Public Bank dips 1.26% on 2Q earnings decline, weaker FY19 outlook

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KUALA LUMPUR (Aug 15): Shares in Public Bank Bhd (PBB) dipped 1.26% in early trade this morning after its net profit for the second quarter ended June 30, 2019 (2QFY19) declined 4.5% to RM1.33 billion from RM1.4 billion last year, with net interest income declining 1.5% to RM1.85 billion from RM1.88 billion last year, following a 0.25% reduction in the overnight policy rate (OPR) in May to 3%.

However, the dip was also tracking the overall drop at Bursa Malaysia, with the FBM KLCI down 17.33 points to 1,582.98.

At 9.20am, PBB fell 26 sen to RM20.54 with 1.16 million shares traded.

The group declared a first interim dividend of 33 sen per share, payable on Sept 10, 2019.

For the first half of the year (1HFY19), net profit slipped 2.1% year-on-year (y-o-y) to RM2.74 billion from RM2.8 billion, as net interest income fell 1.233% to RM3.73 billion from RM3.78 billion.

Meanwhile, CGS-CIMB Research has maintained its “Hold” rating on PBB at RM20.80 with a lower target price of RM22.30 (from RM23.60) and said PBB’s 1H19 net profit at 48% of house full-year forecast was below expectations as the research house anticipates weaker 2H19 due to margin contraction.

In a note Aug 14, the research house said PBB’s 1H19 net profit slid 2.1% y-o-y due to a 1.2% y-o-y decline in net interest income, arising from a 13-basis-point y-o-y contraction in net interest margin.

“Despite the reasonable valuation, PBB remains a Hold due to concerns over margin erosion, partly due to the OPR cut.

“Also, we are projecting a 1.2% drop in its FY19F net profit, impacted by margin contraction. However, we think that it is fairly valued at a CY20F P/E of 14x, below the 5-year historical average of 14.3x,” it said.