PETALING JAYA: Public Bank Bhd
expects its net interest margin (NIM) to come under pressure in the fourth quarter of 2024 (4Q24) due to the seasonal uptick in deposit competition towards year-end.
As such, the lender has initiated several measures to defend its NIM including growing its current account/savings account, increasing retail deposits, and reducing reliance on more expensive wholesale deposits.
In its report yesterday, CGS International (CGSI) Research noted that Public Bank’s NIM expanded by nine basis points (bps) for the nine months to September 2024, from 2.15% in 4Q23 to 2.24% in 3Q24.
However, the brokerage said the bank expected greater pressure in 4Q24 due to the competitive deposit environment, citing a recent briefing by Public Bank’s senior management.
“We think that any quarter-on-quarter (q-o-q) contraction in Public Bank’s NIM will be small in 4Q24 (by around three bps q-o-q from the level of 2.24% in 3Q24),” CGSI Research said.
“For the whole year, its 2024 net interest margin should be close to the level of 2.2% in financial year 2023,” it added.
CGSI Research retained its “add” call on Public Bank, premised on the potential write-back in management overlay and earnings enhancement from the LPI Capital Bhd acquisition.
It kept its target price for the counter at RM5.57 per share.
Public Bank expected its acquisition of a 44.2% stake in LPI Capital, which was completed last week, to enhance its 2025 net profit by 1.7%.
“In 2025, the bank will focus on adding value to LPI Capital through the following initiatives: cross-selling of LPI Capital products through Public Bank’s branch network and vice versa (as well as the agency force of LPI Capital), and co-development of products for the customers of both companies,” CGSI Research noted.
It said the bank faces a potential slowdown in auto loan growth in 2025. “The industry’s auto loans grew at a fast pace of 9.1% year-on-year at end-September 2024.
“Public Bank’s auto loan growth was even stronger at 12.3% at end-September 2024, contributing 2.2% points to its overall loan expansion of 5.3% at end-September 2024,” it said.
Public Bank expects a slowdown in auto loan growth in 2025, anticipating a more sustainable growth rate of 3%-5%, in line with a projected weakening of auto sales, a view shared by CGSI Research.
As of September 2024, overseas loans accounted for 5.9% of Public Bank’s total loans, with 3.2% from Hong Kong, 1.5% from Cambodia, and 1.3% from other markets, including Vietnam and Sri Lanka.
“The outlook in Hong Kong will remain challenging in 2025.
“This is given stiff competition in the domestic banking industry, according to Public Bank,” CGSI Research said.
“Public Bank sees better growth prospects for its operations in Indo-China (Cambodia and Vietnam), partly through the expansion of its network.
“Its total number of branches in Vietnam increased from seven in 2016 to 40 in 2024.”
