2682 05-245 6615 Ipoh Main Office Bureau de Change 05-245 6688 Branch Telephone Resorts Hotel, Genting 03-6101 1237 05-321 9892 04-976 3311 Highlands Jalan Pasir Putih Kangar 05-322 1658 04-976 3413 03-6105 8888 Genting Highlands 05-255 1068 03-6105 8899 Jalan Sultan Idris Shah 05-255 1069 PULAU PINANG 09-567 8461 Jalan Beserah 05-245 6816 09-568 8088 Jalan Yang Kalsom 05-245 6888 Branch Telephone 09-266 1917 Jerantut 05-526 4014 04-331 7822 09-266 1972 Jelapang Bagan Ajam 05-526 4015 04-331 7823 09-240 9824 Kemayan 05-465 1044 04-828 4088 09-240 9866 Kampar Bandar Baru Air Itam 05-465 2160 04-828 6088 284 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP CORPORATE DIRECTORY

04-643 8200 SABAH SARAWAK Bandar Bayan Baru 04-643 8390 Branch Telephone Branch Telephone 04-390 4513 Bandar Seberang Jaya 04-390 4592 087-214 836 085-737 111 Beaufort Batu Niah 087-214 844 085-737 112 04-539 2205 Bukit Mertajam 04-539 2207 088-251 812 084-693 511 City Parade Bintangor 088-251 813 084-693 622 04-332 9837 Butterworth 04-332 9839 088-722 780 086-858 688 Donggongon Bintulu 088-723 780 086-858 788 04-828 8591 Jalan Air Itam 04-828 8595 088-429 112 085-461 600 Inanam China Street 088-429 113 085-461 688 04-226 4571 Jalan Datuk Keramat 04-228 1045 089-913 262 084-311 080 Jalan Apas Jalan Central 089-913 606 084-335 677 04-227 6842 Jalan Macalister 04-227 6843 Jalan Pantai 088-236 800 082-613 377 Jalan Penrissen 082-615 988 04-324 5229 087-335 841 Jalan Raja Uda Keningau 04-324 5297 087-335 845 082-245 220 Jalan Tun Zaidi 082-245 271 04-281 3227 088-977 784 Jelutong Kota Belud 04-282 5230 088-977 807 084-797 652 Kapit 084-797 677 04-575 9085 088-536 123 Kepala Batas Kota Kinabalu 04-575 9086 088-536 188 082-228 688 Kuching City 082-243 886 04-262 7732 089-884 020 Lebuh Macallum Lahad Datu 04-262 7886 089-884 021 084-210 984 Li Hua 084-216 996 04-593 1433 088-217 125 Nibong Tebal Lido 04-593 1460 088-217 669 085-212 443 Limbang 085-212 933 04-390 1241 088-912 522 Prai Papar 04-390 1246 088-912 523 085-755 000 Marudi 085-755 009 04-261 0060 089-202 288 Pulau Pinang Prima Square 04-261 1416 089-202 289 086-311 116 Medan Sentral 086-318 883 04-227 6017 Putatan 088-771 811 Pulau Tikus 04-227 6018 085-412 944 089-245 588 Miri Sandakan 085-412 955 04-644 3102 089-245 667 Relau 04-644 3112 084-871 900 089-761 311 Mukah Tawau 084-872 668 04-588 2436 089-761 322 Simpang Ampat 04-588 6744 082-330 542 Padungan 082-335 954 04-656 2288 Sungai Nibong 04-658 6000 085-415 728 Pelita 085-431 639 04-530 0288 Taman Bandar Raya 04-530 1951 084-652 490 Sarikei 084-652 491 THE WAY FORWARD 285

084-316 511 03-8913 4880 03-7872 8800 Kajang SS2 084-320 088 03-8913 4888 03-7874 1988

083-323 031 03-7845 8614 03-5629 3400 Sri Aman Kampung Baru Subang Subang Jaya 083-323 032 03-7846 8012 03-5629 3588 03-3250 0916 03-6156 1983 082-363 889 Kapar Sungai Buloh Stutong 03-3250 0917 03-6156 2056 082-369 389 03-7803 1267 03-8736 0228 082-419 889 Kelana Jaya Sungai Chua Wisma Saberkas 03-7803 4928 03-8737 0228 082-428 800 03-3342 3567 03-3191 2031 Klang Sungai Jarom 03-3342 3569 03-3191 2032

