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%.

• The group reported a higher core net profit in 3Q21 of RM1.44bil (+4.0% QoQ) after excluding a mod loss from Pemulih net after tax of RM78mil. This was supported by lower operating expenses (opex) and provisions.

• For 9M21, core earnings grew 7.9% YoY to RM4.4bil with higher total income partially offset by increase in operating expenses and provisions.

• Underlying earnings for 9M21 were within expectations, accounting for 78.7% and 78.5% of our and consensus estimate respectively.

• The group’s loan (domestic and overseas) grew at a slower pace of 3.3% YoY or 3.0% annualised (2Q21: 5.2% YoY or 3.7% annualized).

• Domestic loan slowed down in pace to 3.3% YoY or 2.8% annualised vs. the industry’s 2.9% YoY or 3.3% annualised growth. Meanwhile, international loans expanded by 3.1% YoY.

• The group’s total deposits grew by 4.2% YoY or 4.8% annualised. Deposits of its domestic operations expanded at a slower pace of 5.1% annualised (2Q21: 5.4% annualised).

• Growth of CASA continued to taper to 11.4% YoY or 12.2% annualised, and group’s CASA ratio slipped to 19.7%.

• In 3Q21, its underlying NIM was compressed by 2bps QoQ to 2.24%. NOII was softer QoQ from a slowdown in stockbroking as well as investment and trading income.

• Asset quality was stable with a low GIL ratio of 0.33%, well below the domestic industry's 1.6%.

• The group's credit cost of 35bps in 9M21 was within management guidance for FY21.

• Our net profit for FY22 has been lowered by 8.7% to account for additional taxes from the prosperity tax of RM551mil. As this is a one-off additional tax, our core net profit for FY22 of RM6.3bil is unchanged.

Source: AmInvest Research - 30 Nov 2021