RHB maintains ‘buy’ call on Public Bank

KUALA LUMPUR: RHB Investment Bank has reiterated its “buy” call on Public Bank Bhd (PBB) with a new target price (TP) of RM21.60 from RM20.60 previously as it will continue to command premium valuations, given its defensive qualities in the challenging economic environment.

In a research note today, RHB said PBB’s credit cost guidance has been raised to between 30 to 35 basis points (bps) from between 20 and 25bps, as its management intends to take more pre-emptive provisions in the fourth quarter of 2020 to strengthen buffers.

“This aside, other forecast numbers for financial year (FY) 2020 were unchanged. Loan growth is expected to exceed four per cent, with deposits growing in tandem,” the research house said.

PBB’s net interest margin is expected to narrow by 20 bps.

“We increase net profit forecast by four per cent and three per cent for FY20 to FY21. Assumptions of higher credit costs are offset by upward revisions in operating income. Our new forecast points to a 15 per cent recovery in FY21 earnings.

PBB share price down 52 sen to RM18.08 at midday with 4.67 million shares traded. – Bernama