STOCK FOCUS OF THE DAY
Public Bank : Pre-GST surge boost 1Q loan growth
Hold
We maintain HOLD on Public Bank Bhd (PBB) with an unchanged
fair value of RM19.20/share for FY15F. Our fair value is based on an unchanged
ROE of 16.6% for FY15F, leading to a fair P/BV of 2.3x.
PBB’s annualised 1QFY15 came in marginally short of our
forecast (-4.6%), but is within (-0.8%) consensus estimates of RM4,725mil for
FY15F. The main shortfall when compared to our forecast is mainly due to the
net interest income and non-interest income lines. Loans growth performed
better than expected, with an annualised loans growth of 13.1%, exceeding the
earlier articulated target of 9%-10% for FY15F. Annualised deposit growth of
12.8% was also above the company’s targeted growth of 9%-10%.
The company alluded that the higher-than-expected loans
growth was partly due to drawdowns relating to a surge in pre-GST demand in
March 2015. Thus, despite the stronger-than-expected loans growth, the company
is maintaining its loans growth target of 9%-10% for FY15F. However, NIM
declined by 5bps QoQ and 13bps YoY to 2.15% in 1QFY15 – the first time that
that NIM has fallen below 2.20% in the recent past. The company is targeting a
NIM compression of 8bps-10bps YoY for FY15F. The lower NIM was mainly caused by
higher cost of deposit, as the core gross interest expense related to customer
deposits rose 4.0% QoQ, thus outstripping the growth in total customer deposit
of 3.2% QoQ.
Asset quality remains strong, with gross impaired loans
remaining low at only 0.6% in 1QFY15 (4QFY14: 0.6%). Loan loss cover
strengthened to 128.1% from 122.4% level in the previous quarter. We consider
PBB’s 1QFY15 net earnings to be good, as it has once again proven to be
consistent, reliable, and resilient. However, based on the latest result, there
is still limited scope to upgrade our net earnings.
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