Within estimates. Public Bank's 1HFY12 annualized earnings were in line with both consensus and our full-year estimates, with the 1HFY12 numbers representing 49.3% of our full-year earnings estimates.

Moderate overall growth. The group's 1HFY12 earnings grew by a subdued 2.8% y-o-y as persistent net interest margin (NIM) pressure and rising overhead costs crimped overall growth. Pre-provision operating profit ticked up by a very marginal 1.6% y-o-y due to: (i) further pressure on NIMs, which dipped 10bps, ii) higher overhead expenses (+8.8% y-o-y ), and (iii) a 23.6% contraction in new unit trust sales income, which resulted in the pedestrian profit growth. As such, the 2.8% earnings growth was largely shored up by a 12.5% drop in loans loss provision.

Group loans marginally below estimates. The group's1HFY12 gross loans rose at an annualized pace of 11.3%, which is lower than our projected 12.0%, largely owing to a 5.1% contraction in loans from its Hong Kong operations, which dragged down the domestic annualized loans growth of 12.1%. Management is now guiding for group overall loans growth of 10% to 11%. Within the domestic loans portfolio, hire purchase (HP) was the key drag, with an 8.2% y-o-y growth on an annualized basis, while residential and non-residential property loans growth remained robust at 16.1% and 23.2% respectively vs 2011's 17.6% and 16.5%. The loan-to-deposit ratio was steady at 87.7% but was largely sustained by stronger wholesale deposit growth, which grew at an annualized 16.3%. Meanwhile, core deposits grew at a slightly slower annualized rate of 10.1% vs the group's loans growth of 11.3%.