KUALA LUMPUR (Nikkei Markets) -- Malaysia's third-largest bank by assets Public Bank said Wednesday its net profit grew 4.8% in the second quarter from a year earlier thanks to increase in net interest income and non-interest income.
Shares of Public Bank rebounded following the announcement. Although Public Bank's latest quarterly earnings came in largely within market expectations, analysts flagged intensifying competition that will weigh on banks' net interest margins.
"The group was able to sustain good business momentum in the first half of 2018," Chairman Teh Hong Piow said in a statement. "Public Bank will continue to ride on the growing economy to strengthen its banking business along its organic growth strategy."
Net profit for three months ended Jun. 30 was 1.40 billion ringgit ($340.28 million) compared with 1.33 billion ringgit in the same period last year. Quarterly net interest income rose 2.1% on-year to 1.88 billion ringgit while net fee and commission gained 1.8% at 443.89 million ringgit.
For the first six months of the year, net profit climbed 8.5% to 2.80 billion ringgit from 2.58 billion ringgit over the same period last year. Net return-on-equity is 15.0%. The lender is aiming for 14%-to-15% net return on equity in 2018, slightly lower than 2017's 15.8%, according to its annual report.
"Higher consumption could spur better loans growth" in the second half, particularly for mortgages taken for affordable housing, said MIDF Amanah Investment Bank analyst Imran Yassin Yusof. "This will benefit Public Bank as its largest loan exposure is in the retail segment."
Public Bank's total gross loans rose by an annualized rate of 4.1%. In terms of asset quality, gross impaired loans ratio remained stable at 0.5% at the end of June.
That compares to Public Bank's forecast of gross loan growth accelerating to 5% in 2018 from last year's 3.6% pace.
To expand its lending business, Public Bank said it will continue financing purchases of residential properties, commercial properties, and passenger vehicles as well as small and medium enterprises. "The SME segment continues to benefit from various expansionary domestic measures," it said.
The company derived bulk of its profits from Malaysia, making its fortune closely-linked to the health of Southeast Asia's largest economy. Public Bank's international business -- with presence in Hong Kong, China, Cambodia, Vietnam, Laos and Sri Lanka - contributed less than 10% to its pre-tax profit.
Shares of Public Bank rose 0.3% to 24.48 ringgit on Wednesday while the FTSE Bursa Malaysia KLCI edged up 0.1%.