KUALA LUMPUR (May 12): Analysts are upgrading forecasts on Public Bank Bhd following record results in the first quarter ended March 31, 2021 (1QFY21) today.

The results also support the positive outlook for Malaysian banks on the back of improved credit costs, analysts said.

Shares of Public Bank rose six sen or 1.76% to RM4.16 this morning, after the bank announced that 1QFY21 net profit rose 15.11% to a record of RM1.53 billion as revenue declined 8.8% to RM5.03 billion.

This is as it enjoyed lower credit costs, higher net interest income supported by better margin (NIM) and better non interest income (NOII), as well as positive loans growth.

CGS-CIMB Research analyst Winson Ng in his note increased his target price on Public Bank to RM5.30 from RM5.20, following an upward revision in its profit forecast.

“We raise our FY21-23 net profit forecasts by circa 2% as we reverse out the 25 basis points cut in overnight policy rate (OPR) that we imputed in our earnings forecasts for Public Bank but did not materialise, and increase the projected FY21F loan growth from 3% to 4%, on par with the bank’s guidance of 4%,” Ng said.

MIDF Research head of research Imran Yassin Md Yusof meanwhile maintained his earnings forecasts on Public Bank. “We are maintaining our earnings forecast as the group's results were within expectations,” he said.

Imran, however, increased the target price to RM5.10 from RM4.85 as he rolled over valuation to FY22, which analysts have largely expected to see improvement from FY21.

On the view towards the banking industry, Imran said: “We do expect improved performance with the other banks. This will be down to lower credit cost.

“In terms of net income (NII, NIM and NOII), it could differ from one bank to another depending on loans growth, pricing strategy among others.

“However, we do expect improvement in NIM as we saw the strong growth in CASA for banks thus far,” he said in a written reply to The Edge.

On the other hand, another analyst covering the sector reiterated the positive outlook for Malaysian banks, at least for the first quarter. “Expectations of better NIM and NOII are also [supporting the outlook],” the analyst said.

Aside from Public Bank, CIMB Niaga Tbk’s robust results last month also provide a hint on the banking sector performance, the analyst added.

The Indonesian arm of CIMB Group Holdings Bhd posted a 5.6% y-o-y decline in quarterly net profit to 996 billion rupiah in 1QFY21 on higher provisions. Quarter-on-quarter, however, it grew 573% on higher net interest income and NOII.

Shares of Malaysian banks are largely in the green today on the positive sentiment brought about by Public Bank’s results.

At the time of writing, RHB Bank Bhd was up 13 sen or 2.54% to RM5.25, CIMB was up eight sen or 1.95% to RM4.18, and Hong Leong Bank Bhd was up 18 sen or 1.03% to RM17.58.

Meanwhile, AMMB Holdings Bhd was up one sen or 0.34% to RM2.90, Malayan Banking Bhd was up one sen or 0.12% to RM8.20, and BIMB Holdings Bhd was up one sen or 0.25% to RM3.90.

However, Alliance Bank Malaysia Bhd traded unchanged at RM2.55, while Affin Bank Bhd slid one sen or 0.57% to RM1.75.

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