- We maintain our BUY rating on Public Bank Bhd (PBB), with an unchanged fair value of RM19.80/share. This is based on FY14F ROE of 21.4% and a fair P/BV of 3.1x.
- Annualised loans growth was better at 12.0% in 3QFY13 compared to 11.8% in 2QFY13. This brings the annualised growth to the top end of the company’s targeted group loans growth of 11%-12% for FY13F.
- NIM remained stable for the third consecutive quarter, thus indicating that the worst of the deterioration in terms of NIM may be over for PBB. With stable NIM so far for the 9MFY13, PBB’s NIM came in above the earlier targeted 10-12bps YoY decline for FY13.
- Non-interest income growth was marginally flat on QoQ basis, due mainly to lower forex gains. Otherwise, its investment and trading income was resilient.
- The only apparent blip in 3Q’s results is the ongoing QoQ rise seen in the auto and residential mortgage impaired loans, although on overall basis, these are still low. However, we understand that these are due to a more stringent classification arising from a more inhouse prudent stance.
- Otherwise, gross impaired loans ratio remains low and unchanged at 0.7% in 3Q. Credit costs came in at 19bps in 3Q (2Q15bps), well within the company’s target of less than 20bps credit costs for FY13. Loan loss cover remains at a comfortable 117.3% in 3QFY13 (2QFY13: 123.2%).
- Overall, the 3QFY13 results was positive due to PBB achieving the top end of its loans growth, stable NIM, resilient non-interest income and comfortable CET ratios.
- We foresee re-rating catalysts from:- (a) confirmation of higher CET1 ratios; (b) affirmation of resilient investment and trading income; (c) decent loan growth; (d) ongoing excellent asset quality; (e) rising dividend; and (f) likelihood of little capital raising requirements ahead.
Source: AmeSecurities
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