CGSI Research said it is projecting a net profit of RM3.44bil for the bank in 2H24.
PETALING JAYA: Higher revenue and lower loan loss provisioning are expected to drive Public Bank Bhd
’s net profit higher in the second half of the year (2H24).
CGS International (CGSI) Research said it is projecting a net profit of RM3.44bil for the bank in 2H24, which is similar to the level in 1H24.
On a year-on-year (y-o-y) basis, the research house expects the 2H24 net profit to rise by 3.7%, underpinned by higher revenue and lower loan loss provisioning.
“We retain our financial year 2024 (FY24) to FY26 earnings per share forecasts for the bank.
“For valuation, as stated in our report dated April 19 , 2020, we pegged our target price for the bank to a 10% discount to its dividend discount model value to factor in heightened credit risks (partly from Covid-19).
“We do not see the need for such a discount now as we expect credit risks for Malaysian banks to subside in light of stronger economic growth.
“Withdrawing the discount increases our target price from RM4.90 to RM5.40 (cost of equity of 9.3%; terminal growth rate of 4%),” it said.
The research house is retaining its “add” call on Public Bank, given that it has one of the best asset qualities and one of the lowest credit costs in the sector (credit charge-off rate of five basis points (bps) to 10 bps in FY24 as guided by the bank).
Rerating catalysts include potential write-back in management overlay (which stood at RM1.62bil as of end-June) and an increase in dividend payout ratio.
“We estimate that every 10% write-back in management overlay would lift the bank’s FY24 to FY26 net profit by 1.7% to 1.8%. Downside risks include deterioration in its loan growth and asset quality.”
AmInvestment Bank Research, meanwhile, said it’s FY24, FY25 and FY26 earnings for the bank have been tweaked by a decline of 0.1%, an increase of 1.1%, as well as a rise of 2.5%, respectively to factor in a slight improvement in net interest margin and non-interest income as well as an increase in its operating expenditure projection.
Public Bank reported a 10.08% jump in net profit in the second quarter ended June 30, 2024 (2Q24) to RM1.78bil on the back of a top line of RM6.69bil, a 6.82% improvement over the year-ago quarter.
Basic earnings per share in the quarter under review rose to 9.18 sen from 8.34 sen in 2Q23.
For the six-month period ended June 30, 2024 (1H24), Public Bank recorded a net profit of RM3.44bil on revenue of RM13.49bil, as compared to a net profit of RM3.33bil and revenue of RM12.39bil in 1H23.
