Public Bank dead set on diversifying its revenue base

It’s currently 80% driven by net interest income.

Public Bank was the relative underperformer in 1H13 and it is CLSA's least preferred pick among the large cap Malaysian banks.

CLSA had a preference for corporate lenders and top tier wholesale banks over consumer franchises. The analyst had hoped that P&L momentum would gather steam for these institutions as the year progressed – driven by increased activity in domestic corporate lending, investment banking and synergies from both organic and inorganic investments.

Here's more from CLSA:

Following the 2Q13 results season, Public Bank remains solidly on track whereas its large cap peers are struggling to meet expectation.

Although all of the banks face a more challenging macro outlook domestically with rising inflation, slowing GDP and high consumer indebtedness – we believe Public Bank can weather this storm.

Operationally, Public Bank’s asset quality, coverage ratio, and cost control are best-in-class. Its leading retail, commercial property and unit trust businesses are continuing their dominance with domestic loan growth up 6.1% YTD and the net asset value of funds under management up 7.8% in YTD.

This is helping propel noninterest income forward. The bank is focused on diversifying its revenue base which is 80% driven by net interest income and the performance thus far in 1H13 is encouraging.

Unit trust income and fee income account for 67% of total noninterest income. Unit trust income was up 17.5% in 1H13 vs 1H12. The AIA bancassurance alliance could trigger some positive noninterest income surprise in 2H13.