PETALING JAYA: Public Bank Bhd recently overtook Malayan Banking Bhd (Maybank) as the country’s largest banking group in terms of market capitalisation, but still trails the latter in asset terms.
Maybank has total assets of RM256.66 billion, compared with Public Bank’s assets of RM174.15 billion.
As of last Friday, according to Bloomberg data, Public Bank has a lead over Maybank, with a market capitalisation of RM41.67 billion versus the latter’s RM38.31 billion.
Currently, the top three banking and financial institution groups comprise Public Bank, Maybank and Bumiputra-Commerce Holdings Bhd, which still trails significantly behind the other two.
Analysts said Public Bank’s market capitalisation was now higher than Maybank’s, mainly due to the falling of the latter’s share price after announcing its proposed acquisition of a 15% stake in Pakistan’s MCB Bank Ltd for RM3.88 billion.
One analyst from Affin Research said investors’ adverse reaction towards the deal had prompted many of them to switch their investments to Public Bank, causing its market capitalisation to rise.
“Public Bank will be the country’s number one banking group, as long as Maybank’s share price continues to hover at RM7.80,” the analyst said.
According to the latest Bloomberg data, Public Bank has also become the country’s most expensive bank, with a price-to-book value of 4.23 times compared with Maybank’s trading multiple of 1.99 times and the local industry’s average of between two and 2.5 times.
Maybank rose 10 sen to close at RM7.85 on Friday, with a trading volume of 3.11 million shares, while Public Bank’s share price closed at a high of RM11.80, up 20 sen with 6.94 million shares changing hands.
Maybank’s share price fell to its lowest in four years last Tuesday to RM7.55, on the back of concerns that its entry into MCB was pricey which may result in less dividend payouts.
A total of 11 out of 13 research houses covering Public Bank between April 15 and May 2 had buy calls on the banking group, with target prices ranging between RM11.15 and RM13.40.
OSK Research analyst Chan Ken Yew said Public Bank’s high return on equity (ROE) of 23.1% had also increased valuation premium in the stock.
“Public Bank is also reaping the benefits of its acquisition in Asia Commercial Bank (ACB) two years ago and its increased presence in the Indo-China market,” he said.
In 2006, Public Bank, through its 64%-owned Hong Kong unit, JCG Holdings Ltd, outbid nine other parties to acquire a 100% stake in ACB, a small bank with just 12 branches for RM2.2 billion, which was about 2.5 times its price-to-book value.
Public Bank’s joint venture bank in Vietnam, VID Public Bank, had recently opened its seventh branch in Bien Hoa City, apart from other cities there, including Hanoi and Ho Chi Minh City.
Another analyst said Public Bank’s performance was also stronger across the board, apart from having a higher earnings visibility, which added to its attractiveness.
According to a report on Malaysian banks by Macquarie Research dated April 8, 2008, Public Bank had registered a stronger net interest income growth of 5.05% in FY07, compared with Maybank’s 3.22%.
Public Bank also had a higher net profit growth of 6.88% in FY07, while Maybank registered only 1.5% net profit growth in the same financial year.
Analysts had said they expected Public Bank to register a 15% net profit growth in FY08, driven by retail and small and medium enterprises loan growths, which made up of 66% of total loans as at March.
They also picked Public Bank as “most preferred stock” in the banking industry, given its high dividend payouts of between 84% and 89%.
The banking group had a strong asset quality with a low non-performing loan (NPL) ratio of 1.1% as at March 2008, and a provision cover over its gross NPLs of 119.5%, which rating agencies said was the strongest in the industry.
The Edge
12/05/08
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