KUALA LUMPUR (April 19): RHB Investment Bank Bhd (RHB IB) on Friday upgraded Public Bank Bhd to “buy” from “neutral”, with a higher target price (TP) of RM4.80 (from RM4.70).

Including RHB IB, Public Bank now has 14 “buy” calls, with three “hold” ratings and two “sell” calls. The consensus 12-month target price is RM4.78, according to Bloomberg.

In a note on Friday, RHB IB said that it upgraded the call for Public Bank because it sees “room for a big cap, defensive, quality name in investors’ portfolios to tide through the volatility” due to global market fluctuations.

The research house also highlighted five reasons for the “buy” calls, including Public Bank’s earnings safety, which offers investors good earnings predictability, and the stock’s underperformance versus FBM KLCI by 9% year-to-date, which could turn to laggards as volatility rises

Additionally, Public Bank’s foreign shareholding is low — coming in at 25.4% versus the recent multi-year low of 25.1% at end-Oct 2023 — with the bank being a liquid and big-cap stock, noted RHB IB.

On the consumer front, RHB IB said that Public Bank’s loan demand is good thus far, with a loan growth of 5%-6% for 2024, with key drivers being housing loans, auto and small and medium enterprises (SME) segment.

“Similarly, given that most banks are focused on the small and medium enterprises (SME) segment, Public Bank said pricing in this segment has also been competitive,” it said.

While RHB IB expects impact to yields and net interest margins (NIMs) to not be immediate, it is likely to be felt over time — unlike deposit price competition.

“That said, deposit price discipline seems to have held up. Public Bank had reduced its promotional and board fixed deposit (FD) rates by 5 to 10 basis points (bps) in March and saw some peers similarly lower their FD rates. Public Bank guided for a stable-to-single digit NIM squeeze, which it has kept to for now,” it added.

At 10:04am, shares in Public Bank rose three sen or 0.72% higher to RM4.17 for a market capitalisation of RM81.14 billion.