Public Bank’s 9MFY12 results were largely in line with consensus and our full-year estimates. The group remains a solid investment in uncertain times given its superior asset quality. However, it is facing key challenges in the form of a dampened growth outlook and margin compression. A dividend upside surprise isunlikely to materialize in the immediate to medium term. Given the limited upside, slowing consumer lending growth as well as NIMs pressure, we are maintaining our NEUTRAL call on the stock. Rolling forward our valuations to FY13 book values, we raise our FV to RM15.70 from RM14.40 (2.82x FY13PBV, 22% ROE, 9.5% COE, growth rate: 3%).
Within estimates. Public Bank’s 9MFY12 annualized earnings were in line with both consensus and our estimates, with the 9MFY12 numbers representing 74.8% of our full-year earnings forecasts.
Lacklustre growth. The group’s 9MFY12 earnings grew by a subdued 3.8% y-o-y as persistent net interest margin (NIM) pressure and rising overhead costs crimped overall growth. Pre-provision operating profit ticked up by a very marginal 3.4% y-o-y with key drags attributable to (i) 3Q12 NIMs compressing by 20bps y-o-y to 3.1% but remaining stable q-o-q, ii) higher overhead expenses (+8.0% y-o-y ) mainly due to personnel costs, and (iii) a lacklustre performance from its stockbroking and investment banking divisions. The 3.6% PBT growth was largely supported by a 11.6% drop in loans loss provision.
Group loans on track to hit target. The group’s 9MFY12 gross loans rose at an annualized pace of 11.3%, partially dragged down by a 5.0% contraction in loans from its Hong Kong operations, which slowed domestic annualized loans growth to 12.8%. Management has targeted overall loans growth of 10% to 11%. Hire purchase was the key drag in its domestic loans portfolio, with 8.6% y-o-y growth on an annualized basis, while residential and non-residential property loans growth remained robust at 16.9% and 22.2% respectively vs 17.6% and 16.5% in 2011. The loan-to-deposit ratio was steady at 86.8%, largely sustained by stronger wholesale deposit growth, which grew at an annualized 16.2%. Meanwhile, core deposits grew at a slightly slower annualized rate of 12.3% vs the group’s loans growth of 13.3%.
Within estimates. Public Bank’s 9MFY12 annualized earnings were in line with both consensus and our estimates, with the 9MFY12 numbers representing 74.8% of our full-year earnings forecasts.
Lacklustre growth. The group’s 9MFY12 earnings grew by a subdued 3.8% y-o-y as persistent net interest margin (NIM) pressure and rising overhead costs crimped overall growth. Pre-provision operating profit ticked up by a very marginal 3.4% y-o-y with key drags attributable to (i) 3Q12 NIMs compressing by 20bps y-o-y to 3.1% but remaining stable q-o-q, ii) higher overhead expenses (+8.0% y-o-y ) mainly due to personnel costs, and (iii) a lacklustre performance from its stockbroking and investment banking divisions. The 3.6% PBT growth was largely supported by a 11.6% drop in loans loss provision.
Group loans on track to hit target. The group’s 9MFY12 gross loans rose at an annualized pace of 11.3%, partially dragged down by a 5.0% contraction in loans from its Hong Kong operations, which slowed domestic annualized loans growth to 12.8%. Management has targeted overall loans growth of 10% to 11%. Hire purchase was the key drag in its domestic loans portfolio, with 8.6% y-o-y growth on an annualized basis, while residential and non-residential property loans growth remained robust at 16.9% and 22.2% respectively vs 17.6% and 16.5% in 2011. The loan-to-deposit ratio was steady at 86.8%, largely sustained by stronger wholesale deposit growth, which grew at an annualized 16.2%. Meanwhile, core deposits grew at a slightly slower annualized rate of 12.3% vs the group’s loans growth of 13.3%.
Superior overall asset quality sustained. Overall gross impaired loans dipped 0.5% q-o-q, with all key geographical operations registering an improvement: Malaysia: -0.3% q-o-q, Hong Kong and China: -2.7% q-o-q and Cambodia -1.1% q-o-q. As a result, the group’s loans loss coverage ratio continued to go up post MFRS139 adoption to 124.5% from 117.1% in 1Q12, with a corresponding improvement in gross impaired loans ratio to 0.7% from 2Q12’s 0.8%
Trimming guidance for dividend payout ratio. Given the need to conserve capital in anticipation of providing for Basel 3 counter-cyclical buffers amidst challenges in growth and persistent margin pressure, the group is moderating its dividend payout ratio guidance downwards to 40%-50% vs the original guidance of close to 50%. Assuming that the group maintained its FY11 absolute net DPS at 48 sen, this would translate into a net dividend payout ratio of 44% of FY12’s net yield, or just 3.3% of its current share price level.
Source: OSK
No comments:
Post a Comment