Public Bank Bhd fell on the Kuala Lumpur Stock Exchange on Tuesday after the company revised its guidance and signaled mounting margin pressures.
Affin Hwang Investment Bank Bhd said that third-quarter earnings dropped 3.8 percent to RM1.77 billion amid modest income growth and normalised provisions, with non-interest income dragged down by weaker trading income from lower treasury asset valuations.
Margin Pressures and Guidance Revisions
In a post-earnings briefing, analysts said that the bank’s return-on-equity is now expected to track closer to 12 percent for the full year, down from previous guidance of up to 13 percent. Additionally, net interest margins—the spread between what the bank earns on loans and pays on deposits—could contract by as much as 10 basis points this year, The Edge Malaysia reported.
“We continue to view these revisions as reflecting a more challenging funding environment rather than a deterioration in underlying franchise strength,” CIMB Securities said.
For the nine-month period ending in September, Public Bank recorded an 11.7 percent return on equity, while net interest margins narrowed by nine basis points. This performance underperformed the mid-single-digit decline the bank had previously projected.
Asset Quality and Earnings Forecasts
While the bank’s nine-month earnings of RM5.35 billion were within expectations, its third-quarter earnings dropped 3.8 percent to RM1.77 billion, according to KLSE Screener.
Asset quality remains a point of focus for analysts. Meanwhile, the non-household sector recorded a mild 1.0 basis point year-on-year rise in its GIL ratio due to higher working capital and commercial property purchase loans within the wholesale, retail trade, and real estate sectors.
“Public Bank was more downbeat on targets owing to keen rates competition and potentially higher near-term credit costs, signalling wider net interest margin compression, more refined non-interest income growth and higher credit costs,” Affin Hwang Investment Bank reported.
Market Outlook for 2027
Despite the recent volatility, analysts maintain a long-term view of the company’s trajectory. Analysts have reconfirmed their consensus price target at RM5.47, with individual targets ranging from a pessimistic RM5.10 to an optimistic RM6.55 per share.
The bank intends to proceed with its plan to return RM3.5 billion to shareholders, a move expected to lift potential dividend yield to around 6 percent and provide an additional buffer to total returns while reinforcing its appeal to yield-seeking investors, as highlighted by Hong Leong Investment Bank, which kept a buy call supported by resilient domestic demand and small and medium enterprises expansion.
Kenanga Investment Bank and TA Securities downgraded Public Bank after cutting their outlook, leaving the stock with 15 buy recommendations out of 20 analysts tracked by Bloomberg, with the remainder on hold calls.