Malaysia Public Bank eyes 14-15 pct FY09' loan growth

Source: Reuters (Soo Ai Peng)

Q2 net profit up 2.9 percent yr/yr

*Sees slight drop in net interest margin in H2

*Expects government guarantees to support FY2009 loan growth

*Shares up 1 percent after earnings

(Adds news conference, details)

By Soo Ai Peng

KUALA LUMPUR, July 20 (Reuters) - Malaysia's third-largest lender Public Bank (PUBM.KL) can grow its loan book by 14-15 percent this year but its net interest margin will likely be squeezed, said a top executive on Monday.

Public bank on Monday said net profits grew by 2.9 percent to 610.74 million ringgit ($172.2 million) in the second quarter from a year ago.

First-half net profit dropped 8 percent to 1.2 billion ringgit due to a one-off goodwill payment, it said.

The bank recorded 7.2 percent loan growth in the first half.

Loans for the financing of residential properties and passenger vehicles and lending to mid-market commercial enterprises accounted for 77 percent of total loans of 129.4 billion ringgit at the end of June.

The banking industry's loan book will continue to grow even as the Southeast Asian economy is expected to shrink 4-5 percent this year after the government said it will provide, as part of a stimulus package for the economy, guarantees on bank loans to small and medium enterprises.

Public Bank expects its full year loan growth to be double the industry's 7-8 percent growth but the faster growth may come at the expense of falling interest margin.

"Depending on how intense the margin is in the SME segment, we will probably expect a stable margin or a very slight drop in net interest margin," Public Bank Chief Operating Officer Leong Kwok Nyem told a news conference after the earnings release.

Malaysia announced a two-year economic boost comprising extra spending and loan guarantees worth 67 billion ringgit that will bring its fiscal deficit to 7.6 percent this year.

Public Bank is the first Malaysian bank to report its April-June earnings. Top bank Maybank (MBBM.KL) and second-ranked CIMB Bank (BUCM.KL) are expected to announce results in August