Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: MAYBANK
Public Bank Bhd
(March 28, RM13.04)
Maintain hold at RM13.04 with target price of RM14.10: The key take-away from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but rate competition for both loans and deposits is unlikely to ease anytime soon. Our earnings forecasts are broadly maintained.
While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 price-to-book value of three times, return on equity: 23.9%) we believe, and we see little catalyst in the near term. We maintain 'hold' with an unchanged discount dividend model-derived target price of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).
Management earlier this year set a loan growth target of 14% to 15% for 2011 and believes that it is on track to meet this. The current pipeline places mortgages on cue to meet these growth rates, while hire purchase (HP) loans are expected to grow at a slower 9% to 10%. Picking up the slack would be SME financing, where loan growth is targeted to be a faster 17% to 18%.
Our loan growth forecast has erred on the conservative side; we are raising our estimates to 13.3% for 2011 and 12.2% for 2012, from 10.2% and 10.1% respectively.
Management continues to expect 10 to 15 basis points (bps) compression in net interest margins (NIM) this year, with pressure on both asset and liability rates. To this end, we are broadening our NIM compression expectation to nine bps from five bps for 2011, but continue to maintain a mild NIM recovery of about five bps in 2012, on expectations of some positive flow through from interest rate hikes in 2H11.
This essentially offsets the upgrade for our loan growth forecast and our forecasts are little changed.
Overseas operations should fare better this year, on the back of: (i) a pick-up in lending for Public Financial Group (from 8% to 9% growth in 2010); and (ii) improved liquidity for Cambodian Public Bank, which will allow for a pick-up in lending activities. Efforts will also be made to drive the group's commercial operations in Hong Kong (30 branches in the territory).
Overseas operations accounted for 7% of group pre-tax profit for 2010, and the aim is to raise this to 15% over the medium term. ' Maybank IB Research, March 28
This article appeared in The Edge Financial Daily, March 29, 2011.
Company Name: PUBLIC BANK BHD
Research House: MAYBANK
Public Bank Bhd
(March 28, RM13.04)
Maintain hold at RM13.04 with target price of RM14.10: The key take-away from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but rate competition for both loans and deposits is unlikely to ease anytime soon. Our earnings forecasts are broadly maintained.
While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 price-to-book value of three times, return on equity: 23.9%) we believe, and we see little catalyst in the near term. We maintain 'hold' with an unchanged discount dividend model-derived target price of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).
Management earlier this year set a loan growth target of 14% to 15% for 2011 and believes that it is on track to meet this. The current pipeline places mortgages on cue to meet these growth rates, while hire purchase (HP) loans are expected to grow at a slower 9% to 10%. Picking up the slack would be SME financing, where loan growth is targeted to be a faster 17% to 18%.
Our loan growth forecast has erred on the conservative side; we are raising our estimates to 13.3% for 2011 and 12.2% for 2012, from 10.2% and 10.1% respectively.
Management continues to expect 10 to 15 basis points (bps) compression in net interest margins (NIM) this year, with pressure on both asset and liability rates. To this end, we are broadening our NIM compression expectation to nine bps from five bps for 2011, but continue to maintain a mild NIM recovery of about five bps in 2012, on expectations of some positive flow through from interest rate hikes in 2H11.
This essentially offsets the upgrade for our loan growth forecast and our forecasts are little changed.
Overseas operations should fare better this year, on the back of: (i) a pick-up in lending for Public Financial Group (from 8% to 9% growth in 2010); and (ii) improved liquidity for Cambodian Public Bank, which will allow for a pick-up in lending activities. Efforts will also be made to drive the group's commercial operations in Hong Kong (30 branches in the territory).
Overseas operations accounted for 7% of group pre-tax profit for 2010, and the aim is to raise this to 15% over the medium term. ' Maybank IB Research, March 28
This article appeared in The Edge Financial Daily, March 29, 2011.
No comments:
Post a Comment