PETALING JAYA: Public Bank Bhd, which posted a stellar performance for the financial year ended Dec 31, 2010 (FY10) beating analysts' consensus, is expected to remain positive in the current financial year.

On Tuesday, Public Bank reported a record net profit of RM846.19mil, or 24.16 sen per share, for its fourth quarter ended Dec 31, 2010. This was 25% higher than the RM678.2mil, or 19.65 sen per share, reported in the previous corresponding quarter.

Revenue for the period increased to RM2.97bil against RM2.5bil previously.

Public Bank also declared a second interim cash dividend of 25 sen less 25% tax and a single-tier dividend of 8 sen, bringing the total gross dividend for last year to 58 sen.

Public Bank, which reported a record net profit for its fourth quarter, is expected to have another positive year.

For FY10, the bank made a net profit of RM3.05bil against RM2.52bil in FY09 while revenue stood at RM11.04bil compared with RM9.72bil before, exceeding analysts' expectations.

Kenanga Research expects Public Bank's outlook for 2011 to “remain positive” as the bank was well positioned to meet the challenges of rising interest rates, low duration bond book and least asset risks.

The research house said a rate hike would iboost net interest income given the higher loan and deposit growth.

“Moreover, management has started managing its interest rate risk with the aim of growing fees income by 30% year-on-year in FY11,” it added.

Kenanga Research believes the driver of Public Bank's earnings growth has shifted to fee incomes instead of interest incomes previously.

However, it said, challenges being the margin pressure due to intense competition while, on the liability side, Public Bank would focuse in growing more stable retails deposits to support its loan growth.

“We believe non-interest income will focus on retail-driven fee growth and product expansion, with perhaps a better year for bancassurance and fund management. Margins will be hard to improve given potentially keen loan competition in the consumer space,” it said, adding that it was upgrading its estimates to reflect the surging non-interest income growth.

“The net impact is a 7% to 9% upgrade for FY11 and FY12 adjusted net profit (now at RM3.57bil, RM4.12bil). With these, we estimate Public Bank's earning growth will be 17% year-on-year and return on equity estimates of 26.2%.”

ECM Libra has maintained its “hold” recommendation on Public Bank.

“We maintain our hold' call but raise our target price to RM14.20 from RM13.30, as we roll over our valuations to end current financial year 2011.

“Going forward, we are cautious on earnings and loans growth prospects which may be dampened by the rising loan-deposit ratio, as well as the need to preserve capital under new Basel III rules,” it said.

AmResearch, which also maintains its “hold” recommendation on Public Bank, said while Public Bank had turned in a good performance, it still believes the stock will likely be traded in accordance with its dividend.

“We think the stock will re-rate only on a significantly stronger-than-expected dividend. We also expect the dividend to continue to rise, but by a marginal pace,” it said.

Meanwhile, Public Bank's shares touched an intra-day high of RM13.44 before closing at RM13.36, up 2 sen, in active volume of 5.19 million shares.