KUALA LUMPUR: Affin Hwang Investment Bank Bhd (Affin Hwang IB) has trimmed its earnings forecast for Public Bank Bhd between one and 10 per cent for 2026 through 2028.
This is after considering the bank’s Hong Kong goodwill impairment this year and muted expectations on non-interest income and net interest margin.
The firm noted that the bank’s nine-month earnings of RM5.35 billion came in within expectations.
Public Bank’s third quarter earnings dropped 3.8 per cent to RM1.77 billion on the back of modest income growth and normalised provisions.
Non-interest income was dragged by a weaker trading income in tandem with weaker treasury asset valuations.
Affin Hwang IB said the bank’s asset quality was broadly stable at a 0.55 per cent gross impaired loans (GIL) ratio, although absolute GIL inched by 12 per cent year-on-year (YoY) stemming from Malaysia and Cambodia.
A three basis point (bp) rise in household sector GILs was led by mortgages and hire purchase likely a product of cost pressures.
The non-household sector clocked a mild 1.0bp YoY rise in GIL ratio on higher working capital and commercial property purchase loans GILs in the wholesale and retail trade as well as 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.
“Loan growth is likely to exceed its four to five per cent target,” it said in a note.
Affin Hwang IB expects earnings recovery in 2027 and valuations to be supported by capital returns and dividends.
The firm kept its “Buy” call on the stock with a lower target price of RM5.45.