Journey to Wealth
Public Bank - A more cautious tone BUY
- Based on our recent company visit to Public Bank Bhd (PBB), we get the sense that the company is well on track to achieve its domestic loans growth target of 12% despite a more cautious macro environment. The group alluded to an overall loans growth target (including overseas loans contributing about 7% of total loans and largely from HK) of about 9% to 10%.
- The company believes there has been a slight softening in higher-end property pricing, although it is difficult to gauge the average decline in prices in the last few months. This is because of numerous rebates provided by developers when re-launching higher-end properties.
- Despite this, the company believes there is unlikely to be much impact on its residential mortgage loans, with growth still targeted at 15% for FY12F. This is because most of its residential mortgage loans are for the mass market segment, and targeted at mainly owneroccupiers. Residential properties which cost above RM1mil make up about 5% of its overall loan book, while residential properties priced at above RM500k made up about 15%.
- The other segment that PBB remains confident about is its commercial property financing segment to SMEs. SME loans make up about 18% of its total loans. The company is targeting a mid-teen growth for this segment. These would be largely business owners who are looking to finance the purchase of commercial properties for their own use.
- Lending rates have generally held up, despite the slower loans growth environment, with mortgage lending rates still holding at base lending rate (BLR) less 2.4% to 2.5%, and shophouse lending rates at BLR less 2.2% to 2.3%. The main area where rates have fallen is the auto financing segment. Nevertheless, the company is still maintaining its overall net interest margin (NIM) target will be affected by around only 15bps YoY in FY12F.
- Impaired loans are expected to hold up. The company does not foresee any major impact from external uncertainties, unless this lead to major unemployment in Malaysia or a major increase in inflation rate.
- Overall, we get the sense that PBB seems to be more cautious due to growing external uncertainties. We remain positive, with an unchanged fair value of RM16.70/share.
Source: AmeSecurities
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