Investment Highlights

• We keep our HOLD call on Public Bank (PBB) with an unchanged fair value of RM4.40/share pegging the stock to FY22 P/BV of 1.6x, supported by an ROE of 12.3%. We continue to see the stock as fairly valued.

• Our FY21 net profit has been revised lower by 4.8% after lowering our loan growth projection to 3.0% from 4.0% and raising our credit cost estimate to 0.35% from 0.25%. However, our valuation is unchanged as it is based on FY22 numbers.

• The group reported a lower 2Q21 core net profit of RM1.38bil (-9.5% QoQ) attributed to a decline in total income and higher provisions with a further top-up in management overlays.

• For 6M21, core earnings grew by 7.5% YoY to RM2.9bil supported by higher total income partially offset by higher operating expenses and provisions.

• Underlying earnings for 6M21 accounted for 49.9% and 51.2% of our and consensus estimate respectively.

• The group’s loan (domestic and overseas) grew by 5.2% YoY or 3.7% annualised.

• Domestic loan grew by 5.9% YoY or 3.5% annualized vs. the industry’s 3.4% YoY or 3.2% annualized growth.

• The group’s deposits expanded at a faster pace of 4.2% YoY or 5.1% annualized. CASA growth tapered, leading to a slightly lower CASA ratio of 29.7%.

• In 2Q21, NIM slipped 2bps QoQ to 2.26%.

• Softer NOII in 2Q21 on QoQ basis from slowdown in unit trust, stockbroking and gains in financial instruments.

• Stable asset quality with low GIL ratio of 0.4%, well below the domestic industry's 1.6%.

• The group's credit cost was 45bps in 2Q21 vs. 23bps in 1Q21 as the group continued to book in additional provisions (management overlays).

• Arising from the increase of conservative provisions, the group recorded a higher credit cost of 34bps for 6M21.

• The group declared a 7.5 sen/share interim dividend This represented a payout of 50.0%, which has been consistent with the past trend.

Source: AmInvest Research - 30 Aug 2021