Banks expected to post better Q2 results

Source: The Star Online (Leong Hung Yee)

KUALA LUMPUR: Public Bank Bhd’s better-than-expected second quarter results mark the beginning of a slew of positive financial figures from other banks for the current reporting season, say analysts.

Most of the analysts contacted believe the April-to-June quarter would provide a clear indication that the earnings momentum for banks remains intact. As such, they do not expect to see major disappointments.

Public Bank on Monday posted a 2.9% increase in net profit to RM610.7mil on revenue of RM2.35bil for the quarter ended June 30.

Its net non-performing loans (NPL) were below 1% while the bank’s loans growth also remained strong.

Kenanga Research said Public Bank’s net profit of RM1.2bil for the first half year was “commendable” given the current economic environment.

An analyst said if Public Bank were an indicator, he expected banks to report “slightly better results” in the quarter to end-June.

AmResearch expects all banking groups under its coverage to report an improvement in pre-provision profits and core earnings in their quarterly results.

“After a mixed bag in the first quarter this year, we expect banking institutions to post sequential improvement in core net profit for the second quarter.

“In the first quarter, aggregate core net profit of eight listed banks declined by 11% quarter-on-quarter as well as year-on-year,” the research house said.

“We foresee two potential surprise factors – better-than-expected loans growth and a strong rebound in capital market related income.”

AmResearch said while industry loans growth of less than 1% quarter-on-quarter was expected, more aggressive lenders such as Public Bank, CIMB Bank and Malayan Banking Bhd were likely to register above-average increase.

“Improvement in second quarter earnings, benign increase in loan loss provisions and improving business and consumer sentiments would provide room for upward revisions to our sector earnings projections of a 9% fall in 2009 but a healthy 15.5% rebound in 2010,” it said.

Commenting on Public Bank’s latest results, OSK Research said the bank, despite having outperformed the broader market, was still trading at a relatively undemanding 13.6 times for financial year ending Dec 31, 2010 (FY10) earnings.

“The group’s superior asset quality will help minimise any spikes in NPL, thereby allowing the bank to channel its resources to capture further market share at the expense of its peers.

“The stock could continue to re-rate as earnings and dividend may surprise on the upside,” OSK said.

The research house said it was “tweaking upwards” its FY09 and FY10 earnings forecasts for Public Bank by 4.2% and 2.5% after raising loans growth estimates to 13.5% and 15% respectively from 12% and 14% previously.

AmResearch has also raised its net profit forecast for the bank by 4% to RM2.4bil for FY09 and 5% to RM2.74bil in FY10.

“We like Public Bank as it has continued to surprise with its aggressive loans growth targets while benefiting from a recovery in the equities market,” it said.