Public Bank Berhad - FY23 PBT down 3.3% YoY

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+0.55 (13.25%)


  • Public Bank (PBB) reported an 8.7% YoY increase in FY23 net profit to RM6,649mn, driven by the absence of Cukai Makmur. FY23 net profit accounted for around 97% of our full-year estimates. Net ROE stood at 13.0% (FY22: 12.8%).
  • PBB declared a second interim dividend of 10.0 sen per share. Combined with the first interim dividend amounting to 9.0 sen, total dividends for FY23 amounted to 19.0 sen, representing a dividend payout ratio of 55.5% (FY22: 53.9%).
  • Making up around 95% of our full-year forecast, FY23 total income decreased by 2.6% YoY (-1.7% QoQ) – as declines in the net interest income (NII) (-1.2% YoY) and from Islamic Banking operations (-15.9% YoY) muted the 2.6% YoY increase in non-net interest income (non-NII).
  • FY23 NII declined despite loans rising by 5.9% YoY. Domestic loans rose at a stronger pace of 5.9% (FY22: +5.2% YoY). PBB’s market share in the domestic market broadened slightly to 17.5% (FY22: 17.4%). By segment, loans and advances were supported by residential properties (+6.4% YoY) and hire purchases (+10.8% YoY). Financing for commercial properties widened by 2.2% while financing for domestic SMEs increased by 1.0% YoY.
  • FY23 NIM compressed to 2.20% from 2.39% in FY22 due to funding pressures. 4Q NIM also slipped QoQ to 2.15% from 2.21% in 3Q23. Elsewhere, PBB’s total deposits broadened by 4.6% (FY22: +3.8% YoY), driven by Money Market Deposit (+19.8% YoY). Meanwhile, Fixed Deposits widened by 2.8% while Savings and Demand Deposits contracted by 0.6% YoY. PBB’s market share in the customer deposit space held steady at 16.3% (FY22: 16.3%). Meanwhile, liquidity remains ample, with the liquidity coverage ratio (LCR) at 136.8% (FY22: 127.7%).
  • FY23 non-NII expanded by 2.6% YoY. The yearly improvement was attributed to higher income from foreign exchange (+16.8% YoY) and stockbroking businesses (+15.4% YoY). Meanwhile, PBB registered lower net gains on financial instruments amounting to RM49.0mn vs. RM70.9mn in FY22. Net fees and commissions strengthened further, rising by another 1.8% YoY due to higher income from the sale of unit trust (+2.1% YoY). Fee income was however, muted by lower fee and commission income (-0.6% YoY). In the Wealth Management business, PBB’s Net Asset Value of Funds (NAV) under management rose to RM97.1bn (FY22: RM91.8bn). Over in the bancassurance business, FY23 annualised new premium (ANP) stood at RM422.1mn (FY22: RM406.7mn).
  • FY23 loan loss allowances improved to RM156.7mn (vs RM365.5mn in FY22). PBB’s credit cost strengthened to 4 bps compared to 10 bps in

FY22. Management expects asset quality to remain sound, with a healthy loan loss coverage ratio of 181.8% (FY22: 272.0%).

  • Elsewhere, the total gross impaired loans rose to RM2,335mn vs. RM1,584mn in 2022, the bulk of which was attributed to a corporate account in Hong Kong. With that, the gross impaired loans ratio (GIL) rose YoY to 0.59% from 0.42% in 2022. Domestically, the GIL for residential properties climbed to 0.33% from 0.21% in FY22. The GIL ratio for commercial properties also deteriorated slightly by 6 bps YTD to 0.62% (FY22: 0.56%), while the GIL ratio for transport vehicles stood little changed at 0.26% (FY22: 0.25%).
  • PBB remains backed by a solid capital position with a Common Equity Tier 1 (CET1) Capital Ratio and Total Capital Ratio of 14.7% and 17.6%, respectively.


  • Incorporating the FY23 results, we adjust PBB’s FY24/25 net profit to RM6,990/7,294mn from RM7,259/7,378mn. We forecast FY26 net profit to increase by 5.3% YoY to RM7,680mn.


  • Management is cautiously setting modest targets for FY24, acknowledging prevailing macro challenges such as the rising cost of living that may impact sentiments. Despite this, PBB remains optimistic about achieving a 5-6% loan growth, supported by stable labour market conditions and favourable policy measures, which would benefit key segments like mortgages, hire purchase, and SME financing. The expectation is for deposits to increase in line with the loan growth.
  • Management predicts that NIM will remain stable in 2024, although there might be a slight compression due to heightened competition for deposits and some loan segments such as mortgages and SMEs. In terms of asset quality, management remained confident that credit costs will be in the range of 5-10 bps, attributing this to consistent repayment patterns and a stable delinquency trend.
  • Overall, FY24 ROE is projected to be around 12%, down from the previous year's 13%, with support from the ongoing expansion in loans and deposits and a commitment to maintaining sound asset quality. However, potential downside risks include NIM compression and inflationary pressures.


  • Updating the latest beta assumption obtained from Bloomberg, we raised PBB’s TP from RM4.50 to RM4.70. Our valuation is based on an implied PBV of c. 1.57x based on the Gordon Growth Model. With that, we upgrade PBB from sell to HOLD given the wider risk-reward potential.

Source: TA Research - 29 Feb 2024

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