Investment Highlights

• We maintain BUY call on Public Bank (PBB) with an unchanged fair value of RM4.70/share. This is supported by ROE of 13.1% leading to FY24F P/BV of 1.6x. No change to our neutral 3-star ESG rating.

• We make no changes to our earnings estimates as 6M23 net profit were within expectations, accounting for 48.3% of our and 48.9% of consensus estimates.

• 6M23 core earnings of RM3.3bil grew by 8.4% YoY supported by higher net interest income (NII), non-interest income (NOII) coupled with lower allowances for credit losses.

• The group’s non-interest income (NOII) rose by 5.4% YoY to RM1.25bil. This was contributed by higher FX and stockbroking income, partially offset by lower unit trust, fee, commission income and gains from financial instruments.

• Provisions declined by 69.7% YoY contributed by lower provisions for retail operations and the write back in allowances for impairment of HP loans.

• PBT of Public Mutual fell by 1.2% YoY to RM388mil in 6M23 due to lower sales of unit trust funds as a result of unfavourable market condition. Net asset value of funds under management stood at RM96bil as at end-2Q23, an increase of 4.6% from RM91.8bil in 2022. The retail market share of Public Mutual continued to hold up at 35.8%. Meanwhile, for bancassurance business, annualised new premiums (ANP) rose by 5% YoY to RM211mil.

• The group’s loan (domestic and overseas) growth was sustained at 5.2% YoY. Domestic loan growth eased slightly to 5% YoY and outpaced the industry’s 4.4% YoY expansion. Meanwhile, international loan growth accelerated to 8.2% YoY.

• CASA expanded by 2.2% QoQ, resulting in a higher CASA ratio of 29.1% in 2Q23 vs. 28.9% in 1Q23. NIM in 2Q23 was compressed by 8bps QoQ to 2.18%. Nevertheless, the compression was lower than the decline of 32bps QoQ seen in 1Q23.

• The slight uptick in GIL ratio to 0.55% was driven largely by the impairment of 1 corporate loan in Hong Kong related to the property sector. No provisions were required for this loan, which is well collateralised. 6M23 credit cost of 1bps was well within management guidance of <10bps for FY23.

• PBB recorded a lower 2QFY23 core earnings of RM1.6bil (- 5.6% QoQ) underpinned by a decline in total income and higher provisions.

• An interim dividend of 9 sen/share (payout: 52.4%) has been declared in 6M23, close to the 8 sen/share in 6M22.

Source: AmInvest Research - 30 Aug 2023