Highlight Public Bank's latest results fail to excite investors

by **Cals** Fri 22 Apr 2016, 04:38

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[size=28]Public Bank's latest results fail to excite investors

By Tan Siew Mung / theedgemarkets.com | April 21, 2016 : 11:23 AM MYT

KUALA LUMPUR (April 21): Public Bank Bhd's first quarter results, which are within analysts' expectations, failed to excite investors as its shares prices were deemed pricey by some analysts amid challenging conditions.

At 10.50am, shares of the country's third largest bank by assets rose six sen to RM19.08 with only 970,200 shares traded.

Yesterday, the group announced to Bursa Malaysia that its net profit grew 5% to RM1.23 billion in the first quarter ended March 31, 2016 (1QFY16) from RM1.17 billion a year ago, supported by higher net interest income, non-interest income and Islamic banking income.

The group's revenue for the period climbed 9.5% to RM5.04 billion when compared with RM4.6 billion in the previous year.

As the results were generally in line with expectations, most analysts maintained their profit forecasts on the group.

CIMB IB Research said in a report today that although it likes Public Bank for its strong fundamentals and above-industry loan growth, it was pricey when compared with other peers.

Its FY17 forecast price to earnings (P/E) of 13 times and price to book (P/BV) of 1.9 times are the highest among the Malaysian banks, while its FY16 forecasted dividend yield of 3.1% is below the sector's average of 4.3%, said the research house.

Thus, CIMB maintained its "hold" call with a target price of RM19.15, less than 1% upside when compared with its current market price.

According to Kenanga Research, the pressure for loans growth, asset quality and net interest margins remain the group's challenges.

It said in a report today, the leading indicators for 2016 loans growth remain weak and the research house only expects system loans to expand by 5% to 6% year-on-year this year, lower than 7.9% in 2015. Besides, the industry's relatively high loan-deposit ratio of over 91% makes bank lending difficult.

On asset quality, the research house expects it to stabilise with credit costs facing upward pressure due to higher costs of living.

The group's net interest margins downward pressure is likely to persist on the back of stiff price-based competition for loans and deposits, it added.

Due to the uncertain economic challenges ahead, Kenanga maintained "market perform" on Public Bank with a higher target price of RM20.05, from RM19.23 previously.
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