KUALA LUMPUR: Public Bank Bhd's net interest margin (NIM) is expected to remain broadly stable next quarter since FD rivalry is now less intense, said Hong Leong Investment Bank Bhd (HLIB).
HLIB said Public Bank's loan growth is seen to chug along, backed by the mortgage, auto, and small and medium enterprises (SME) segments.
"Besides, management has the appetite to offer competitive financing terms and pricing to enhance its market position; this move, however, would not dent NIM in the near term as these loans would only be drawn down gradually," it said in a note.
On a separate note, HLIB said Public Bank's asset quality is seen to stay fairly resilient given its conservative and prudent credit origination practices.
Also, the bank said Malaysia's delinquency rate (at 1.8 per cent) is trending below the pre-pandemic level of more than three per cent.
"Thus, net credit cost (NCC) is expected to remain steady at 5–10 basis point ex-writebacks.
"Even if the gross impaired loan (GIL) ratio were to climb in the near term, we are not overly concerned, as 91 per cent of the public's loans are collateralized and LLCs are now at 169 per cent versus a pre-pandemic level of circa 120 per cent," it said.
Overall, HLIB said Public Bank's results were in line, and thus, its financial year 2024 (FY24) to FY25 profit forecasts were kept.
Separately, the bank introduced Public Bank's FY26 projections.
"All in all, we still like Public Bank for its defensive qualities, where the bank has strong asset quality and loan loss coverage (LLC) towering that of the pre-pandemic level (1.4 times).
"Moreover, foreign shareholding is near a multi-year low. Maintain Buy, but with a higher target price of RM4.90 (from RM4.80)," it added.