PUBLIC Bank Bhd, the country's third largest banking group, reported a slight drop in its second quarter net profit after adopting new accounting rules and on stiffer competition.
The results were nevertheless within analysts' expectations.
Net profit came in at RM952.7 million, a 0.2 per cent drop compared with RM954.9 million in the same quarter a year ago. Its revenue rose by 9.3 per cent to RM3.5 billion.
"The marginal decrease in net profit was mainly due to the effect of narrowing interest margin resulting from market competition," Public Bank said in a stock exchange filing yesterday.
The results were nevertheless within analysts' expectations.
Net profit came in at RM952.7 million, a 0.2 per cent drop compared with RM954.9 million in the same quarter a year ago. Its revenue rose by 9.3 per cent to RM3.5 billion.
"The marginal decrease in net profit was mainly due to the effect of narrowing interest margin resulting from market competition," Public Bank said in a stock exchange filing yesterday.
The group's management told analysts at a results briefing yesterday that it continued to expect downward pressure in NIM.
A retrospective accounting change led to its second quarter net profit last year being restated at RM954.9 million, slightly higher than the previously reported RM880.4 million.
Public Bank declared a first interim dividend of 20 per cent, which will result in a total dividend payout of RM700 million, matching the payout in the same period last year.
Its shares rose slightly in the stock market, closing two sen higher to RM14.32.
"Going forward, the group is expected to maintain its earnings momentum and record satisfactory performance in the second half of 2012," its founder and chairman Tan Sri Teh Hong Piow said.
It maintained its pole position among local banking groups in terms of profitability, with the highest net return-on-equity (ROE) of 24.7 per cent.
Some analysts, however, wondered if the group, envied for its high ROEs, could maintain the high digits.
"We assert that the group's ROE has peaked and is on a declining trend going forward due to the decelerating earnings momentum and restrictions on the group's ability to engage in active capital management to enhance its ROE," said Cheah King Yoong, a banking analyst at Alliance Research.
He said it would be tougher for the group to sustain its earnings momentum, given the continued margin suppression, a maturing property segment and the fact that it was not as well positioned to fully capitalise on Economic Transformation Programme-related loans and investment banking deals.
Cheah has a "sell" call on the stock with a target price of RM13.50.
Most other analysts, however, have a "buy" call.
Analysts said the group had lowered its 2012 loan growth target to between 10 per cent and 12 per cent, from 12 per cent before.
For the six month period, the group registered overall loan growth of 10.8 per cent on an annualised basis, dragged by its China and Hong Kong operations.
The stock has increased by 7.2 per cent so far this year, slightly higher than the benchmark FBM KLCI index's 6.9 per cent gain.
Read more: Public Bank's Q2 profit dips http://www.btimes.com.my/Current_News/BTIMES/articles/pubs/Article/#ixzz21YGJ3ma7
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