We maintain BUY call on Public Bank (PBB) with an unchanged fair value of RM4.70/share. This is supported by ROE of 13.3% leading to FY23F P/BV of 1.7x. No change to our neutral 3-star ESG rating.
We make no changes to our earnings estimates in view that the 1Q23 core earnings were within expectations accounting for 24.8% of both our and consensus estimates.
Underlying net profit excluding the impact of Cukai Makmur in 1Q22 grew by 13.8% YoY in 1Q23 to RM1.7bil. The improved earnings were driven largely by higher net interest income (NII) and significantly lower loan loss provisions. Provisions fell by 98.5% YoY contributed by the writeback in provisions for retail operations and HP segments.
The group’s non-interest income (NOII) was subdued with a growth of 0.7% YoY to RM647mil. Higher FX gains, net gains on financial instruments and stock broking income were partially offset by weaker unit trust income.
PBT of Public Mutual fell by 4.7% YoY to RM193mil in 1Q23, contributed by lower sales of unit trust funds as a result of weaker market sentiment. Net asset value of funds under management stood at RM94.4bil as at 1Q23, an increase of 2.8% from RM91.8bil in 2022. The retail market share of Public Mutual increased marginally to 35.7% in 1Q23 vs. 35.4% in 4Q22. Meanwhile, for bancassurance business, annualised new premiums (ANP) rose by 9.8% YoY to RM102.2mil.
The group’s loan (domestic and overseas) growth eased slightly to 5.2% YoY in 1Q23 vs. 5.3% YoY in 4Q22. Domestic loan growth moderated to 5.1% YoY, close to the industry’s 5% YoY expansion. Meanwhile, international loans grew at a slightly faster pace of 6.9% YoY.
CASA contracted by 2.9% YoY, resulting in a lower CASA ratio of 28.9% in 1Q23 vs. 29.9% in 4Q22.
NIM in 1Q23 was compressed by 32bps QoQ to 2.26%. The interest margin in 1Q23 was lower than NIM of 2.39% for FY22. The compression was contributed by tapering positive impact of 4 previous OPR hikes which cumulated to 100bps in FY22 on asset yield and higher funding cost.
Slight uptick in GIL ratio to 0.52% in 1Q23 from 0.42% in 4Q22, driven largely by the impairment of 1 corporate loan in Hong Kong related to the property sector. No provisions were required for this loan as it is well collateralised.
1Q23 credit cost of 0.2bps was well within management guidance of <10bps for FY23.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....