Public Bank

KK · Guru

Public Bank

KK · Guru

The Star, Wednesday October 19, 2005

Public Bank third quarter net profit hits RM348m

PUBLIC Bank Bhd reported a 9% increase in net profit for its current financial year’s third quarter from the same period a year ago, as it gave out more loans to small- and medium-sized enterprises (SMEs), and for the purchase of vehicles and residential property. Net profit amounted to RM347.9mil for the quarter, or 10.6 sen a share, compared with RM319mil, or 9.88 sen a share, previously. Revenue improved to RM1.53bil from RM1.26bil while pre-tax profit rose to RM500.4mil from RM466mil.

For the nine months to end-September, Public Bank reported a net profit of RM1.06bil, or 32.34 sen a share, compared with RM932.1mil, or 29.03 sen a share, from the same period a year earlier. Revenue rose to RM4.36bil from RM3.62bil and pre-tax profit improved to RM1.5bil from RM1.35bil.

Commenting on the bank's performance for the nine-month period, Public Bank chairman Tan Sri Teh Hong Piow, in a statement, attributed the improvement to the increase in net interest income and Islamic banking net financing income, coupled with higher other operating income.

“Despite the pressure on lending margins due to intense competition, the group’s net interest income and net financing income from Islamic banking business grew by RM146mil, or 7%, for the first nine months of 2005, on the back of continued strong loans growth, improvement in asset quality and the increasing pool of lower-cost customer deposits,'' said Teh. He said other operating income rose by 25% to RM677mil during the same period, mainly as a result of higher gains from sale of trust units. This was due to the launch of new unit trust funds and increase in management fees from higher net value of unit trust funds under management.

Overseas operations, which are based primarily in Hong Kong, achieved a 35% improvement in pre-tax profit on the back of lower loan loss provisioning. Public Bank’s domestic operations registered an 8% increase in pre-tax profit, and accounted for 85% of the group’s pre-tax profit.

Teh said Public Bank's loan book grew by 19.2% on an annualised basis compared with the industry average of 7.5%. Demand deposits increased by 6% in the first nine months, which was faster than the industry's average growth of 4%. Public Bank's net non-performing loans ratio further improved to 1.8% in September 2005 from 2.1% at the end of 2004, and was 72% lower than the banking industry’s ratio of 6.4% as at August 2005.

“The group’s lending direction continued to be focused on the retail sector, with loans for the financing of residential mortgages, purchase of passenger vehicles and small- and medium-sized enterprises accounting for 73% of the total loan portfolio as at end-September 2005, and 77% of total new loans approved during the first nine months of 2005,'' said Teh.

“Going forward, the Public Bank group will continue to focus on its core activities of lending to the retail sector, with loans to small- and medium-sized enterprises, residential mortgages and passenger-vehicle financing. “The Public Bank group will also focus on growing its low-cost deposits to mitigate the competitive pressures on interest margins,'' Teh said.

Barring unforeseen circumstances, Public Bank expects to continue to record satisfactory performance for the rest of the year.

tfwee · Veteran

Wednesday October 19, 8:27 AM

Malaysia's Public Bank 3Q Net MYR347.9M Vs MYR318.9M

(This article was originally published Tuesday.)

KUALA LUMPUR (Dow Jones)--Public Bank Bhd. (1295.KU) said Tuesday its third-quarter net profit rose 9% because of higher income from conventional and Islamic lending businesses.

Malaysia's No.2 bank by market capitalization registered a net profit of MYR347.9 million compared with MYR318.9 million a year ago.

For the nine months to September, its net profit rose 13.6% to MYR1.06 billion, from MYR932.1 million a year ago.

At this pace, Public Bank appears on track to reach the MYR1.44 billion analysts polled by Thomson Financial expect the lender to earn in the full year.

Profit rose thanks to a rise in loans to small and medium-sized enterprises, vehicle hire purchase financing and residential mortgages, the bank said.

