PBBANK (1295) PUBLIC BANK BHD
KUALA LUMPUR: CIMB Equities Research said Public Bank’s net profit growth of 13.8% on-year in the third quarter ended Sept 30, 2014 (3Q14) was the strongest in the past three years.
It said on Friday this was underpinned by (1) stabilisation of the net interest margin, as a result of the bank's active asset-liability management to expand its loans faster than deposits, and (2) a 54.8% on-year plunge in loan-loss provisioning (LLP).
“However, the above would not be sustainable, in view of the following (1) given the tight liquidity, PBB will need to speed up its deposit growth to support the loan expansion, and (2) the 3Q14 credit charge-off rate was low, at only 8bp, compared to a sustainable level of 20 basis points to 30 bps,” it said.
CIMB Research pointed out Public Bank’s loan growth moderated further from 10.8% on-year in June 2014 to 10.2% in September 2014, in line with the industry’s trends.
Most major loan segments, including property and auto loans, posted weaker growth in September 2014, but the growth in working capital loans improved from 13.7% on-year in June 2014 to 15.2% on-year in September 2014.
The gross impaired loan ratio stayed at 0.65% in June to September 2014, while the loan-loss coverage inched down from 117.6% in June 2014 to 117.1% in September 2014.
“Maintain Reduce call. We advise investors to reduce their holdings in Public Bank, due to the concerns over expected margin contractions and the uptick in credit costs,” said CIMB Research.
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