Public Bank Reports Record Profit, Overtakes CIMB by Value

Public Bank Bhd. reported record quarterly earnings with Malaysia’s expanding economy after overtaking CIMB Group Holdings Bhd. to become country’s second-largest lender by market value.

Net income climbed 8.7 percent to 992.5 million ringgit ($321 million), or 28.34 sen a share, in the three months ended Dec. 31, from a restated 913.4 million ringgit, or 26.08 sen a share, a year earlier, the lender said in a stock exchange filing today. The lender increased its fourth-quarter dividend by 2 sen to 30 sen per share.

Public Bank has benefited from Malaysia’s expanding economy, which has grown by more than 5 percent for five straight quarters through September. Prime Minister Najib Razak, who must dissolve parliament by April 28 for polls, has extended handouts for the poor as part of a 251.6 billion-ringgit proposed budget this year, supporting local demand for goods and services.

“The group is expected to maintain its earnings momentum and record satisfactory performance in 2013,” Public Bank Chairman Teh Hong Piow said in a separate statement. “We are optimistic that the domestic economy, in which the group largely operates, will continue to be stable and supportive of growth.”

The lender’s net interest income, or revenue from borrowers after deducting interest paid to depositors, climbed 5.2 percent last quarter to 1.34 billion ringgit, according to today’s statement.

Net income from Islamic banking dropped 2.8 percent to 206 million ringgit, the filing showed. Allowances for impairment on loans fell 21 percent to 84.2 million ringgit, it said.

Buy Calls

The Kuala Lumpur-based lender has climbed 14 percent over the past year, pushing its market value to 55 billion ringgit, according to data compiled by Bloomberg. CIMB, which has more assets, has gained 2.1 percent over the same period and has a market capitalization of 53.1 billion ringgit. Malayan Banking Bhd. remains the country’s largest bank by both value and assets.

Eleven out of 22 analyst ratings compiled by Bloomberg have the equivalent of buy calls on Public Bank, with one recommending sell. There are 10 hold ratings. The stock has fallen 3.4 percent this year, compared with a 4.4 percent decline in the FTSE Bursa Malaysia KLCI Index. Some risk-averse investors have cut exposure to the nation’s biggest stocks ahead of the Southeast Asian nation’s general election after its benchmark gauge closed at a record on Jan. 7.

Short-term gains in Public Bank shares may be limited as its “resilient” fundamentals have been priced in, Lim Sue Lin and Hon Seow Mee, analysts at HwangDBS Vickers Research Sdn., wrote in a Jan. 30 report. The stock’s price target was cut to 16.60 ringgit from 17 ringgit at HwangDBS, which maintained its hold rating.

Public Bank rose 0.3 percent to close at 15.72 ringgit in Kuala Lumpur today, outperforming a 1.2 percent slump in the benchmark KLCI.

CIMB has fallen 6.3 percent this year, with 13 out of 30 analysts having the equivalent of buy ratings and seven saying sell, according to data compiled by Bloomberg. Nazir Razak, the bank’s chief executive officer, is a brother of the prime minister.

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