Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Public Bank Bhd
(July 26, RM13.48)
Maintain outperform at RM13.36 with fair value of RM16: Public Bank's 2Q11 results were within our and consensus expectations with 1H net profit of RM1.7 billion (+20% year-on-year [y-o-y]) accounting for 50% of our and consensus full-year estimates. Public Bank declared a single-tier dividend per share of 20 sen (2Q10: 25 sen, gross).
Net interest income for 2Q11 rose 5% quarter-on-quarter and 10% y-o-y on the back of continued loan growth (+3.4% q-o-q; +13.2% y-o-y) and net interest margin expansion (+9 q-o-q; +11 basis points [bps] y-o-y). Non-interest income remained healthy (+9.3% q-o-q; +16.2% y-o-y) and increased to 21.7% of total operating income, thanks to the mutual fund operations and stronger dividend income. Overheads were under control, resulting in CIR improving to 29.4% from 30.4% in 1Q11 (2Q10: 31.6%). Credit cost was stable at 10 bps against 1Q11: nine bps (2Q10: 12 bps). Generally, the results were solid, albeit without any major surprises.
Loan growth for 2Q stood at 13.2% y-o-y (+3.4% q-o-q) with the main growth drivers'' residential (+16.8% y-o-y) and non-residential (+22.6% y-o-y) mortgages as well as hire purchase (+10% y-o-y). Annualised group loan growth stood at 13.6%, driven by the domestic segment (14.5% annualised) while loan growth from overseas (3.2% annualised) was partly impacted by adverse foreign exchange translation. Although annualised loan growth was slightly below the 14% to 15% growth target set, we expect the target to be met with stronger growth in the quarters ahead. Customer deposits grew 4.4% q-o-q (+7.9% y-o-y) due to higher fixed (+3.2% q-o-q), demand (+5% q-o-q) and money market (+13.8% q-o-q) deposits and with that, group loans-deposit ratio improved to 87.3% as at end-June 2011 from 88.1% as at end-March 2011.
Asset quality remained intact with new impaired loan formation (annualised) improving slightly to 27 bps, compared with 29 bps in 1Q11 (2Q10: 79 bps). Absolute impaired loans fell 5% q-o-q and the gross impaired loans ratio improved to 0.96% as at end-2Q11 from 1.05% as at end-1Q11. Tier-1 and risk-weighted capital ratios rose by 70 bps each to 10.2% and 13.7% respectively.
We have retained our fair value of RM16 (based on target FY12 price-earnings ratio of 15 times) and 'outperform' call on the stock. We continue to like the stock for its above-industry growth and asset quality. Public Bank'' is the best proxy to the domestic economy in terms of loan growth. ' RHB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
Company Name: PUBLIC BANK BHD
| Research House: RHB | Price Call: BUY | Target Price: 16.00 |
Public Bank Bhd
(July 26, RM13.48)
Maintain outperform at RM13.36 with fair value of RM16: Public Bank's 2Q11 results were within our and consensus expectations with 1H net profit of RM1.7 billion (+20% year-on-year [y-o-y]) accounting for 50% of our and consensus full-year estimates. Public Bank declared a single-tier dividend per share of 20 sen (2Q10: 25 sen, gross).
Net interest income for 2Q11 rose 5% quarter-on-quarter and 10% y-o-y on the back of continued loan growth (+3.4% q-o-q; +13.2% y-o-y) and net interest margin expansion (+9 q-o-q; +11 basis points [bps] y-o-y). Non-interest income remained healthy (+9.3% q-o-q; +16.2% y-o-y) and increased to 21.7% of total operating income, thanks to the mutual fund operations and stronger dividend income. Overheads were under control, resulting in CIR improving to 29.4% from 30.4% in 1Q11 (2Q10: 31.6%). Credit cost was stable at 10 bps against 1Q11: nine bps (2Q10: 12 bps). Generally, the results were solid, albeit without any major surprises.
Loan growth for 2Q stood at 13.2% y-o-y (+3.4% q-o-q) with the main growth drivers'' residential (+16.8% y-o-y) and non-residential (+22.6% y-o-y) mortgages as well as hire purchase (+10% y-o-y). Annualised group loan growth stood at 13.6%, driven by the domestic segment (14.5% annualised) while loan growth from overseas (3.2% annualised) was partly impacted by adverse foreign exchange translation. Although annualised loan growth was slightly below the 14% to 15% growth target set, we expect the target to be met with stronger growth in the quarters ahead. Customer deposits grew 4.4% q-o-q (+7.9% y-o-y) due to higher fixed (+3.2% q-o-q), demand (+5% q-o-q) and money market (+13.8% q-o-q) deposits and with that, group loans-deposit ratio improved to 87.3% as at end-June 2011 from 88.1% as at end-March 2011.
Asset quality remained intact with new impaired loan formation (annualised) improving slightly to 27 bps, compared with 29 bps in 1Q11 (2Q10: 79 bps). Absolute impaired loans fell 5% q-o-q and the gross impaired loans ratio improved to 0.96% as at end-2Q11 from 1.05% as at end-1Q11. Tier-1 and risk-weighted capital ratios rose by 70 bps each to 10.2% and 13.7% respectively.
We have retained our fair value of RM16 (based on target FY12 price-earnings ratio of 15 times) and 'outperform' call on the stock. We continue to like the stock for its above-industry growth and asset quality. Public Bank'' is the best proxy to the domestic economy in terms of loan growth. ' RHB Research, July 26
This article appeared in The Edge Financial Daily, July 27, 2011.
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