Public Bank’s 1H18 within expectations, cautious outlook ahead

KUCHING: Public Bank Bhd’s ( Public Bank) first half of 2018’s (1H18) financial performance was within expectations but analysts pegged a cautious outlook ahead for the bank.

MIDF Amanah Investment Bank Bhd’s research arm ( MIDF Research)saidthegroupregistered 1HFY18 net profit growth of 8.6 per cent year on year (y- o-y) that were supported by 12.6 per cent y- o-y growth in 1QFY18.

“Provisions fell 8.2 per cent y- o-y to RM86 million as current account was 23.2 per cent y- o-y lower to RM91.5 million.

“We opine that the impact of MFRS 9 seems to have normalised. As we come to expect from the group, asset quality remain stable which contributed to the low credit cost. Gross income loan (GIL) ratio was 0.5 per cent as at the second quarter of FY18 (2QFY18),” the research team added.

It noted that Public Bank’s operating expenditure ( opex) improved marginally on a sequential quarterly basis, as it fell marginally by 0.1 per cent qoq in 2QFY18.

“As such, 1HFY18 opex grew 1.6

Provisions fell 8.2 per cent y-o-y to RM86 million as current account was 23.2 per cent y-o-y lower to RM91.5 million.

per cent y- o-y only due to higher personnel cost. This lead to better cost-to-income (CI) ratio which improved 0.7 percentage points ( ppts) y- o-y to 33.1 per cent,” it added.

Mea nwh i l e , Kena n g a Inves tment Bank Bhd’s research team said Public Bank’s management guided for a challenging environment ahead ranging from; global trade friction, normalisation of monetary policy globally, and capital outflow.

It said: “Management revised its loans target for FY18 to four to five per cent (from circa five per cent previously) with loans supported by demand from the retail segment (residential property and SME financing) with hire purchase ( HP) financing expected to taper with the implementation of SST.

“Despite healthy LDR/LTF of 94.2 and 88.8 per cent management guided for a low to mid-single digit compression (from single- digit compression) due to on- going funding competition.”

On a positive note, it highlighted that thanks to stringent asset quality beforehand, it does not expect any spike in GIL ahead, thus credit costs are likely to be muted despite management continued assessment of 15bps credit costs for 2018.

Overall, it maintained a ‘market perform’ rating on the stock while MIDF Research pegged a ‘ buy’ call.

It explained: “We continue to like the group’s ability to maintain its profitability and the higher than expected interim dividend was a pleasant surprise.

“Although, there are potential headwinds stemming from external uncertainties, we remain optimistic of the Group’s ability to sustain its profitability.

“Moreover, we believe that the group’s retail-centric should stand to benefit in the uplift of consumer sentiment.”