- At our recent company visit, Public Bank (PBB) indicated there was not much change in its customer behaviour after the 13th general election. From its perspective, it believes there were perhaps a very small percentage of buyers who held back in terms of property and auto purchases before the general election.

- We believe this might be due to its customer profile, who are mostly retail and owneroccupiers. For its existing residential mortgage loan portfolio, about 85% are for properties priced below RM500k. The remaining 15% are for properties priced above RM500k. For new loans, about 70% are for properties priced below RM500k, which means that its target market is still the mass market segment.

- Thus, PBB has not seen any major uptick in loans demand trend since the general elections. It hinted that loans approval trend is still generally stable on a YoY basis.

- On an overall basis, it is targeting group loans growth of 11% to 12% for FY13F, with higher SME loans target at 14% to 15% FY13F, given better yields than the residential mortgage loans.

- Loan pricing for retail loans is stable, with PBB’s indicative board rate for residential mortgage loans at Base Lending Rate (BLR) less 2.3% (BLR - 2.3%), compared to the industry’s BLR - 2.4%. Commercial and shophouse pricing are also holding at BLR - 2.1% to - 2.2% compared to year ago. There is still a negative carry in terms of wholesale deposit (which makes up about 20% of PBB’s total deposits) but the negative in terms of quantum at 15 to 20bps (compared to interbank rates) is within the same range compared to a year ago. Thus, NIM target is maintained at -10 to -12bps decline YoY FY13F.

- The company hints of a stable asset quality so far, with credit costs target now at less than 20bps for FY13, slightly ahead of its earlier target of 20bps for FY13F.

- The company is also maintaining its dividend payout target, which is to raise the quantum of dividend, but the payout ratio will likely decline slightly given a higher earnings base.

- What is new from the company visit is the indication of no major uptick in loan demand from its targeted retail segment since the general election. Otherwise, the visit reaffirms the view that PBB has one of the most resilient and visible earnings among local banks given its stable asset quality. We maintain HOLD.

Source: AmeSecurities