Investment Highlights

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

• No changes to our earnings estimates as 1Q24 net profit of RM1.65bil was within expectations, making up 24.8% of our estimate and 23.5% of the consensus projection.

• Earnings declined 3.5% YoY, contributed by higher operating expenses (OPEX) and provisions for loan losses.

• On QoQ basis, PBB recorded marginally higher net profit of 2.3%, underpinned by an increase in total income and lower allowances for loan losses.

• 1Q24 saw a modest rise in net interest income (NII) by 2.6% YoY to RM2.3bil supported by expansion of loan book. NIM was stable at 2.21% in 1Q24 compared to the FY23 average of 2.20%. This was in line with the guidance on interest margin for FY24F.

• Non-interest income (NOII) in 1Q24 of RM650mil was subdued (+0.5% YoY) with stronger unit trust, fees and commission income partially offset by weaker stock broking, fx and lower net gains on securities.

• Negative JAW of 7.2% YoY in 1Q24 with growth in operating expenses (9.5% YoY) outpacing total income (+2.3% YoY). The increase in OPEX was attributed to higher personnel costs from adjustments in salaries due to inflation.

• 1Q24 PBT of Public Mutual rose by 11.4% YoY to RM215mil with an increase in net asset value of funds under management to RM100.4bil (+6.4% YoY). The retail market share of Public Mutual remained steady at 35.8%. Meanwhile, in the bancassurance business, annualised new premiums (ANP) grew 5.8% YoY to RM108mil in 1Q24.

• The group’s overall loans accelerated to 6.2% YoY in 1Q24 compared to 5.9% YoY in 4Q23. Domestic loans grew 6% YoY in line with industry growth. 1Q24 saw a robust growth in domestic HP loans which led to an increase in market share to 31% from 30.5% in 4Q23.

• Growth in CASA continued to be flat at 1% YoY. As a result, the CASA ratio was marginally lower at 28.1% in 1Q24 (4Q23: 28.4%).

• Increase in GIL ratio to 0.62% from 0.59% in the preceding quarter was driven by upticks in impairment of residential/commercial properties and working capital loans domestically. Besides, impaired loans in Hong Kong, China and Cambodia increased QoQ. Net credit cost rose to 6bps in 1Q24 vs. 0.2bps in 1Q23, contributed by non- recurrence of write backs in the retail and hire purchase segments’ allowances for loan impairments.

Source: AmInvest Research - 21 May 2024