SELANGOR 03-6140 6295 03-3141 1236 Kota Damansara Sungai Pelek 03-6148 3766 03-3141 1237 Branch Telephone Kota Kemuning 03-5525 9600 03-3371 8212 03-4256 2333 Taman Chi Liung Ampang 03-3371 8433 03-4256 2636 03-3289 4193 Kuala Selangor 03-3289 4194 03-8938 1988 03-3323 1661 Taman Equine Bandar Bukit Tinggi 03-8938 2020 03-3323 6006 03-3167 2830 Pandamaran 03-3167 2831 03-9075 5200 03-8082 9821 Taman Indah Bandar Kinrara 03-9075 5202 03-8082 9822 03-7957 0007 Petaling Jaya New Town 03-7957 0211 03-7803 0124 03-9019 7872 Taman Mayang Bandar Mahkota Cheras 03-7803 0151 03-9019 8788 03-7783 3734 Petaling Jaya Old Town 03-7783 3735 03-4296 1806 03-8074 2628 Taman Muda Bandar Puchong Jaya 03-4296 1935 03-8074 2788 03-3167 4550 Port Klang 03-3167 4668 03-5161 3369 03-8062 7799 Taman Sentosa Klang Bandar Puteri Puchong 03-5161 3414 03-8062 7941 03-6099 6214 Rawang 03-6099 6388 03-5121 6394 Taman Sri Muda Bandar Setia Alam 03-3348 3999 03-5121 6395 03-3216 2500 Sabak Bernam 03-9055 1888 03-3216 2612 03-8961 2460 Bandar Sungai Long Taman Taming Jaya 03-9055 1890 03-8961 4980 03-7873 8931 SEA Park 03-5636 0713 03-7873 8932 03-5635 0617 Bandar Sunway UEP Subang Jaya 03-5636 0722 03-5635 0760 03-7958 2585 03-3187 2466 Section 14 Banting 03-7958 2586 03-3187 5992 03-3241 0092 TERENGGANU 03-6057 1200 Sekinchan Batang Kali 03-3241 0093 03-6057 2401 Branch Telephone 03-8723 8706 03-6028 2168 Semenyih 09-859 3150 Bukit Beruntung 03-8723 8811 Chukai 03-6028 2169 09-859 3154 03-6185 2980 03-7728 7353 Seri Gombak 09-848 2114 Damansara Jaya 03-6188 6316 Kuala Dungun 03-7729 8588 09-848 2507 03-8939 2000 03-7728 9376 Seri Kembangan 09-622 6016 03-8939 2001 03-7728 9406 09-622 6122 03-7874 1944 03-3341 4889 Seri Setia Jalan Tapah 03-7874 1966 03-3341 9036 03-5510 0567 Shah Alam 03-5510 1313 286 2018 ANNUAL REPORT PUBLIC BANK BERHAD GROUP CORPORATE DIRECTORY

