Investment Highlights

• We maintain HOLD on Public Bank (PBB) with an unchanged fair value of RM4.60/share supported by ROE of 12.9% leading to FY24F P/BV of 1.6x. No change to our neutral 3-star ESG rating.

• We made no changes to our earnings estimates as 9MFY23 core earnings of RM5bil were within expectations, making up 73% of our full-year estimate and 74.5% of consensus.

• 9M23 core earnings grew 4.9% YoY, supported by modest growth in total income and lower net impairment allowances.

• On QoQ basis, PBB recorded a growth of 5.1% in 3Q23 core earnings to RM1.7bil, underpinned by higher net interest (NII) and non-interest income (NOII) and partially offset by increased operating expenses (OPEX) and loan provisions.

• For 9M23, NII was flattish at RM6.7bil (+0.7% YoY), impacted by NIM compression from higher funding cost. YTD 9M23 NIM compressed by 17bps YoY to 2.22%. 3Q23 saw a slight improvement in NIM by 3bps QoQ to 2.21%.

• 9M23 non-interest income (NOII) climbed 3.4% YoY to RM1.9bil, contributed by higher FX and stockbroking income, partially offset by lower unit trust income and gains from financial instruments.

• Loan provisions fell by 78.3% YoY, contributed by lower provisions of retail operations and corporate lending segments as well as write back in allowances for HP loan impairment losses.

• 9M23 PBT of Public Mutual was subdued at RM592.8mil (+2.1% YoY) due to challenges on sales of unit trust under unfavourable market conditions. Net asset value of funds under management fell to RM96bil as of end-3Q23 vs. RM95bil in 2Q23. The retail market share of Public Mutual slipped to 35.1% in 3Q23 compared to 35.8% in 2Q23. Meanwhile, on bancassurance business, annualised new premiums (ANP) grew by a tepid 1.2% YoY to RM313mil in 9M23.

• The group’s overall loan growth picked up pace slightly to 5.4% YoY. Domestic loan growth accelerated to 5.6% YoY and outpaced the industry’s 4.3% YoY. Meanwhile, growth in international loans eased to 2.4% YoY.

• CASA continued to contract by 3.5% YoY, leading to lower CASA ratio of 28.5% in 3Q23 (2Q23: 29.1%).

• Slight uptick in GIL ratio to 0.58%, driven largely by the impairment of international loans (property sector-related financing in Hong Kong, which was well-collateralised). 9M23 credit cost of 2bps was within management guidance of <10bps for FY23F.

Source: AmInvest Research - 30 Nov 2023