KUALA LUMPUR (Feb 27): Analysts have raised their FY2025-FY2026 profit forecasts for Public Bank Bhd (KL:PBBANK) after the bank’s stronger-than-expected FY2024 performance.

In a note on Thursday, Hong Leong Investment Bank (HLIB) increased its profit estimates by 2%, maintaining a "buy" rating while raising Public Bank’s target price (TP) to RM5.30 from RM5.20.  

This adjustment was based on a higher 1.63x FY2026 price-to-book (P/B) ratio, up from 1.56x, reflecting an improved return on equity (ROE) projection of 12.3%, up from 11.9%.  

The higher target price remains above the sector's average P/B of 0.94x, but within Public Bank’s five-year average. 

“We believe Public Bank, being a large cap, index-heavy weight stock, will shine in the current market climate as investors take refuge from Trump 2.0 uncertainties,” HLIB said.

HLIB said that Public Bank's recently reported core earnings for FY2024 came in ahead of expectations, making up 108- 109% of its and consensus’ full-year forecasts. 

The positive deviation from forecasts was largely driven by stronger-than-expected non-interest income (NOII) and lower-than-anticipated loan loss provisions, it added.

The performance exceeded expectations despite a relatively high loan-to-deposit ratio (LDR) of 98%, with the research house forecasting a stable net interest margin (NIM) in the first quarter of 2025.

The expected stability in NIM was attributed to easing seasonal fixed deposit rivalry and Public Bank’s disciplined approach to pricing loans and deposits.  

The research house anticipates steady loan expansion, primarily in the mortgage, auto and small-to-medium enterprise (SME) segments. 

Meanwhile, MIDF also raised its earnings estimates for Public Bank, upping its FY2025 and FY2026 projections by 6.5% and 5.8%, respectively, on the back of better-than-expected net interest income (NII) and NOII performance in FY2024. 

In a separate note, CGS raised its FY2025-FY2026 earnings per share (EPS) estimates for Public Bank by 1.4% and increased its target price to RM5.81 from RM5.57.  

This increase factored in the potential contributions from LPI, the insurance group acquired by Public Bank, and potential further write-back gains from the bank’s management. 

As a large-cap, index-heavyweight stock, Public Bank remains well-positioned to shine in the current market, where political and economic uncertainties are influencing investors, said CGS. 

CGS added that Public Bank’s dividend yield is also attractive at 5.1% in FY2025F.

To recap, Public Bank saw robust profitability for FY2024, contributed by steady loans and deposits growth, stable net interest margin, accompanied by lower loan loss allowances.

Its fourth-quarter performance for FY2024 surpassed expectations, with core net profit hitting RM2.3 billion, marking a 19% quarter-on-quarter (q-o-q) and 41% year-on-year (y-o-y) increase. 

For the full year, the bank reported RM7.6 billion in core net profit, a 15% y-o-y rise, representing 108-109% of both consensus’ and analysts’ projections.

CGS was of the view that this performance is sustainable into FY2025 given its expectation of stable economic growth.