Company Coverage
Public Bank (PBK MK): 2Q26: Capital Management Upside Priced In; Downgrade To HOLD
HOLD (Downgraded)
Current price:
Target price:
Upside:
Previous TP :
RM5.15
RM5.54
+7.6%
RM5.65
Analyst
Highlights
2Q26 earnings were marginally below expectations due to higher-than expected credit costs.
We downgrade the stock to HOLD, with a lower target price of RM5.54 (1.74x 2027F P/B; ROE: 13.1%) from RM5.65 following our earnings revisions. Given its strong share price performance (+15% ytd vs +3% for the sector), making it the sector’s top performer, we see limited near-term upside and take the opportunity to downgrade our recommendation.
Even factoring in potential special dividends of up to RM3.5b, subject to BNM approval, the stock’s dividend yield remains broadly in line with peers. As such, we believe the current valuation adequately reflects its capital return prospects, which have been the key catalyst for its share price performance.
Analysis
Marginally below expectations. Public Bank delivered a 2Q26 net profit of RM1.82b (+3.7% yoy, +4.1% qoq), bringing 1H26 earnings to RM3.58b (+2.0% yoy). 1H26 earnings came in marginally below expectations, at 46%/47% of our/consensus 2026 estimates, primarily due to higher-than expected credit costs. 1H26 earnings rose 2% yoy, underpinned by a robust 11% yoy increase in non-interest income, driven by stronger wealth management fees and forex income, alongside positive operating jaws. This was partly offset by a 10bp yoy NIM compression and higher credit costs, which tempered overall earnings growth.
Highlights
2Q26 earnings were marginally below expectations due to higher-than expected credit costs.
We downgrade the stock to HOLD, with a lower target price of RM5.54 (1.74x 2027F P/B; ROE: 13.1%) from RM5.65 following our earnings revisions. Given its strong share price performance (+15% ytd vs +3% for the sector), making it the sector’s top performer, we see limited near-term upside and take the opportunity to downgrade our recommendation.
Even factoring in potential special dividends of up to RM3.5b, subject to BNM approval, the stock’s dividend yield remains broadly in line with peers. As such, we believe the current valuation adequately reflects its capital return prospects, which have been the key catalyst for its share price performance.
Analysis
Marginally below expectations. Public Bank delivered a 2Q26 net profit of RM1.82b (+3.7% yoy, +4.1% qoq), bringing 1H26 earnings to RM3.58b (+2.0% yoy). 1H26 earnings came in marginally below expectations, at 46%/47% of our/consensus 2026 estimates, primarily due to higher-than expected credit costs. 1H26 earnings rose 2% yoy, underpinned by a robust 11% yoy increase in non-interest income, driven by stronger wealth management fees and forex income, alongside positive operating jaws. This was partly offset by a 10bp yoy NIM compression and higher credit costs, which tempered overall earnings growth.
HOLD (Downgraded)
Current price:
Target price:
Upside:
Previous TP :
RM5.15
RM5.54
+7.6%
RM5.65
Analyst
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