- We maintain our HOLD rating on Public Bank Bhd (PBB) with an unchanged fair value of RM20.00/share for FY15F. Our fair value is based on FY15F’s ROE of 17.4%, and an unchanged fair P/BV of 2.5x.

- PBB’s 3QFY14’s annualised net earnings came in 1.1% above our forecast and 2.5% above consensus estimates of RM4,349mil for FY14F.

- The 9M results made up 74.1% of our full-year forecast and 75.1% of consensus’ forecast for FY14F.

- The company posted an annualised loans growth of 9.8%, in line with its targeted loans growth of 10%-11%. NIM improved by 9bps QoQ, due to positive impact from the 25bps rate hike effective from 10 July 2014.

- Asset quality remains resilient, with gross impaired loans ratio unchanged at 0.7% in 3QFY14, when compared to 0.7% in 2QFY14.

- Credit costs were sustained at low levels, at only 8bps in 3QFY14. This is therefore ahead of its targeted credit costs of less than 20bps for FY14F. Loan loss cover remained high at 117.1% in 3QFY14 (2QFY14: 117.6%).

- The company indicated that there have been no major worrying signs in terms of asset quality trends so far.

- The 3Q results were generally in line with expectations, with key positive trends being PBB’s strong SME loans growth, resilient asset quality and consistent earnings.

- Despite the strong trend, we find Settle room to upgrade net earnings, even with positive impact on NIM from the recent rate hike.

- We maintain our HOLD rating as there is less than 15% upside (our in-house threshold for buy rating) to our fair value.

Source: AmeSecurities