PUBLIC Bank Bhd had a stellar third quarter after chalking up 13.8 per cent higher net profit year-on-year of RM1.19 billion, Hong Leong Investment Bank Bhd’s (HLIB) research unit said.
HLIB Research said the earnings were boosted by continued loans growth, higher sequential net interest margin (NIM), higher non-interest income and lower overheads. These had made up for a slightly slow first half results.
The research house said that the strong quarter was largely in line with forecasts and made note of the fact that Public Bank has complied with Bank Negara Malaysia’s regulatory reserve requirement ahead of the December 31 2015 deadline by transferring RM1.25 billion from retained earnings to regulatory reserve.
Public Bank has an above-industry asset quality and stronger capital position post rights issue and its excellent track record in delivering guidance and being consistent in its growth, HLIB Research said.
The risks that lay ahead for Public Bank, HLIB Research said, were unexpected jump in impaired loans, lower than expected loan growth and higher than expected erosion in NIM.
HLIB Research said it is maintaining a target price at RM18.32, based on Gordon Growth with a return on equity of 16.6 per cent and weighted average cost of capital of 8.2 per cent.