Investment Highlights

• The stock is fully valued and we keep our HOLD call on Public Bank (PBB) with an unchanged fair value of RM4.40/share. We peg the stock to FY22 P/BV of 1.7x, supported by an ROE of 12.4%.

• We tweak our FY22/23 earnings by -3.1%/-0.8% after adjusting our estimates for credit cost and NIM assumptions.

• The group reported a lower core net profit in 4Q21 of RM1.38bil (-4.1% QoQ). This was contributed by lower non-interest income from a drop in unit trust and stockbroking income coupled with higher taxes.

• For 12M21, core earnings grew 11.0% YoY to RM5.7bil with higher total income partially offset by an increase in operating expenses and provisions. Net interest income (NII) expanded by 15.8% YoY in 12M21 from loan growth as well as due to the low base and impact of OPR cuts in 12M20. The group’s non-interest income (NOII) fell by 7.3% YoY attributed to lower investment, stockbroking and FX income.

• Underlying earnings for 12M21 were within expectations, accounting for 103.6% and 102.7% of our and consensus estimate respectively.

• The group’s loans (domestic and overseas) accelerated in 4Q21 to 3.6% YoY vs. 3.3% YoY growth in 3Q21. Even though domestic loans picked up pace to 3.4% YoY, it was below the industry growth of 4.5% YoY. Meanwhile, international loan growth accelerated to 6.6% YoY.

• The group’s total deposits growth slipped to 4.0% YoY with deposits of its domestic operations expanding by 4.5% YoY. Growth in CASA was decent at 11.7% YoY lifting the CASA ratio to 31.0%.

• In 4Q21, NIM expanded by 3bps QoQ to 2.18%. For 12M21 NIM rose by 27bps YoY to 2.22% from a lower funding cost and the low base in 12M20 due to OPR reductions.

• Asset quality was stable with a sustained GIL ratio of 0.31%, well below the domestic industry's 1.4%. The group's credit cost of 0.34% in 12M21 was within management guidance of 0.35% for FY21. The group set aside additional provisions (management overlays) of RM300mil in 4Q21, leading to total of conservative provisions of RM1.7bil for FY20 and FY21 (FY20: RM700mil, FY21: RM1bil).

• The group declared a 2nd interim dividend of 7.7 sen/share leading to total dividends of 15.2 sen/share (payout: 52.2%). This was in line with expectations.
   

Source: AmInvest Research - 28 Feb 2022