Public Bank to continue to outperform peers on 'good loans'

Publish date: Fri, 01 Dec 2023, 08:31 AM

KUALA LUMPUR: Kenanga Research expects Public Bank Bhd to continue commanding the leading gross impaired loan (GIL) ratio among peers at 0.4 per cent versus peers' average of 1.7 per cent, attributable to its densely collateralised housing loan portfolio.

Kenanga said in its research note that although the stock may not have the highest dividend yield, there is the possibility of "more than a biannual dividend payment" which would interest certain investors.

It is keeping its "outperform" call and has a target price (TP) of RM4.75 for Public Bank.

"We also applied a five per cent premium to our TP based on our four-star environmental, social and governance (ESG) rating, led by the stock's strong green financing pipeline," said Kenanga.

Risks to its call include higher-than-expected margin squeeze; lower-than-expected loan growth; worse-than-expected deterioration in asset quality; further slowdown in capital market activities; adverse currency fluctuations, and changes to the overnight policy rate (OPR).

Meanwhile, Hong Leong Investment Bank (HLIB) also retained a "buy" call for the bank with a TP of RM4.80; it liked the bank for its defensive qualities, "which typically shine in times of uncertainties," HLIB said.

It said the bank has strong asset quality and its loan loss coverage towers that of pre-pandemic levels.

"We expect net interest margin (NIM) to remain broadly stable in the next quarter, considering fixed deposit (FD) rivalry is still fairly benign.

"Also, loan growth is seen to chug along for now. Separately, we expect asset quality to be resilient given its prudent and conservative credit origination practices," it said.

HLIB also made no changes to its forecast since its 3Q FY2023 results were in line.

As at 10.24 am, Public Bank's share was up 1.0 sen to RM4.25 with 1.5 million shares traded. - Bernama

Labels: PBBANK

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