Investment Highlights

• We maintain our HOLD call on Public Bank (PBB) with an unchanged fair value of RM4.70/share. This is supported by ROE of 13.6% leading to FY23F P/BV of 1.7x. No change to our neutral 3-star ESG rating.

• Core earnings for 9MFY22 were within our expectation, accounting for 75.4% of our estimate and were slightly above consensus forecast at 81.9% of street’s.

• Hence, we fine-tuned our FY22F/23F/24F earnings by +0.2%/- 0.6%/-2.1% after adjusting net interest margin (NIM) and loan growth assumptions.

• PBB reported core earnings of RM4.8bil in 9MFY22, a growth of 10 %YoY. Stronger NII from loan expansion and higher net interest margin (NIM) as well as lower loan loss allowances were partially offset by a decrease in NOII due to a decline in unit trust, stock broking and gains from financial instruments.

• PBT of Public Mutual fell 9.8% YoY to RM580mil in 9MFY22. Net asset value of funds under management declined QoQ to RM88.7bil. The retail market share of Public Mutual slipped slightly QoQ to 34.4%. Meanwhile, for bancassuance business, annualised new premiums (ANP) slipped 22.3% YoY to RM309.8mil.

• The group reported an underlying net profit excluding the impact of Cukai Makmur in 3Q22 of RM1.7bil (+10% QoQ). The improved earnings were driven largely by higher net interest income (NII) and non-interest income (NOII), partially offset by the increase in provisions.

• The group’s loans (domestic and overseas) gained momentum to register a higher growth rate of 5.7% YoY in 3QFY22. Domestic loans grew by 5.2% YoY vs. the industry’s 6.4% YoY growth. Meanwhile, international loans expanded at a faster pace of 11.9% YoY.

• Growth in CASA moderated to 4.8% YoY leading to a lower CASA ratio of 30.7% in 3QFY22 compared to 31.8% in 2QFY22.

• In 3QFY22, NIM expanded by 13bps QoQ to 2.42% contributed by OPR hikes. YTD NIM climbed by 10bps to 2.32% (7-8bps were contributed by higher OPR with remaining 2-3bps supported by higher CASA balances).

• Asset quality remained stable albeit a slight uptick in GIL ratio to 0.33%. 9MFY22 credit cost of 10bps was within management guidance of between 10-15bps for FY22F.

• Total cumulative conservative provisions remained at RM1.7bil with no additional management overlays raised in 9MFY22.

• A 2nd interim dividend of 4 sen/share has been declared. This brings 9MFY22 total dividends to 12 sen/share, representing a payout of 52.9%.

Source: AmInvest Research - 1 Dec 2022