KUCHING: Public Bank Bhd (Public Bank) is positioned to meet the challenges of rising interest rate thanks to strong current account savings accounts, low duration bond books and least asset risks.
According to Kenanga Investment Bank Bhd (Kenanga Research), the interest rate hike would increase net interest income given the higher loan and deposit growth.
Moreover, Public Bank has started managing its interest rate risk with the aims of growing fees income by 30 per cent year-on-year in financial year 2011 (FY11). This was demonstrated by stronger contributions from bancassurance and fund management.
Following the recently launched scheme, ‘My First Home Scheme’ by Prime Minister Datuk Seri Najib Tun Razak, young workers could buy houses that cost between RM100,000 and RM220,000 with a 100 per cent financing facility for those earning less than RM3,000 a month.
The scheme saw the participation of 25 financial institutions and Cagamas Bhd would bear the costs of the initial 10 per cent deposit for the house, highlighted Kenanga Research.
With the easing of borrowing requirement, a further upside in mortgages demand was now a real possibility.
This, opined the research firm, implied additional demand on ‘bread and butter’ segment in property valuing in range of RM100,000 to RM220,000 in coming years and higher demand for bank loans.
The group’s strength on the consumer lending side, its excess liquidity position and sufficient capital base should ensure that it would be ready for this and was the main beneficiary.
Kenanga Research spotted Public Bank to have ample scope for earnings expansion in FY11 onward, and believed the growth would continue to drive performance.
Hence, Kenange Research pegged Public Bank at a target price of RM14.80 per share as the company set to repeat its high profitability growth path and pull further away from its peers.