Research houses hold mixed views on Public Bank

Research houses hold mixed views on Public Bank
Business & Markets 2013
Written by Bernama
Wednesday, 24 July 2013 15:58

KUALA LUMPUR, (July 24): Kenanga Research has maintained its 'Outperform' call on PUBLIC BANK BHD [], saying the banking group will grow from strength to strength, being one of very few consistent performers on Bursa Malaysia.

"The bank has a potential return of 10 per cent, including a potential dividend yield of 3.1 per cent to our target price of RM18.20," the research house said in a note.

It said Public Bank's first-half 2013 (H1 FY13) net profit of RM2.0 billion accounted for 47 per cent of its estimate of RM4.3 billion and 48 per cent of consensus estimate of RM4.2 billion.

This was in line with expectations as the H1 results normally accounted for 47-49 per cent of the full-year numbers, it said.

Kenanga said the bank's total income only grew 6.5 per cent yoy and 3.1 per cent quarter-on-quarter (qoq) due to slower growth rate by Islamic banking business which grew 1.3 per cent q-o-q but declined 0.5 per cent yoy.

"Despite the keen competition and tighter administrative measures, the group still registered a total loan growth of 5.9 per cent or 11.8 per cent on an annualised basis.

"The loan growth is in line with our growth expectation of 12 per cent, and outperformed the industry's yoy growth of 9.0 per cent as of end-May 2013," it said.

Deposit grew at an annualised rate of 13.6 per cent, higher than the industry growth of 9.2 per cent.

Net interest income only grew 6.6 per cent yoy to RM1.39 billion in the second quarter this year compared with RM1.27 billion last year, while non-interest income accounted for 21.8 per cent of total income, attributed by higher income from unit trust, forex and traditional banking.

The group also continued to be an efficiently managed bank in Malaysia and registered a decline in operating expenses.

In a separate note, RHB Research maintaind its 'Neutral' call on Public Bank, saying the results had no major surprises and the group was on track to meet its 2013 goals.

It has maintained the earning forecasts for the bank but raised the fair value by eight per cent to RM19.40.
Meanwhile, Maybank Research maintained its 'Hold' call on the bank as the results were within expectations.

"Much as we admire the bank for its strong fundamentals and solid growth, valuations are fair given declining return on earnings and a prospective FY13 dividend yield of just 3.1 per cent."

Maybank Research has raised its target price for the stock to RM18.60 from RM17.60 previously.