Public Bank an outperform, says Inter-Pacific Research

Public Bank an outperform, says Inter-Pacific Research

Tags: PBB

Written by Surin Murugiah
Friday, 09 October 2009 08:43

Inter-Pacific Research Sdn Bhd is recommending PUBLIC BANK BHD [] (PBB) as an outperform at RM10.40 with target price RM11.80, and said the bank's loans growth of 15% for FY09 seemed achievable.

The research house said on the back of high loans approval, up 17% year-on-year (y-o-y) to RM24.5 billion in 1HFY09, it expects PBB's full year loans to expand by 15% y-o-y from 19.2% y-o-y in FY08.

It said non-performing loans (NPLs) were expected to creep up slightly in 2HFY09 from loan defaults as PBB's organic loans that accounts for two-third of their total loans would be affected from the first two quarters of 2009 real gross domestic product (GDP) contraction.

"We project gross and net NPLs to be at 1.02% and 0.9% respectively in FY09, from 1.01% and 0.86% respectively in FY08," it said.

Inter-Pacific Research said PBB's net interest margin (NIM) would be compressed by 20-25 basis points in FY09 from the after effects of 150 basis points cut in Overnight Policy Rate (OPR) to 2% by Bank Negara.

But the drop in margins was compensated from the increase in hire purchase rates and corporate loans in March 2009, it said.

On the bank earnings, it said bottomline was projected to shrink by 13.1% in FY09 following compressed NIM and higher interest cost from raising RM1 billion of Non-Innovative Tier 1 Capital.

"But the bottomline should rebound by 9.5% in FY10 from stronger loans growth, lower credit charge off rate and higher contribution from non-interest income," it said.