Public Nominees (Asing) Sdn Bhd Overseas Branches 6th Floor, Menara Public Bank 146 Jalan Ampang SRI LANKA Pakse Branch 50450 Kuala Lumpur Colombo Branch 070 No. 13 : 03-2162 6077 #340, R A de Mel Mawatha South Road, Phonesavanh Village : 03-2162 6078 Colombo 00300, Sri Lanka Pakse District Champasak Lao P.D.R. : 94-11-257 6288 (Country Head) Public Investment Bank Berhad 94-11-257 6289/90/91/92, 94-11-729 : 856-31-218 111, 856-31-218 112 0200-7 (General Numbers) : 856-31-218 113 Head Office th : 94-11-257 3958 : [email protected] 25 Floor, Menara Public Bank : PBBELKLX 146 Jalan Ampang : [email protected] 50450 Kuala Lumpur Wattay Branch : 03-2166 9382 No. 146/1 and 146/2 : 03-2166 9362 Nawala Branch Souphanouvong Road : [email protected] #150, Nawala Road, Nugegoda Wattay Noy Tha Village : www.publicinvestbank.com Sri Lanka Sikhottabong District Branch Office: : 94-11-282 9751, 94-11-282 9752 Vientiane Capital (General Numbers) Lao P.D.R 27th Floor, Bangunan Public Bank : 94-11-2829755 : 856-21-219 869/870 6 Jalan Sultan Sulaiman : 856-21-219 876 50000 Kuala Lumpur : [email protected] : 03-2268 3000, 03-2031 3733 Galle Branch : 03-2268 3167, 03-2268 3178 #26 A Colombo Road Kaluwella Subsidiaries Public Invest Nominees (Tempatan) Sdn Bhd Galle Sri Lanka 27th Floor, Bangunan Public Bank Public Islamic Bank Berhad : 94-91-223 1741, 94-91-223 1742 6 Jalan Sultan Sulaiman (General Numbers) Head Office: 50000 Kuala Lumpur : 94-91-2231743 14th Floor, Menara Public Bank : 03-2268 3000 146 Jalan Ampang : 03-2268 3167 50450 Kuala Lumpur, Malaysia LAO P.D.R. : 03-2176 6000 : 03-2162 2224 Public Invest Nominees (Asing) Sdn Bhd Vientiane Branch : [email protected] 27th Floor, Bangunan Public Bank 100/1-4 Talat Sao Road P.O. Box 6614 : www.publicislamicbank.com.my 6 Jalan Sultan Sulaiman Vientiane, Lao P.D.R. 50000 Kuala Lumpur : 856-21-223 395 (Country Head) : 03-2268 3000 Kampung Baru Branch 856-21-223 394, 856-21-216 614 : 03-2268 3167 : 856-21-222 743 1-1, 1-2, 2-3, Plaza RAH : 4310 PBBVTE LS No. 111, Jalan Raja Abdullah, Kampung Baru Public Mutual Berhad : PBELALA 50300 Kuala Lumpur : [email protected] : 03-2692 7269, 03-2692 8749 Menara Public Bank 2 : 03-2692 7188, 03-2698 7699 No. 78, Jalan Raja Chulan 50200 Kuala Lumpur Savannakhet Branch : 03-2022 5000 Putrajaya Branch 308/3 Sisavangvong Road 03-2022 6800 Group 24 Ban. Sounantha 66 Jalan Diplomatik : 03-2022 6900 Kaisonephomvihanh District Presint 15 : [email protected] Savannakhet Province, Lao P.D.R. 62050 Putrajaya, Malaysia : www.publicmutual.com.my : 856-41-252 131/132 : 03-8888 7878 (32 branches/customer service centres : 856-41-252 133 : 03-8881 1366 nationwide) : [email protected] Public Nominees (Tempatan) Sdn Bhd Public Holdings Sdn Bhd 6th Floor, Menara Public Bank 8th Floor, Menara Public Bank 146 Jalan Ampang 146 Jalan Ampang 50450 Kuala Lumpur 50450 Kuala Lumpur : 03-2162 6077 : 03-2176 6000, 03-2176 6666 : 03-2162 6078 : 03-2163 9903 THE WAY FORWARD 287

