Public Bank aims for 5% loan growth this year

Public Bank Bhd is targeting a loan growth of 5% for this year, backed by a more positive economic outlook, low interest-rate environment and ongoing promotions focusing on its mortgage and hire-purchase segments.

In a research report, UOB Kay Hian (UOBKH) Research noted that the bank registered commendable loan growth of 5.6% in the first half of its financial year 2022 (1H22).

The performance was above the research house’s full-year assumption of 4.5% year-onyear (y-o-y) and the bank’s guidance of between 4% and 5%.

Meanwhile, Hong Leong Investment Bank (HLIB) Research noted that net interest margin (NIM) continued to expand following the overnight policy rate (OPR) hike in July 2022.

However, HLIB Research believes the magnitude may be capped by downward current account savings account (CASA) mix normalisation.

“That said, loan growth is expected to chug along for now, considering the economic recovery is strong,” it noted.

Separately, HLIB Research expects gross impaired loan ratio to rise. However, the research house is not overly concerned, since Public Bank has already made heavy preemptive provisioning in the previous financial years to cushion this impact.

In terms of asset quality, Public Bank believes credit costs should stay between 10 and 15 basis points in 2022 versus 34 basis points in the previous financial year.

According to TA Research, this is because Public Bank continues to provide assistance to customers who still face repayment difficulties.

“Despite a more sanguine outlook, management noted the potential downside risks to earnings from lower non-net interest income arising from the subdued market condition, higher overhead expenses due to the normalisation in business operations and inflationary pressures, as well as the lingering effects of Covid-19 and effects of a one-off prosperity tax.”

On the other hand, CGS-CIMB Research projects a net profit of Rm3bil for Public Bank in 2H22.

The projection is underpinned by expansion in NIM, which was lifted by the OPR hikes and improvement in non-interest income from better investment income.

Consequently, CGS-CIMB Research reiterated its “add” call on the stock with an unchanged target price (TP) of RM5.07 per share.

Meanwhile, TA Research maintained its “buy” call on Public Bank with a TP of RM5.30 per share. HLIB Research and UOBKH Research have a “hold” call on the stock with a TP of RM4.80 and RM 4.85 per share, respectively.