PBBANK – Fundamental Analysis (14 Apr 2016)

Excel – Download the analysis file

Financial Report – Annual Report 2015 (3 Mar 2016)

FY15 Q4 Results Highlight:

  • 4Q15 net profit came in at RM1,492m, bringing full-year FY15 earnings to a record RM5,062m. There was a one-off gain from revaluation of properties of RM107m and the bank took the opportunity to realise some investment gains during the year. NIM fell 8bps y-o-y due to funding cost pressures but top-line growth was strongly supported by its 11.6% y-o-y loan growth, which was above industry levels of 7.9%. Deposit growth was at 8.9% y-o-y, way outpacing industry average of 1.8%. Non- interest income remained driven by its unit trust business, bancassurance and banking operation-related fees.
  • Cost-to-income ratio remained best in class at 30.5%. Credit costs were at a low of 6bps while NPL ratio improved to 0.5%. Management articulated that there was an improvement in the bank’s loan ageing profile, lower delinquencies and higher recovery rates for the year. Loan loss coverage stood at 121%; including regulatory reserves, loan loss coverage was at a high of 258%. PBBANK has minimal to no exposure to the oil & gas segment. Its loans are largely fully collateralised.
  • Capital ratios remained robust with CET1, Tier-1 and Total CAR of 10.9%, 12.0% and 15.5% respectively. Final DPS of 32sen per share was declared, bringing full-year dividend per share to 56sen (FY14: 54sen), equivalent to a 43% payout ratio.


I think fair value of PBBANK is from 17.5 to 19. The range is pretty big. The uncertainty risk of fair value is from High to Very High.


Going Forward:

Despite unexpected good results of PBBANK in FY15, moving forward, I believe that PBBANK result will be stable or a bit slow down. This is because loan applications will continue to be slow marginally and NIM compression will be higher in the future. PBBANK believes that its asset quality position will remain robust, in line with continued employment and income growth notwithstanding the rising cost of living and a moderated economic environment.

PBBANK announced its FY16 KPI targets which were slightly lower than FY15:

  • ROE>15
  • RWCR of >13%
  • GIL ratio < 1%
  • CI ratio < 33.0%
  • Group loan growth of 8-9%
  • Group deposit growth of 7-8%.

I will continue to hold this share, and accumulate it when there is a dip in the price.

At the time of writing, I owned shares of PBBANK.


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