Net interest income for the period rose 8.5% to MYR637.8 million, compared with MYR588.0 million a year earlier.

Income from Islamic banking, a growing business for banks in Malaysia, grew 8% to MYR738.5 million from MYR684.3 million a year ago.

Total non-performing loans amounted to MYR1.15 billion, down from MYR1.21 billion a year ago.

Public Bank was upbeat on its prospects, saying it will focus on increasing its deposits to mitigate competitive pressures on interest margins.

KK · Guru

Extracts fm UOBKayHian Report,

Public Bank (PBKF MK/PBK MK/ BUY / RM 6.70 (L)/RM 6.70 (F)/ Target Price: RM8.00(L)/RM9.10(F))

3Q05: Within Expectation

3Q05 net profit of RM347.9m was up 9.1% yoy but down 5.0% qoq on the back of higher loan loss provision (+60.8% qoq). Earnings was within our and market expectations.

Strong loans growth. Loans growth grew 4.6% in 3Q05. Public Bank reported strong loans growth of 14.4% in the first nine months and will easily meet our projection of 18% for FY05. Again, loans book expansion was supported by strong consumer loans, with loans for residential mortgages and financing of passenger vehicles growing 6.7% and 4.0% respectively in 3Q05.

Net interest margin (NIM) down marginally. Net interest margin down marginally to 2.56% compared to 2.58% in 2Q05, as margin contraction was mitigated by strong volume growth. Public Bank is growing its low-cost deposits to mitigate the competitive pressures on interest margins.

Higher loan loss provision. LLP was higher in 3Q05, reported at RM119.5m (vs 2Q05's RM74.0m) due to higher specific allowance. Overall assets quality improved with gross NPL dropping to 2.16% in 3Q05 compare with 2.32% in the previous quarter. Cost-to-income ratio improved from 37.5% in 2Q05 to 36.7% in 3Q05.

We are maintaining our net profit forecast of RM1.5b and RM1.7b in FY05 & FY06 respectively, while assessing the full impact of the deposit insurance. However, this will not change our view of Public Bank as the most well-run company with excellent asset quality, a high dividend yield, and growing loans and deposit market share. Maintain BUY

KK · Guru

Extracts fm OSK Report (email me if u need a copy),

Momentum in new loans growth sustained into the third quarter with the group loan book expanding by about 14% in the first 9 months of the year. While this may be lower than the 16.2% growth for the same period in 2004, it is impressive given the more challenging economic environment this year from higher crude oil pries and rising interest rates overseas, especially in the United States. Gross loans growth should reach 18% - 19% this year to RM67.3bn, after growing 20% per annum since 2001.
Competition in the housing loan segment stabilized in the third quarter but pressure on margins could intensify again in the current quarter after rival banks recently launched some aggressive mortgage packages again. We estimate third quarter NIM (including NIDs) to have held up close to 3.1% but could ease to 2.9% by end 05/early 06.
The bank has already started paying its first premiums following the implementation of the deposit insurance scheme effective September. At a rate of 0.02% of total deposits, the scheme will set the group back by about RM15m per annum or less than 1% of group pre-tax earnings.
The group’s official position is that there could be a 25 basis point hike by end 05 and another 50 basis points in 2006 in Malaysia’s overnight policy rates (OPR) of 2.7%. As part of the group’s asset-liability management strategy, the bank has been managing the growth of its fixed rate loans and fixed deposits. Based on its loans and deposits profile currently, an interest rate increase will be largely neutral on the group’s net interest income.
Public Bank is the most expensive banking exposure on the market. It is trading at a forward 2006 PER of 14.3x which is in line with the KLCI. On a P/NTA basis, its 2.8x compares with the range of 1.3x – 2.6x for other banking groups. While a premium is clearly justified given its above industry loan growth, impressive ROE and strong management, we do not see a catalyst for a significant run-up in the near term. Our 12-month target price is RM7.30, at 3.0 times our projected NTA for 2006. NEUTRAL.