PETALING JAYA: Public Bank Bhd’s fourth-quarter earnings announced Tuesday are within analysts’ expectations, but earnings outlook is still expected to be dampened by the weaker economic prospects this year. For the quarter ended Dec 31, Public Bank posted a slightly lower pre-tax profit of RM812.9mil compared with RM821.2mil in the previous corresponding period. This was due to an increase in loan loss allowance of about RM46mil as well as lower “other operating income” from unit trusts fund management business and stockbroking activities. However, a lower effective tax rate during 2008 that lowered tax expense and zakat to RM156.3mil in the quarter, compared with an expense of RM213.4mil in the previous corresponding quarter, helped boost net profit for the period under review. Net profit for the fourth quarter at RM654mil was 12.8% higher year-on-year and a 6.1% increase from the third quarter. An analyst at a major brokerage said: “Public Bank has met ours and everyone’s expectations. This means that it will do okay but (earnings) will still be affected by higher non-performing loans (NPLs) that are expected to hit the banking sector this year. “However, I think Public Bank will be better off than most other players in the banking sector due to strong asset quality and stringent credit control that it has been demonstrated so far.” Public Bank’s asset quality has improved as at Dec 31, with its gross NPL balance decreasing 13.8% to RM1.21bil compared with RM1.4bil at Dec 31, 2007. The NPL ratio has also improved to 0.9% from 1.2% a year ago. An analyst at another major brokerage said the bank showed “quite strong growth on many fronts, but Hong Kong asset quality took a hit in syndicated loans.” AmResearch deputy head Fiona Leong in a report also expressed similar sentiments. “As warned, loan loss allowance jumped 41% quarter-on-quarter due to additional provision made on impaired loans of Public Bank’s operations in Hong Kong. “There were also specific provisions made on certain loans secured by properties exceeding seven years with zero value assigned to collateral.” However, Leong – who maintains a “buy” call on the counter – said Public Bank’s 6% quarter-on-quarter increase in net profit to RM654mil in the fourth quarter was an achievement. “Although net interest income dipped 1% quarter-on-quarter, a 16% increase in non-interest income and a 17% rise in Islamic banking income pulled up Public Bank’s bottomline,” she said. Public Bank’s gross NPLs rose 4% quarter-on-quarter to RM1.2bil as the bank’s small and medium enterprise customers experienced stress in the fourth quarter, but net NPL ratio remained low at 0.9% while loan loss coverage was high at 160%. Leong sees capital ratios remaining healthy with core capital ratio at 7.7% and risk weighted capital ratio of 13.1% as at end-2008. http://biz.thestar.com.my/news/story.asp?file=/2009/1/22/business/3082210&sec=business
