Investment Highlights

• The stock is fully valued and we keep our HOLD call on Public Bank (PBB) with a slightly higher fair value (FV) of RM4.70/share from RM4.65/share. We peg the stock to FY23 P/BV of 1.7x, supported by ROE of 13.5%. Our FV reflect a neutral 3-star ESG rating.

• We tweak our FY23F/24F earnings by +0.8%/+0.9% after revising our loan growth projection to 6% from 5%. Underlying earnings for 1QFY22 were within expectations, accounting for 25% of our estimate and 26.5% of consensus forecast.

• The group reported a subdued 1QFY22 core net profit of RM1.5bil (+0.4% YoY), excluding the impact of Cukai Makmur. This was attributed to lower net income from its Islamic banking business and non-interest income with a decline in unit trust and stockbroking income. The weaker unit trust income was due to lower fees from new sales while management fees were stable. NAV of funds under management stood at RM99.8bil.

• The group’s loans (domestic and overseas) grew at a faster pace of 3.7% YoY in 1QFY22 vs 3.6% YoY in 4QFY21. Domestic loans accelerated to 3.7% YoY (4QFY21: 3.4% YoY). Meanwhile, international loan growth moderated to 4.2% YoY.

• The group’s total deposits growth expanded by 4.4% YoY. Growth in CASA eased to 8.8% YoY. Nevertheless, CASA ratio remained steady at 31.2%.

• In 1QFY22, NIM expanded by 6bps QoQ to 2.24% contributed by lower funding cost. The decrease in cost of funds was attributed to higher average CASA balances. Every 25bps hike in OPR will increase the group’s NIM by 2bps.

• Asset quality was stable with a low GIL ratio of 0.29%, well below the domestic industry's 1.5%.

• No additional provisions (management overlays) were set aside in 1QFY22. Total cumulative conservative provisions raised remained at RM1.7bil (FY20: RM700mil & FY21: RM1bil). Management hinted that there will not be writebacks of management overlays in FY22. The group will remain prudent on provisions and any write-back of conservative provision buffers will only be likely in FY23F.

Source: AmInvest Research - 31 May 2022