Thursday, January 27

Public Bank records decent start to the year, meets expectations

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KUCHING: Public Bank Bhd (Public Bank) has recorded a decent start to the year with the group’s first quarter of 2015 (1Q15) results meeting most analysts’ expectations.

In its filing on Bursa Malaysia, Public Bank noted that for the first quarter ended March 31, 2015, the group’s net profit attributable to equity holders improved by RM154.6 million or 15.2 per cent to RM1,171.5 million.

Public Bank further noted that the improved earnings was mainly due to higher net interest income of RM131.2 million (9.4 per cent) and higher net fee and commission income of RM47.4 million (14.7 per cent).

“The growth in the group’s net interest income was driven by continued healthy loans and customer deposits growth coupled with sustained strong asset quality, as well as the positive impact arising from the rights issue exercies in the third quarter of the previous year,” it said.

According to analyst David Chong, of RHB Research Institute Sdn Bhd (RHB Research), small and medium enterprise (SME) loans were the key loan growth driver (+20 per cent), while loans to individuals increased by 12 per cent (figures annualised).

The research house believed overall group loan growth was also aided by forex impact.

“We estimate annualised group loan growth stood at 11.5 per cent on constant currency terms, but this was still tracking ahead of its 2015 target,” Chong said.

Meanwhile, Chong noted that Public Bank’s total customer deposits rose 10 per cent year on year (y-o-y)/+3 per cent quarter on quarter (q-o-q) while the group’s current account and savings account (CASA) deposits grew eight per cent y-o-y/three per cent q-o-q.

Hence, he said that Public Bank’s loan-to-deposit (LD) and CASA ratios were generally stable q-o-q at 88 per cent and 25 per cent respectively.

As at end-March, Chong noted that estimated fully-loaded group and bank common equity tier 1 (CET-1) ratios were at 10.4 per cent (December 2014: 10.7 per cent) and 10 per cent (December 2014: 10.2 per cent) respectively.

Meanwhile, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) believed management’s guidance still holds for example, nine to 10 per cent domestic loan growth for 2015 (+10.9 per cent y-o-y in 1Q15) and for net interest margin (NIM) to still compress by about eight to 10 basis points (bps).

It noted that credit costs are likely to normalise higher amid lower recoveries, but remain benign at just 12 bps.

RHB Research liked the group for its good earnings predictability (it is less reliant on markets-related income, etc), sound asset quality, cost efficiency and resilient book value growth.

However, the research arm of CIMB Investment Bank Bhd (CIMB Research) thinks that the prospects for Public Bank are still challenging in 2Q15, plagued by the negative impact of the implementation of goods and services tax (GST).

“Margins will still be under pressure given the sliding yields for residential mortgages and keen competition for deposits,” it said.