Investment Highlights

• We maintain HOLD on Public Bank (PBB) with a revised fair value of RM4.50/share from RM4.60/share, supported by ROE of 11.9% leading to FY24F P/BV of 1.5x. No change to our neutral 3-star ESG rating.

• Our FY24F/25F/26F earnings have been tweaked by - 3.3%/1.5%/4.6% after adjusting our NIM assumptions.

• 12M23 net profit of RM6.6bil was within expectations, coming in 4% below our estimate and 2% of consensus projection.

• Earnings grew 8.7% YoY in 12M23, supported by higher non-interest income (NOII) and lower provisions.

• On QoQ basis, PBB recorded a lower net profit of RM1.6bil (-5%) underpinned by weaker net income from islamic banking as well as higher operating expenses (OPEX) and provisions.

• For 12M23, NII was flattish at RM9bil (-1.2% YoY), impacted by NIM compression from higher funding cost. 12M23 NIM was compressed by 19bps to 2.2%, and this was within management’s guidance. 4Q23 saw a compression in NIM by 6bps QoQ to 2.15%.

• 12M23 non-interest income (NOII) climbed 2.6% YoY to RM2.5bil, contributed by higher FX, income from stockbroking and unit trust.

• 12M23 PBT of Public Mutual rose by 2.3% YoY to RM798mil. Net asset value of funds under management increased slightly to RM97bil in 4Q23 vs. RM96bil as of end-3Q23. The retail market share of Public Mutual improved to 35.9%. Meanwhile, on bancassurance business, annualised new premiums (ANP) grew 3.8% YoY to RM422mil in 12M23.

• The group’s overall loans accelerated to 5.9%YoY in 4Q23 compared to 5.4% YoY in 3Q23. Domestic loan growth of 5.9% YoY outpaced the industry’s 5.3% YoY.

• CASA continued to contract by 0.6% YoY, leading to lower CASA ratio of 28.4% in 4Q23 (3Q23: 28.5%). Nevertheless, the ratio stayed above the pre-pandemic level of 25.1%.

• Uptick in GIL ratio to 0.59% driven largely by the impairment of international loans (property sector related financing in Hong Kong which was well collateralised). 12M23 saw upticks in domestic residential and commercial property loans due to expiry of repayment assistance programmes. Net credit cost rose to 9.7bps in 4Q23 vs. 3.5bps in 3Q23 due to additional provisions for the impaired loan in Hong Kong owing to decrease in property value. 12M23 credit cost of 4bps was within management guidance of <10bps.

• 2nd interim dividend of 10 sen/share has been declared bringing the full FY23 dividends to 19 sen/share (payout: 55.5%). This was close to our estimate of 18 sen/share.

Source: AmInvest Research - 29 Feb 2024