Analysts remain upbeat on Public Bank

KUALA LUMPUR: Most analysts maintained a "buy" call on Public Bank Bhd's stock, a day after the country's third largest banking group reported a slightly lower second quarter net profit.

RHB Research, which has a target price of RM17 on the stock, the highest among research houses, said while the bank's latest results may "lack excitement", the second half may see the bank grow at a faster year-on-year pace compared with the first half.

The bank's shares, which rose to an intra-day high of RM14.36 in the stock market yesterday, closed unchanged from the previous day at RM14.34.

The bank's second quarter profit fell by 0.2 per cent to RM952.7 million, while its first half net profit grew by three per cent to RM1.89 billion after it restated higher earnings for the year-earlier period following a retrospective accounting change.

RHB Research likes Public Bank for its leading domestic retail banking franchise, well-regarded management, sound asset quality and cost efficiency, as well as decent dividends.

"Recently, concerns on the strength of the global economic recovery appeared to have resurfaced and this may see markets remaining volatile. We think Public Bank's defensive qualities will help tide investors through such volatile periods better," it said, maintaining an "outperform" call on the stock.

OSK Research, however, kept its "neutral" call and fair value of RM14.10, citing the bank's limited dividend payout upside, slowing consumer lending growth as well as net interest margin pressure.

"Although the group is a solid investment during times of uncertainty given its superior asset quality, a dampened growth outlook and margin compression are the key challenges for 2012, with a dividend upside surprise unlikely to materialise in the immediate-to-medium term," it said in a report yesterday.

Public Bank's management lowered its dividend payout ratio guidance to a range of between 40 per cent and 50 per cent, compared with its original guidance of close to 50 per cent.

MIDF Research upgraded the stock to "buy" from "neutral", and raised its target price by RM1.60 to RM16.10.

"In addition to growth in small-and-medium enterprises loans, we continue to see growth in retail loans, which does not seem to be impacted by the responsible lending guidelines and tighter guidelines on retail loans," MIDF Research said in a note to clients yesterday.