Results

• Results in line. PBB ended FY17 with healthy results. 4Q17 net profit climbed at stronger pace of RM1.4bn (+0.2% yoy, +5.7% qoq), lifting FY17 net profit to RM5.4bn (+5.1% yoy). PBB bottomline of RM5.4bn is in line with expectations, accounting for 104% and 102% of HLIB and consensus forecasts.

Deviations

• In line.

Dividend

• Declared second interim dividend of 34 sen, bringing FY17 dividend to 61 sen, translating to 43% payout and dividend yield of 2.7%.

Highlights

• 4Q17. PBB total operating income grew 9.1% yoy to RM2.7bn, supported by a 5.3% and 24% rise in NII and NOII (which was in turn boosted by higher investment and unit trust income. There was a slight incremental in the opex (by 1% yoy), fueled mainly by higher personnel cost.
• 12M17. The sequential rise in LLP by 5.5% due to a surge in CA was well offset by higher operating income (+8%, driven by both NII and NOII growth, which rose 7% and 11.5% respectively). NII was underpinned by stable loans yield whilst NOII emanated by unit trust, fee income and forex.
• Loan lifted by domestic. PBB total loan growth slowed to 3.6% yoy (from 4.5% yoy in 3Q17), dragged by overseas operation, whilst domestic loan growth was sturdy at 4.6% yoy. Domestically, hire purchase segment moderated by 3% yoy in view of flat TIV, whilst the growth in residential and commercial property segments inched up by 10% yoy and 4.2% yoy respectively.
• Stronger deposits. Deposits recovered marginally by 3% yoy (vs. 2.9% yoy in FY16), driven by domestic deposits growth (+3.6% yoy, vs. +2.1% yoy in FY16). CASA growth of 6.6% was more than growth in fixed deposit growth (3.6% yoy), contributing to CASA ratio of 26%.
• NIM recovered faster. NIM recovered swiftly by 2bps qoq on the back of active assets and liability management which pushed LDR higher to 95%. On full year basis, NIM surged 8bps yoy due to stable loans yield across all product segment amidst slower deposit competition approaching year end.

Risks

• Weakening impaired loans, slower loan growth and NIM compression.

Forecasts

• We raise FY18-19 net profit forecasts by 0.3% and 5%, in view of LLP could normalise towards FY19.

Rating

HOLD (↔)

• PBB introduced slightly better guidance in FY18 in view of improving consumer sentiment and the pickup in the corporate lending space which could support its bottomline due to its bulky retail loan composition.

Valuation

• Post earnings revision, we maintain our HOLD rating with higher TP of RM21.50. Our TP is derived from GGM (based on COE and WACC of 9.5% and 8.5%).

Source: Hong Leong Investment Bank Research - 23 Feb 2018