Public Bank on track to meet full-year estimates

Update Public Bank on track to meet full-year estimates

Tags: 52-week high | Cambodian Public Bank plc | Islamic banking business | Maybank IB | OPR | OSK Research | Public Bank Bhd | Public Islamic Bank Bhd | Tan Sri Tay Ah Lek | third quarter

Written by Ellina Badri
Friday, 16 October 2009 00:42

KUALA LUMPUR: PUBLIC BANK BHD [] surged to its 52-week high of RM10.70 on Oct 15, the highest it has been since May 2008, following the release of its third quarter ended Sept 30, 2009 (3QFY09) results, which put it on track to meet full-year consensus estimates.

Its net profit in 3QFY09 rose 3.68% year-on-year (y-o-y) to RM639.05 million on the back of strong loans and deposit growth and stable asset quality, coming in slightly above analysts’ expectations of a growth of between 2% and 3%.

Upon mild profit taking, the stock closed unchanged at RM10.62 on Oct 15, with 2.3 million shares done. Its foreign shares rose two sen to RM10.62 on 681,400 shares traded.

In a statement on Oct 15, the country’s third-largest lender said the growth in profit was despite the negative impact of the drop in Bank Negara Malaysia’s overnight policy rate (OPR) and the slowing economy.

Revenue, however, fell 12.5% to RM2.44 billion in 3QFY09 from a year earlier, while earnings per share grew to 18.52 sen from 18.37 sen. It did not declare any dividend.

Its annualised net return on equity stood at 25.5%.

For the nine months to Sept 30, 2009, net profit declined 4.66% to RM1.84 billion from a year earlier, as its results in the previous corresponding period had included a one-off goodwill income of RM200 million from ING Asia/Pacific Ltd in respect to a regional strategic alliance on bancassurance distribution, it said.

It said excluding the goodwill, the group’s net profit rose 3.2% y-o-y during the nine-month period. Revenue dipped to RM7.22 billion from RM7.94 billion, while earnings per share declined to 53.66 sen from 57.44 sen.

If it maintains the profit momentum for the rest of the financial year, its net profit for FY09 could come in at RM2.45 billion, higher than consensus estimates of RM2.38 billion.

In a note on Oct 15, OSK Research said Public Bank’s annualised nine-month results were largely within its and consensus full-year forecasts, accounting for 73% and 77% of consensus estimates.

OSK and Maybank Investment Bank had both revised upwards its FY09 earnings forecasts for Public Bank ahead of its 3QFY09 results announcement.

OSK now expects the bank’s net profit to grow 5.9% to RM2.58 billion, after raising its loans growth estimates to 15% from 13.4% previously, while Maybank IB has upped its FY09 net profit forecast by 3%, expecting recurring net profit to come in at RM2.69 billion for the full year after adjusting for lower loan loss provisions.

Pre-tax profit at its local commercial bank, Public Bank Bhd, was lower at RM1.92 billion compared with RM2.13 billion in the nine months to Sept 30, 2008, mainly due to the goodwill as well as from the vesting of its Islamic banking business to its unit, Public Islamic Bank Bhd in November 2008.

Pre-tax profit contributions from its overseas operations fell by 35.9% to RM186.8 million, also due to the goodwill from ING.

Commenting on its higher nine-month net profit, the bank said: “The profit improvement was primarily due to higher net interest and financing income by RM273.1 million, which grew 8.6%, and higher other operating income by RM92.7 million, or 9.9%.”

It said the higher net interest and financing income, despite the negative impact arising from the reduction in OPR three times since November 2008, was attributable to the sustained high rate of growth in both quality loans and customer deposits, whilst asset quality remained stable.

It also said its higher other operating income was mainly due to higher investment income from securities held, as well as higher foreign exchange profit during the nine months to Sept 30.

“These were partially offset by higher other operating expenses by RM225.2 million and higher loan loss and impairment loss allowances by RM87.8 million resulting from higher business volumes,” it said.

It added the higher other operating expenses was due to an increase in personnel costs from the growth of its marketing sales force, while the higher loan loss allowance was partly due to higher general allowance by RM41.9 million, resulting from higher loan growth achieved during the nine month period.

Public Bank said total loans, advances and financing rose 10.7% year-on-year to RM133.6 billion in the nine months to Sept 30.

Its annualised loans growth and core deposit growth was 14.3% and 19.5%, respectively, ahead of the banking system’s annualised growth of 6.8% and 6.3%, it said.

“We are on track to achieve the targeted 14%-15% loan growth for 2009, supported by demand from small and medium-sized business enterprises and increases in housing loans and motor vehicle hire purchase financing,” the bank’s managing director and chief executive officer, Tan Sri Tay Ah Lek said.

Despite the above-average loans growth, the banking group maintained its asset quality, with its net non-performing loans ratio strengthening to 0.82% as at Sept 30 compared with 0.87% a year earlier, compared with the industry’s net NPL ratio of 2.1% as at end-August, the bank said.

It said loan loss coverage stood at 171%, from 160% in FY08, due to additional general allowance, amounting to RM1.99 billion, set aside for its loans growth.

The bank’s risk-weighted capital and core capital ratios stood at 11% and 12.1%, respectively, it said.

Meanwhile, the bank said total customer deposits grew 12.6% to RM182.7 billion, as core customer deposits rose 14.6% to RM128.8 billion.

Its overseas operations also contributed to deposits growth, especially Public Financial Holdings Group in Hong Kong and Cambodian Public Bank plc, which reported deposits growth of 15.6% and 53.6%, respectively.

Its unit trust and fund management business’s net asset value of funds under management grew 45% y-o-y to RM33.8 billion in the nine months to Sept 30, and recorded total unit trust sales of RM6.1 billion, while its bancassurance business reported a 64% increase in sales.

On the group’s prospects, Tay said: “As the global recession begins to recede and with recovery on the horizon, the outlook for the banking industry is expected to improve. However, margins continue to be under pressure due to continued intense competition.”

http://www.theedgemalaysia.com/business-news/151451-update-public-bank-on-track-to-meet-full-year-estimates.html