PB Trust (L) Ltd Winton (B.V.I) Limited Campu Lonpac Insurance Plc Level 8(B), Main Office Tower Room 1101-1110, 11/F 7th Floor, Campu Bank Building Financial Park Labuan Phase 1, Argyle Centre No. 23, Kramuon Sar Avenue Jalan Merdeka 688 Nathan Road, Mongkok (Street No. 114) 87000 Federal Territory of Labuan Kowloon, Hong Kong Sangkat Phsar Thmey II Malaysia : 852-2391 9388 Khan Daun Penh : 6087-411 898, 6087-412 336 : 852-2391 5366 Phnom Penh : 6087-451 193 : [email protected] Kingdom of Cambodia : [email protected] : www.wintongroup.com.hk : 855-23-998 200/986 279 : www.pbtrust.com.my (3 branches in Hong Kong) : 855-23-986 308 : [email protected] : www.campulonpac.com.kh Public Bank (L) Ltd Public Bank (Hong Kong) Limited Level 8 (A) & (B), Main Office Tower 2/F, Public Bank Centre Financial Park Labuan 120 Des Voeux Road Central Public Bank Vietnam Limited Jalan Merdeka Central, Hong Kong Hanoi Head Office st th th 87000 Federal Territory of Labuan : 852-2541 9222 1 , 10 and 11 Floor, Malaysia : 852-2541 0009 Hanoi Tungshing Square Building : 6087-411 898 : [email protected] No. 2 Ngo Quyen Street : 6087-413 220 : www.publicbank.com.hk Ly Thai To Ward : PBLLMYKA (32 branches in Hong Kong and Hoan Kiem District : www.pblebank.com 4 branches in Shenzhen, China) Hanoi Vietnam : 8424-3943 8999, 8424-3943 9011, Public Financial Holdings Limited Cambodian Public Bank Plc 8424-3943 9012 2/F, Public Bank Centre Campu Bank Building : 8424-3943 9005 120 Des Voeux Road Central No. 23, Kramuon Sar Avenue : VIDPVNV5 Central, Hong Kong (Street No. 114) : [email protected] : 852-2541 9222 Sangkat Phsar Thmey II : www.publicbank.com.vn : 852-2815 9232 Khan Daun Penh (18 branches) : [email protected] Phnom Penh : www.publicfinancial.com.hk Kingdom of Cambodia : 855-23-222 880/222 881/222 882 Associated Companies (General Lines) Public Finance Limited : 855-23-222 887 PB Trustee Services Berhad Room 1105-7 Wing On House : CPBLKHPP 17th Floor, Menara Public Bank 71 Des Voeux Road Central : [email protected] 146 Jalan Ampang Central, Hong Kong : www.campubank.com.kh, 50450 Kuala Lumpur, Malaysia : 852-2525 9351 www.cpbebank.com : 03-2176 6623/6651/7674/7939 : 852-2845 0681 (31 branches in Cambodia) : 03-2164 3285 : [email protected] : www.publicfinance.com.hk (42 branches in Hong Kong) Campu Securities Plc AIA Public Takaful Berhad th 6 Floor, Campu Bank Building Menara AIA No. 23, Kramuon Sar Avenue Public Securities Limited 99 Jalan Ampang (Street No. 114) 50450 Kuala Lumpur, Malaysia Room 1101-3, Wing On House Sangkat Phsar Thmey II : 1 300 88 8922 71 Des Voeux Road Central Khan Daun Penh : [email protected] Central, Hong Kong Phnom Penh : www.aiapublic.com.my : 852-3929 2800 Kingdom of Cambodia : 852-2845 5240 : 855-23-999 880 : [email protected] : 855-23-999 883 CPB Properties Co Ltd : www.publicsec.com.hk : [email protected] 2nd Floor : www.campusecurities.com.kh Campu Bank Building Public Securities (Nominees) Limited No. 23, Kramuon Sar Avenue (Street No. 114) Room 1101-3, Wing On House Sangkat Phsar Thmey II 71 Des Voeux Road Central Khan Daun Penh, Phnom Penh Central, Hong Kong Kingdom of Cambodia : 852-3929 2850 : 855-23-222 880/222 881 : 852-2845 5240 : 855-23-222 887 : [email protected] This page has been intentionally left blank FORM OF PROXY

My/our proxy/proxies shall vote as follows: Number of shares held CDS Account No. (Please indicate with an “X” in the space provided below how you wish your votes to be cast on the resolutions specified in the notice of –– meeting. If you do not do so, the proxy/proxies will vote, or abstain from voting on the resolutions as he/they may think fit.)

FIRST PROXY “A” SECOND PROXY “B” “A” I/We NRIC/Co. No. (FULL NAME IN BLOCK LETTERS) NO. RESOLUTIONS FOR AGAINST FOR AGAINST of Ordinary Resolutions: (FULL ADDRESS) 1. Re-election of Mr Lee Chin Guan as Director Tel No. being a Member of PUBLIC BANK BERHAD, hereby appoint 2. Re-election of Dato’ Mohd Hanif bin Sher Mohamed as Director NRIC No. (FULL NAME IN BLOCK LETTERS AS PER NRIC) 3. Re-election of Tan Sri Dato’ Sri Tay Ah Lek as Director of 4. Re-election of Ms Lai Wai Keen as Director (FULL ADDRESS) 5. Approval of payment of Directors’ fees, Board Committees or failing him, NRIC No. Members’ fees, and allowances to Directors for financial (FULL NAME IN BLOCK LETTERS AS PER NRIC) year ended 31 December 2018 of 6. Approval of payment of remuneration and (FULL ADDRESS) benefits-in-kind (excluding Director’s fee and Board or failing him, the CHAIRMAN OF THE MEETING as my/our *first proxy to attend and vote for me/us on my/our behalf at the meeting allowance) for financial year ended 31 December 53rd Annual General Meeting of the Company to be held at the Grand Ballroom, Shangri-La Hotel, Jalan Sultan Ismail, 2018 to the then Chairman in financial year ended 50250 Kuala Lumpur on Monday, 22 April 2019 at 11.00 a.m., or any adjournment thereof. 31 December 2018, Tan Sri Dato’ Sri Dr. Teh Hong Piow 7. Re-appointment of Messrs Ernst & Young as Auditors and authority to the Directors to fix the Auditors’ remuneration “B” Where it is desired to appoint a second proxy, this section must also be completed, otherwise it should be deleted. Special Resolution: 1. Proposed adoption of New Constitution of the Company I/We NRIC/Co. No. (FULL NAME IN BLOCK LETTERS) Signed this day of 2019. of (FULL ADDRESS) * Delete if inapplicable. Tel No. being a Member of PUBLIC BANK BERHAD, hereby appoint Signature of Member/Common Seal

