KUALA LUMPUR (Aug 27): Public Bank Bhd’s (KL:PBBANK) push to grow fee-based income is gaining traction, providing some cushion against persistent pressure on lending margins, according to analysts reviewing the bank’s latest quarterly results.
CGS International (CGSI) in a note said Public Bank’s fee income jumped 25.6% year-on-year in the second quarter ended June 30, 2026 (2QFY2026), driven largely by a 53.6% increase in asset management-related income.
CGSI attributed the improvement partly to the bank’s cross-selling initiatives, including with its 44.2%-owned insurer LPI Capital Bhd (KL:LPI).
The research house maintained its “add” call on Public Bank, citing improving fee income, capital management initiatives and expectations for return on equity to rise to 12.5% by FY2028 from 12% this year.
However, overall, Public Bank’s 1HFY2026 profit missed CGSI and Hong Leong Investment Bank’s (HLIB) expectations, due to higher-than-expected loan loss provision and lower net interest income (NII) contributions.
As such, CGSI cut its earnings forecasts for FY2026 to FY2028 by between 3% and 5%, mainly after raising its loan-loss provision assumptions and lowering NII forecasts. Its target price was reduced to RM6.40 from RM6.60.
The research house said the increase in provisions should not be a major concern given Public Bank’s still-low credit costs, while the bank continues to target loan growth of 4% to 5%, double-digit growth in non-interest income and return on equity of 12% to 13% this year.
Meanwhile, HLIB was more cautious, maintaining its “hold” call and RM4.90 target price as it expects pressure on net interest margins to persist.
The research house said Public Bank’s loan growth accelerated to 5.5% year-on-year in 2QFY2026, putting the lender on track to potentially exceed its full-year target if the momentum is sustained.
However, its net interest margin slipped three basis points quarter-on-quarter to 2.08%, the lowest since 2020, with HLIB expecting further mild compression over the next two quarters amid intense deposit competition and gradual loan yield repricing.
HLIB said wealth management and stronger cross-selling should continue to support double-digit non-interest income growth. It also highlighted Public Bank’s RM3.5 billion allocation for special dividends over three years as a positive for shareholder returns.
Still, HLIB sees limited near-term share-price upside, pointing to a potential supply overhang from the Teh family estate’s ongoing stake reduction and possible passive selling following changes to Public Bank’s weight in the FBM KLCI. It cut its FY2026 earnings forecast by 6%.
There are 12 “buy” calls and eight “hold” calls in Bloomberg’s consensus, with no “sell” calls. The average 12-month target price is RM5.57.
Public Bank’s net profit rose 3.7% year-on-year to RM1.82 billion in 2QFY2026, bringing first-half net profit to RM3.58 billion, up 2% from a year earlier.