Results

• In line with expectations. Reported 1Q17 net profit of RM1.24bn (+1.5% YoY, -15.8% QoQ) which came in within expectations, accounting for 23.1% and 23.8% of HLIB and consensus full-year forecasts respectively.

Deviations

• None.

Dividend

• No dividend declared during the quarter.

Highlights

• Against FY17 KPIs. Overall, on annualized growth, PBK only missed loan growth guidance. Group and domestic loan growth were at 3.6% and 4.7% respectively.
• 1Q17. Net profit grew +1.5% YoY to RM1.24bn driven by steady growth in net interest income (NII) to RM2.07bn. This was underpinned by stable NIM of 2.31% and strong loan growth (+7% YoY). Non-interest income (NOII) was slightly weaker at RM514m (-13.2% YoY), caused by lower investment income and forex income. Loan-loss provision was higher in 1Q17 at RM67.1m, premised by the surge in general provision.
• QoQ. 1Q17 results was weaker (-15.8% QoQ) due to higher loan provision of RM67.1m as opposed to the RM37.1 writeback in 4Q16. This is within our expectations given our credit cost assumption of 10bps in FY17.
• Loan still superior. PBK’s loan growth continued to outpace industry, growing 7% YoY in 1Q17, premised on the growth of retail operation. In Malaysia, PBK posted growth of 6% YoY, with residential and SME remaining the preferred areas of growth. Meanwhile, hire purchase loan continued to contract by 0.8% QoQ. Despite missing target on annualized basis, we opine that PBK will be able to meet our 8% loan growth target in FY17.
• Deposit recovery. Deposit grew to RM316bn (+3.1% YoY) driven by growth in Malaysia (8.1% annualized). CASA composition accelerated to 25.5% (+31bps), largely attributed to higher CASA in Malaysia (30.4%). The increase in both loan and deposit lifted loan-to-deposit (LDR) to 93.3% (+103bps).
• Rise in NIM. Despite in the increase in fixed deposit composition, NIM picked up to 2.31% (+9bps QoQ). We attribute this to the stable loan yields as well as the spillover effect of repricing of deposits in 4Q16.

Risks

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

Forecasts

• Unchanged

Rating

HOLD (↔)

• The lower guidance introduced in FY17 should translate into moderation in PBK earnings. We also expect the modest consumer sentiments to curb the upside to PBK loan growth target in FY17.

Valuation

• Maintain Gordon Growth Derived TP of RM19.86 (based on ROE and WACC of 15.8% and 8.7%).

Source: Hong Leong Investment Bank Research - 21 Apr 2017