Friday, Feb 09, 2001
MARC has re-affirmed its financial institution rating of AA- and short-term rating of MARC-1 for Public Finance Berhad with a positive outlook. The ratings reflect the finance company’s defensible business franchise, healthy capital base, good asset quality, capable management, strong earnings, ample liquidity and its 56.76% ownership by Public Bank Berhad.
Public Finance is a well established player in the finance company industry, where it holds a significant share of the motor vehicle hire purchase business and retail deposits, and owns the largest branch network among the finance companies. The finance company enjoys the benefits of good franchise value in a rapidly consolidating domestic banking and financial market – one characterized by intensifying competition and increasing product commoditization. Since commencing operations in 1966, Public Finance continues to be engaged principally in retail deposit taking and consumer lending. The lending activities of Public Finance are focused on the financing of new and used motor vehicles as well as housing loans. At 47% of gross loans as at end-September 2000, hire purchase financing of transport vehicles remained the largest component of the company’s loans portfolio.
Public Finance’s asset quality indicators continue to show signs of improvement, consistent with the finance company’s strengthened credit culture and asset recovery efforts. In the long term, Public Finance’s efforts to reposition its hire-purchase portfolio towards a higher proportion of new cars financed will contribute positively to the finance company’s asset quality. The finance company’s level of net non-performing loans (NPLs) of 2.9% as at end-September 2000 (based on a six-month classification) remains markedly lower than the aggregate industry average of 9.1%. The finance company has comfortable levels of provisions against problem accounts and continues to pursue collections. Overall, MARC believes that Public Finance’s credit experience in its core passenger vehicle financing and residential lending businesses should remain good vis-à-vis the industry.
Public Finance’s capital adequacy measures remain strong viewed in the context of its favourable asset quality and earnings generation. Its risk-weighted capital ratio as at end-September 2000 stood at 14.5% while its core capital ratio of 12.9% was well above the industry average of 8.0%. The company’s shareholders’ funds strengthened further to RM1.1 billion as at end-September 2000.
Public Finance has been able in recent years to increase its market share of savings deposits, thanks to a successful savings deposit gathering campaign and its sizeable branch network. The finance company’s strong core funding and favourable access to the interbank market continue to underpin its healthy liquidity position. Both its liquid assets and loans to deposits ratios are more conservative as compared to the market averages.
The finance company’s core profitability is good and its operating efficiency continues to improve. The finance company posted an 80.5% increase in its pre-tax profit to RM241 million for the nine months ended September 2000. The improvement in earnings was driven by higher net interest margins, reducing loan provisioning requirements and strong loans growth. In the months ahead, MARC expects the finance company to experience margin pressures from vigorous competition in retail lending and rising funding cost, which may moderate its results.
Public Finance’s rating outlook is positive. The finance company’s financial institution rating is currently on a very solid footing as a result of recent improvements in its profitability and asset quality. While strengthening operational and financial fundamentals support a positive rating outlook for Public Finance, future rating action will be intimately linked to developments in the wider economy.
Public Finance is a well established player in the finance company industry, where it holds a significant share of the motor vehicle hire purchase business and retail deposits, and owns the largest branch network among the finance companies. The finance company enjoys the benefits of good franchise value in a rapidly consolidating domestic banking and financial market – one characterized by intensifying competition and increasing product commoditization. Since commencing operations in 1966, Public Finance continues to be engaged principally in retail deposit taking and consumer lending. The lending activities of Public Finance are focused on the financing of new and used motor vehicles as well as housing loans. At 47% of gross loans as at end-September 2000, hire purchase financing of transport vehicles remained the largest component of the company’s loans portfolio.
Public Finance’s asset quality indicators continue to show signs of improvement, consistent with the finance company’s strengthened credit culture and asset recovery efforts. In the long term, Public Finance’s efforts to reposition its hire-purchase portfolio towards a higher proportion of new cars financed will contribute positively to the finance company’s asset quality. The finance company’s level of net non-performing loans (NPLs) of 2.9% as at end-September 2000 (based on a six-month classification) remains markedly lower than the aggregate industry average of 9.1%. The finance company has comfortable levels of provisions against problem accounts and continues to pursue collections. Overall, MARC believes that Public Finance’s credit experience in its core passenger vehicle financing and residential lending businesses should remain good vis-à-vis the industry.
Public Finance’s capital adequacy measures remain strong viewed in the context of its favourable asset quality and earnings generation. Its risk-weighted capital ratio as at end-September 2000 stood at 14.5% while its core capital ratio of 12.9% was well above the industry average of 8.0%. The company’s shareholders’ funds strengthened further to RM1.1 billion as at end-September 2000.
Public Finance has been able in recent years to increase its market share of savings deposits, thanks to a successful savings deposit gathering campaign and its sizeable branch network. The finance company’s strong core funding and favourable access to the interbank market continue to underpin its healthy liquidity position. Both its liquid assets and loans to deposits ratios are more conservative as compared to the market averages.
The finance company’s core profitability is good and its operating efficiency continues to improve. The finance company posted an 80.5% increase in its pre-tax profit to RM241 million for the nine months ended September 2000. The improvement in earnings was driven by higher net interest margins, reducing loan provisioning requirements and strong loans growth. In the months ahead, MARC expects the finance company to experience margin pressures from vigorous competition in retail lending and rising funding cost, which may moderate its results.
Public Finance’s rating outlook is positive. The finance company’s financial institution rating is currently on a very solid footing as a result of recent improvements in its profitability and asset quality. While strengthening operational and financial fundamentals support a positive rating outlook for Public Finance, future rating action will be intimately linked to developments in the wider economy.