PBBANK – Fundamental Analysis (25 Apr 2016)

Excel – Download the analysis file

Financial Report – Quarterly Report FY16Q1 (20 Apr 2016)

FY16 Q1 Results Highlight:

  • In 1QFY16, the Group reported a net profit of RM1.22b (-17.6%qoq;+5.0%yoy). The on-year improvement in net profit was contributed by higher NII (+9.8%yoy), NOII (+12.4%yoy) and Islamic Banking income (+11.3%yoy) partially offset by higher OPEX (+12.2yoy) due to rise on personnel cost.
  • What surprised positively was that NIM held up (+1bp) QoQ, and forex income continued to be robust (+78% YoY) as a result of ongoing currency volatility.
  • On the flip side, the group experienced negative JAWS during the quarter, due largely to the GST impact that was absent in 1Q15 – some of the input costs for banks are not claimable. Domestic loan growth of 9% was within guidance of 8-9%. The group’s gross impaired loans ratio was stable QoQ at 0.5% end-Mar 2016. The net credit charge was just 10bps – still very benign. Loan loss coverage was stable at 120%.

Valuation:

I think fair value of PBBANK is from 19.2 to 20.2. The uncertainty risk of fair value is High.

PBBANK-FY16Q1-Football-Field

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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