Wednesday, January 26, 2011

HDBSVR maintains Hold on Public Bank, TP RM13.10

KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining its Hold recommendation on PUBLIC BANK BHD [] and a target price of RM13.10 following the full-year earnings.

It said on Wednesday, Jan 26 Public Bank remains a Hold for its expensive valuation which is 3.4 times book value '(which is +2SD vs sector average of 2.3x), coupled with flat returns on equity (ROE) and net interest margin (NIM) compression ahead'.

HDBSVR said it expected dividend payout ratio to remain at 52%, translating into 4%-5% yields.

'As for the outlook for 2011,'' we expect loan growth to remain robust supported by the domestic market. Accordingly, we raised FY11-12F loan growth assumptions to 13-14% (from 12%). We expect competitive pressure in the consumer (HP and mortgages) and commercial segments to continue to squeeze NIM,' it said.

Analysing Public Bank's financial results, it said net interest income grew 2% on-quarter driven by 3% loan growth. NIM was flat at 2.2%. Non-interest income grew 3% driven mainly by its unit trust business.'' Loan provisions fell 29% in the absence of non-recurring provisions that were booked in 3Q10. Overheads rose 6% in the quarter due to higher staff costs, but cost-to-income ratio fell to 30%, implying better operating efficiency.

For full year FY10, loans grew 13.8% and were largely domestic driven (+15.6%). Mortgages and hire purchase (HP) remained the key loan growth drivers, rising 17% and 12% yoy, respectively. Tier-1 CAR inched up to 12.4% and RWCAR to 13.3%.

The group declared 25 sen second interim DPS (less 25% tax) and single tier 8 sen DPS, bringing FY10 total DPS to 58 sen or 52% payout, within HDBSVR's expectations.


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