Public Bank profit to fall 5.5% as Hong Kong unit faces loss: CGS

Hong Kong subsidiary PFH faces a US$254.9m loss following a goodwill write-off.

CGS International expects Malaysian bank Public Bank Bhd’s reported earnings to fall 5.5% this year due to a projected loss at its Hong Kong subsidiary, whilst its underlying business is expected to remain profitable.

Malaysia's Public Bank Bhd is expected to post a 5.5% decline in net profit to $1.7b (RM6.8b) in 2026, as losses at its Hong Kong subsidiary weigh on earnings, according to CGS International.

In an October 19 report, the research firm lowered its 2026 net profit forecast by 7.8%, from $1.8b (RM7.4b), after accounting for an expected loss at Public Financial Holdings (PFH), a 73.2%-owned subsidiary of Public Bank.

Excluding the loss, CGS International expects Public Bank's core net profit to grow 2.4% to $1.8b (RM7.4b) this year, supported by a projected 3.4% increase in net interest income and a 4.3% rise in other income.

PFH expects to record a net loss of $242.6m to $254.9m (HK$1.9b to HK$2.0b) in 2026, reversing a net profit of $10.2m (HK$80.0m) in 2025. The expected loss follows its decision to write off $249.7m (HK$2.0b; RM1.0b) in goodwill, an accounting value linked to past acquisitions.

Public Bank's share of the write-off is estimated at $183.3m (RM748.0m).

The bank said the expected loss would not affect the operations of its other subsidiaries. PFH also said the write-off would not reduce its operating cash flow or affect the financial position of its main banking and finance businesses.

Looking ahead, CGS International forecasts Public Bank's net profit to recover to $2.0b (RM8.0b) in 2027 and increase to $2.1b (RM8.4b) in 2028.

The research firm expects the bank's capital ratio, a measure of its financial strength, to remain between 14% and 15% in 2026 and 2027, compared with 14.5% in 2025.

This is expected to allow Public Bank to maintain its policy of paying out 60% of earnings as dividends and proceed with plans to distribute $857.8m (RM3.5b) in special dividends between 2026 and 2028.

CGS International also expects total dividend payouts to exceed 70% of earnings during the three-year period.

Meanwhile, Public Bank's plan to take PFH private for approximately $93.0m (HK$734.8m) is expected to be completed in the first half of 2027. The bank announced the proposal in September, offering $0.3 (HK$2.5) per share.

CGS International cautioned that slower loan growth, weaker loan quality, and greater competition for loans and deposits could affect the bank's earnings outlook.