Results

• 9MFY16 net profit of RM3.72bn (+4.3%) came in within expectations, accounting for 73.1-74.9% of our and consensus full-year forecasts.

Deviations

• Broadly in line.

Dividend

• -

Highlights

• Against its FY16 KPIs… Except for annualised loan growth (7.8% vs. target of 8-9%), ROE and total capital ratios (15.8% and 15.2%) surpassed group’s targets, while GIL ratio, CIR and deposit growth (0.5%, 32.5% and 7.5% respectively) were in line with targets.

• QoQ… Although topline was higher by 2.7% (driven mainly by 1.7% loan growth and slightly better NIM), 3Q16 net profit declined by 1.4% to RM1.24bn mainly on lower NOII, coupled with higher provisions (+32.3%) and overheads (+1.5%).

• Loan growth eased to 1.7% (from 2.3% in 2Q16, driven mainly by slower loan growth at the property segment). LDR declined to 90.2% (from 90.5% in 2Q16), as deposit growth (2.1%, driven by CASA and FD, which grew by 1.9% and 2.4% respectively) outpaced loan growth of 1.7%.

• 9MFY16 net profit grew 4.3% to RM3.72bn, as higher overheads and lower NOII were more than mitigated by 7.5% loan growth, improved NIM and lower provisions.

• Asset quality remains robust… With gross IL ratio remained stable at 0.5%. While LLC declined to 109.5% (from 116.3% in 2Q16 and 130.8% a year ago), we note that the coverage ratio is higher than industry LLC (89.6% in Aug-16).

Risks

• Unexpected jump in impaired loans, lower than expected loan growth and higher than expected erosion in NIM

Forecasts

• Maintained.

Rating

HOLD 

• While we like Public Bank for strong brand name and market position, as well as its sustained quality loan growth, we believe further upside is capped by its rich valuation (FY16 P/E of 14.9x, vs. industry average FY16 P/E of 10.9x).

Valuation

• Maintain Gordon Growth Derived TP of RM18.50 (based on ROE and WACC of 15.8% and 8.5

Source: Hong Leong Investment Bank Research - 21 Oct 2016