KUALA LUMPUR (Dec 2): Public Bank Bhd (KL:PBBANK) rose to its highest in more than a month on Monday, after the release of its third-quarter results last Friday, as analysts expect the country’s third-largest bank by assets to further write-backs of loan loss provisions in the coming quarters.

Shares in Public Bank edged up 1.21% to RM4.52, their highest since Oct 21. At the closing bell, the stock pared its gains to settled at RM4.47, with more than 14 million shares changed hands, valuing the bank at RM86.77 billion. Net profit for the quarter ended Sept 30, 2024 (3QFY2024) was largely within expectations, accounting for 77% of the consensus full-year estimate.

“We understand that Public Bank intends to continue gradually write back more management overlay provisions (balance: RM1.5 billion) over the next few quarters since its LLC (loan loss coverage) is still elevated at 154%, versus pre-Covid [levels] of 120%,” Hong Leong Investment Bank (HLIB) said in a note.

Public Bank wrote back RM80 million in management overlay in 3QFY2024, bringing the total write-back to RM260 million for the cumulative nine months ended Sept 30, 2024 (9MFY2024), according to CGS International in a separate note.

Despite the headroom for provision write-backs and its low foreign shareholding, HLIB found Public Bank’s risk-reward profile to be balanced.

“This is because its dividend yield of 4% is not very compelling versus some of its peers (at 6% to 7%), in our view,” HLIB said.

Like other banks, HLIB expects a softer net interest margin (NIM) for Public Bank in 4QFY2024, given the heightened competition for fixed deposits that typically heats up during year end.

“Loan growth is anticipated to chug along, backed by the mortgage, auto, and SME (small and medium enterprise) segments. On a separate note, asset quality is seen to stay fairly resilient, given its prudent credit origination practices,” the research house said.

CGS, meanwhile, retained its 'add' rating for Public Bank, given that the bank has one of the best asset qualities in the sector.

“We are projecting a net profit of RM1.53 billion for Public Bank in 4QFY2024, representing a year-on-year (y-o-y) drop of 5.6%, mainly due to higher overheads,” CGS said.

The house said that it remains positive on Public Bank’s longer-term outlook for its NIM, due to the improved deposit pricing discipline in the sector over the past two years, although there is pressure on the bank’s NIM in 4QFY2024.

“Public Bank has set the following targets for FY2024: 5% to 6% growth in loans and deposits, a stable NIM, low single-digit basis point credit charge off rate, and a return on equity of about 13%,” CGS added.

Last Friday, Public Bank posted a 12% y-o-y increase in its net profit to RM1.91 billion in 3QFY2024, compared with RM1.70 billion a year earlier. Revenue for the quarter rose 5% to RM6.81 billion, from RM6.48 billion previously.

For 9MFY2024, Public Bank recorded a net profit of RM5.35 billion, or 27.55 sen per share, up 6% from RM5.03 billion, or 25.93 sen per share, in the same period last year. Revenue rose 7.6% to RM20.20 billion from RM18.87 billion.