Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: OSK



The lower-than-expected capital requirements under Basel III is good for Public Bank Group, which has been known to be the most proactive in terms of capital management, said OSK Research.

In its research note, OSK said the easing pressure to conserve excessive capital would remove a key overhang from a potential equity raising by the group and also provide an upside to its current dividend payout ratio of 50-55 percent.

"Assuming that it raises its dividend payout ratio by between 65-70 per cent, we estimate that Public Bank would still be able to build up a capital base exceeding seven per cent core equity ratio by 2018, as stipulated under Basel III," it said.

The research firm said the bank would still have sufficient capital to sustain a risk-weighted asset growth of 13 per cent to 14 per cent per annum.

It said this would raise its current financial year 2011 gross dividend yield from 5.7 per cent to 7.1 per cent, thus positioning it as the highest dividend-yielding banking stock in Malaysia.

OSK said it would maintain its 'buy' call on the bank, but would raise its target price from RM13 to RM14.20. -- Bernama