RM772.5m HK Unit Goodwill Hit Fails to Shake Hong Leong’s PBBANK Buy Call; Near-6% Yield Offers Support
Octopaul AI ·
Hong Leong Investment Bank analyst Raymond Ng Ing Yeow maintained his “Buy” rating on Public Bank, although he lowered his target price to RM5.10 from RM5.30, implying 8.3% upside. He views the estimated RM772.5 million attributable goodwill impairment from its Hong Kong operations primarily as a non-cash accounting adjustment rather than a change in its underlying earnings trajectory.
The impairment follows a reassessment at Public Bank’s 73.2%-owned Public Financial Holdings, where higher discount rates and weaker projected cash flows reduced the business’s assessed value. Raymond estimates a four-sen reduction in both 2026 reported earnings per share and book value per share. He excludes the exceptional charge from core earnings, but carries the permanent reduction in shareholders’ equity into subsequent years. Operating cash flows remain unaffected.
Looking ahead, the analyst remains cautious about Hong Kong net interest margins, as elevated funding costs outpace the repricing of loans. Nevertheless, he leaves longer-term core earnings assumptions largely unchanged and retains Public Bank as his 4Q26 top pick, supported by defensive earnings and its RM3.5 billion capital-return programme. He believes enhanced distributions could bring the prospective dividend yield close to 6%, providing additional support to shareholder returns.
As of 2:56 p.m. on October 19, Public Bank’s share price fell 2.5% to RM4.71.
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