CEO Morning Brief

Public Bank on Course to Hit FY2024 Earnings Target on Better Outlook, Say Analysts

Publish date: Wed, 22 May 2024, 11:34 AM
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TheEdge CEO Morning Brief
Photo by Shahrin Yahya/The Edge

KUALA LUMPUR (May 21): Public Bank Bhd (KL:PBBANK), Malaysia’s third-largest bank by assets, is on course to achieve an earnings forecast of RM6.96 billion for the financial year ending Dec 31, 2024 (FY2024), with its first-quarter results aligning with analysts’ expectations.

Analysts remain bullish on the bank's outlook, citing strategic positioning and sound management as key factors in its continued growth and stability.

Out of 19 analysts covering Public Bank, a majority of 14 analysts advised investors to buy the stock, while three suggest to hold, and the remaining two recommend to sell. The consensus 12-month target price is RM4.75, according to Bloomberg data.

Hong Leong Investment Bank (HLIB) anticipates Public Bank to maintain a stable net interest margin (NIM) — a measure of profitability from interests charged on loans after deducting returns paid to depositors — in the upcoming quarter, citing "fixed deposit rivalry is now less intense".

HLIB, which maintained its 'buy' rating and raised its target price to RM4.90 (from RM4.80) for Public Bank, added that while Public Bank is offering competitive financing terms and pricing strategies aimed at bolstering market presence, this "will not dent its NIM in the near term, as these loans would only be drawn down gradually".

On Monday, Public Bank reported to Bursa Malaysia that its net profit for the first quarter ended March 31, 2024 (1QFY2024) slipped 3.5% to RM1.65 billion, or 8.52 sen per share, compared with RM1.71 billion, or 8.83 sen per share, for 1QFY2023, mainly due to higher personnel cost and provisions. The results accounted for about 24% of the consensus full-year forecast.

Year-on-year, net interest income grew by 2.8% to RM2.73 billion, while non-interest income saw a marginal increase of 0.5% to RM649.64 million.

HLIB also expects Public Bank to see strong asset quality, bolstered by conservative lending practices.

“With Malaysia’s delinquency rate currently at 1.8%, well below the pre-pandemic figure of over 3%, net credit cost is forecast to stay within the range of five to 10 basis points, excluding write-backs,” HLIB said.

Meanwhie, Kenanga Investment Bank said that Public Bank’s conservative approach to overlay write-backs and operational efficiency initiatives are likely to support its FY2024 target for a return on equity of 12%.

The research house, which maintained its 'outperform' rating for Public Bank, noted that the easing of deposit competition presents repricing opportunities, although the landscape remains tight, suggesting a stable to mid-single-digit compression in Public Bank's NIM in FY2024.

At the time of writing on Tuesday, shares in Public Bank were unchanged at RM4.19, valuing the company at RM81.33 billion. Year to date, the stock has dropped 2.33%.

Source: TheEdge - 22 May 2024

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