Tuesday 8 February 2011

Public Bank still ahead of the pack

Public Bank still ahead of the pack


Written by Financial Daily
Monday, 07 February 2011 11:39


Public Bank Bhd
(Feb 2, RM13.44)
Maintain buy at RM13.65 with target price RM14.20: 
Public Bank reported an FY10 earnings growth of 24.7% year-on-year (y-o-y) and a 4QFY10 quarter-on-quarter (q-o-q) growth of 8%, the highest sequential growth in FY10, further
cementing the group’s share of domestic market leading loans, core customer deposits and private unit trust at 16.2%, 16% and 43.3% respectively.

The group’s FY10 results were spot on with our full-year estimates but slightly ahead of consensus, representing 99.6% and 104.8% of our and consensus full-year forecast respectively. The results are commendable as the group continued to register above industry growth rates, which translate into a one percentage point improvement in return on equity (ROE) to a record 27.1% despite the competitive domestic banking landscape, which has put immense pressure on industry wide retail lending yields and upward pressure on deposit rates in general.

Growth was broad based across all key operating lines. Net interest income jumped 13.9% y-o-y on a relatively robust loans growth of 13.8%, which was more than sufficient to offset the slight 10 basis points contraction in net interest margins. Non-interest income expanded by 18.7% on: i) higher unit trust management fees (up 29.7% y-o-y) due to expansion in assets under management, ii) a 45.7% surge in forex income, and iii) a 18.1% increase in transactional fee income. Meanwhile, profit before tax from its overseas operations expanded by 30% largely on the back of lower credit costs on improving non-performing loans. Asset quality remained solid, with gross impaired loans ratio declining to 1.1% from 1.4% while coverage ratios hit 142%.

We have raised our FY11 and FY12 earnings by 2.9% and 3.7% respectively, taking into account the stronger fee-based income growth from its bancassuarce business. Consequently, our ROE is raised marginally to 26.3% from 26% and our target price from RM14.20 to RM14.40. Maintain buy. — OSK Investment Research, Feb 2


This article appeared in The Edge Financial Daily, February 7, 2011.

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