KUALA LUMPUR (April 21): Public Bank Bhd (KL:PBBANK) may declare a special dividend as changes in capital rules provide additional headroom under the upcoming Basel 3.1 framework, according to CIMB Securities.
The revised capital adequacy framework, set to take effect in the second half of 2026, is expected to position the group for potential upside.
The regulatory transition will differentiate Standardised Approach (SA) banks such as Public Bank by enhancing capital headroom through improved risk-weighted asset (RWA) density and a lower risk weight requirement.
"PBB has indicated that any special dividends would be paid on top of the existing 60% payout ratio, with a more detailed capital management roadmap expected in 2H2026, once the new capital adequacy ratios become effective," CIMB Securities said in a note on Tuesday.
The house said that although Public Bank management could not explicitly guide on the timing of any special dividends, the capital uplift is a certainty for the group.
CIMB Securities further said that the stock may continue to trade at a premium price to book valuation of 1.4 times financial year ending Dec 31, 2026 (FY2026).
Additionaly, Public Bank's recently proposed buy-back is expected to support share price stability and could lift earnings per share if the shares are cancelled, while its impact on net asset value is likely to be neutral to slightly positive.
CIMB Securities maintained its 'buy' call on the stock with an unchanged target price of RM5.50, citing Public Bank’s resilient earnings profile, strong capital buffers and consistent return on equity.
The share buy-back of up to 10% of its issued shares is a move aimed at strengthening Public Bank's capital management and supporting its market valuation, said the house.
The banking group has already secured approval from Bank Negara Malaysia and will seek shareholder consent at an upcoming extraordinary general meeting. The mandate would allow the bank to repurchase up to 1.94 billion shares.
The exercise will be funded entirely from retained earnings, reflecting the bank’s strong capital position and limited immediate need for excess cash. Based on current market prices, a full buy-back could cost about RM9 billion.
Shares repurchased may be cancelled, retained as treasury shares for resale, or distributed as dividends, giving the bank flexibility in how it returns value to shareholders.
In parallel, the mandatory disposal of Public Bank shares (held under 44.17%-owned associate LPI Capital Bhd (KL:LPI); currently classified as treasury shares at Public Bank’s level) provides another potential catalyst.
"With the disposal deadline set for June 3, 2026 (subject to extension), the monetisation of these shares could also pave the way for special dividends in 2H2026, although the timing remains uncertain," said the house.