Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: RHB
Public Bank
(Jan 17, RM13.48)
Outperform call maintained at RM13.44 with fair value at RM15.40: Public Bank will be announcing its 4QFY10 results later this month. Our full-year net profit estimate of RM3 billion implies that 4Q10 net profit could be up by around 3% quarter-on-quarter and 19% year-on-year.
With 9M10 annualised gross loan growth at 13.7%, we expect full-year loan growth to come in within the 14% to 15% range that is in line with management's target. Net interest income growth, however, would be tempered by our expectation that net interest margins (NIMs) would contract q-o-q, mainly due to the ongoing repricing of longer-term deposits.
We expect non-interest income to remain at healthy levels buoyed by the mutual fund operations, while loan impairment allowances are expected to trend lower q-o-q in the absence of lumpy, one-off provisioning that was made in 3Q10.
Last month, Bank Negara Malaysia updated the guideline in relation to the classification of rescheduled/restructured facilities. Banks must now wait until repayments for rescheduled/restructured loans have been observed continuously for a period of time before these loans can be reclassified as non-impaired, compared with the earlier practice where loans are reclassified upon perfection of the relevant documentation.
This effectively lengthens the period required before rescheduled/restructured loans can be reclassified as non-impaired and could impact ratios, such as impaired loans and loan loss coverage, but is unlikely to impact loan impairment allowances, we believe.
According to management, this updated guideline is not expected to have a significant impact on the group's asset quality ratios.
We expect a second interim gross dividend per share (DPS) of 35 sen (4QFY09: 25 sen, gross, plus one-for-68 distribution of treasury shares), which would bring the full-year gross DPS to 60 sen (FY09: gross DPS of 55 sen).
This would translate to a net payout ratio of about 53%, within the 50% to 55% payout guidance.
We understand that monthly loan approvals for mortgages have been stable in 4Q10, which helps support management's expectations that the 70% loan-to-value cap for third home financing facilities would not have a significant impact on loan growth.
On the whole, we project FY11 net interest income growth of 8.7%, underpinned by loan growth assumption of 14%, partly offset by NIM contraction of 5bps. We assume non-interest income growth of 15% led by the unit trust business and further supported by rising contributions from other areas such as forex, remittances and trade financing.
Credit charge for the domestic side should largely be stable going forward with a further boost coming from the prospects of recovery from both Hong Kong and Cambodia.
We have left our earnings forecasts unchanged. Our fair value of RM15.40 remains unchanged and is based on target CY11 price-earnings ratio of 16 times. We maintain our 'outperfrom' call. ' RHB Research, Jan 17
This article appeared in The Edge Financial Daily, January 18, 2011.
Company Name: PUBLIC BANK BHD
Research House: RHB
Public Bank
(Jan 17, RM13.48)
Outperform call maintained at RM13.44 with fair value at RM15.40: Public Bank will be announcing its 4QFY10 results later this month. Our full-year net profit estimate of RM3 billion implies that 4Q10 net profit could be up by around 3% quarter-on-quarter and 19% year-on-year.
With 9M10 annualised gross loan growth at 13.7%, we expect full-year loan growth to come in within the 14% to 15% range that is in line with management's target. Net interest income growth, however, would be tempered by our expectation that net interest margins (NIMs) would contract q-o-q, mainly due to the ongoing repricing of longer-term deposits.
We expect non-interest income to remain at healthy levels buoyed by the mutual fund operations, while loan impairment allowances are expected to trend lower q-o-q in the absence of lumpy, one-off provisioning that was made in 3Q10.
Last month, Bank Negara Malaysia updated the guideline in relation to the classification of rescheduled/restructured facilities. Banks must now wait until repayments for rescheduled/restructured loans have been observed continuously for a period of time before these loans can be reclassified as non-impaired, compared with the earlier practice where loans are reclassified upon perfection of the relevant documentation.
This effectively lengthens the period required before rescheduled/restructured loans can be reclassified as non-impaired and could impact ratios, such as impaired loans and loan loss coverage, but is unlikely to impact loan impairment allowances, we believe.
According to management, this updated guideline is not expected to have a significant impact on the group's asset quality ratios.
We expect a second interim gross dividend per share (DPS) of 35 sen (4QFY09: 25 sen, gross, plus one-for-68 distribution of treasury shares), which would bring the full-year gross DPS to 60 sen (FY09: gross DPS of 55 sen).
This would translate to a net payout ratio of about 53%, within the 50% to 55% payout guidance.
We understand that monthly loan approvals for mortgages have been stable in 4Q10, which helps support management's expectations that the 70% loan-to-value cap for third home financing facilities would not have a significant impact on loan growth.
On the whole, we project FY11 net interest income growth of 8.7%, underpinned by loan growth assumption of 14%, partly offset by NIM contraction of 5bps. We assume non-interest income growth of 15% led by the unit trust business and further supported by rising contributions from other areas such as forex, remittances and trade financing.
Credit charge for the domestic side should largely be stable going forward with a further boost coming from the prospects of recovery from both Hong Kong and Cambodia.
We have left our earnings forecasts unchanged. Our fair value of RM15.40 remains unchanged and is based on target CY11 price-earnings ratio of 16 times. We maintain our 'outperfrom' call. ' RHB Research, Jan 17
This article appeared in The Edge Financial Daily, January 18, 2011.
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