NRIC No. Notes: Where a Member of the Company is an exempt authorised nominee (FULL NAME IN BLOCK LETTERS AS PER NRIC) which holds ordinary shares in the Company for multiple beneficial 1. In respect of deposited securities, only Members whose names owners in one securities account (omnibus account), there is no appear in the Record of Depositors on 15 April 2019 (General of limit to the number of proxies which the exempt authorised (FULL ADDRESS) Meeting Record of Depositors) shall be entitled to attend, speak nominees may appoint in respect of each omnibus account it holds. and vote at this 53rd Annual General Meeting (AGM). or failing him, NRIC No. An exempt authorised nominee refers to an authorised nominee (FULL NAME IN BLOCK LETTERS AS PER NRIC) 2. A Member entitled to attend, speak and vote at this 53rd AGM defined under the Securities Industry (Central Depositories) Act, of may appoint a proxy to attend, speak and vote on his behalf. A 1991 which is exempted from compliance with the provisions of (FULL ADDRESS) proxy need not be a Member of the Company. subsection 25A(1) of the said Act. or failing him, the CHAIRMAN OF THE MEETING as my/our second proxy to attend and vote for me/us on my/our behalf at the 3. A Member shall not be entitled to appoint more than 2 proxies to 4. The instrument appointing a proxy shall be in writing under the hand attend and vote at this 53rd AGM provided that where a Member of the appointor or of his attorney duly authorised in writing or if the 53rd Annual General Meeting of the Company to be held at the Grand Ballroom, Shangri-La Hotel, Jalan Sultan Ismail, 50250 is an authorised nominee as defined in accordance with the appointor is a corporation, either under its common seal or under Kuala Lumpur on Monday, 22 April 2019 at 11.00 a.m., or any adjournment thereof. provisions of the Securities Industry (Central Depositories) Act, the hand of an officer or attorney of the corporation duly authorised. 1991, it may appoint up to 2 proxies in respect of each Securities 5. The instrument appointing a proxy must be deposited at the office Account it holds with ordinary shares in the Company standing to of the Share Registrar, Tricor Investor & Issuing House Services Sdn The proportions of my/our holding to be represented by my/our proxies are as follows: the credit of the said Securities Account. Bhd, Unit 32-01, Level 32, Tower A, Vertical Business Suite, Where a Member appoints 2 proxies, the appointment shall be Avenue 3, Bangsar South, No. 8, Jalan Kerinchi, 59200 First Proxy “A” % invalid unless he specifies the proportions of his shareholdings to Kuala Lumpur, Malaysia not less than 48 hours before the time set Second Proxy “B” % be represented by each proxy. for this 53rd AGM or no later than 20 April 2019 at 11.00 a.m.

100% 6. Pursuant to Paragraph 8.29A(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions set out in this Notice will be put to vote by way of poll. Please fold here to seal

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STAMP

TO: SHARE REGISTRAR TRICOR INVESTOR & ISSUING HOUSE SERVICES SDN BHD Unit 32-01, Level 32 Tower A, Vertical Business Suite Avenue 3, Bangsar South No. 8, Jalan Kerinchi 59200 Kuala Lumpur Malaysia

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www.publicbankgroup.com

PUBLIC BANK BERHAD (6463-H) Menara Public Bank, 146 Jalan Ampang, 50450 Kuala Lumpur, Malaysia Tel: 603 2163 8888 / 603 2163 8899 Fax: 603 2163 9917