Higher earnings expected for PBB

PETALING JAYA: A higher dividend payout ratio of 60% is expected from Public Bank Bhd (PBB), with a possible capital optimisation exercise in the near future.

In financial year 2024 (FY24), the payout ratio stood at 57%, said Maybank Investment Bank Research (Maybank IB) in a note. The research house also said the prospective dividend yields of 4.4% and 4.8% for FY25 and FY26 are decent.

PBB is expected to release its fourth-quarter 2025 (4Q25) financial results on Feb 25.

Maybank IB also raised its target price to RM5.45 from RM5.10 a share on faster earnings growth, improved capital ratios and the partial clearing of the share overhang in FY26.

Maybank IB said valuation-wise, the group continues to trade below its long-term one-year forward mean price earnings ratio of 13.4 times.

With improved earnings prospects and a sustained return on equity, it expects the stock to trade back to mean valuations. At RM5.35 a share, PBB would trade at a forward FY26 price earnings ratio of 13.8 times. It retains its “buy” call on the stock.

The shares were last traded at RM5.08.

For the upcoming 4Q25 financial results, Maybank IB expects net income margins to compress sequentially, but for benign credit costs to provide support, with over RM900mil worth of management overlays.

It estimates core net profit growth of 4.5% in FY25, picking up pace to 5.3% in FY26 amid expectations of stable margins and low credit cost.

The group’s domestic loan growth has typically been ahead of industry’s and it forecast a faster pace of 5.1%, which would be at the lower end of management’s 5% to 6% forecast.

The key drivers would continue to be the mortgage and auto segments, which currently account for 43% and 19% of its domestic loans, respectively.

PBB’s common equity tier-one ratios (13.8%/11.9% at the group/bank level as at end-September 2025) could potentially increase by up to 100 basis points once credit risk weight adjustments under Basel III reforms kick in by July 2025.

It said LPI Capital Bhd is expected to place out its 1.1% stake in PBB by June 3, 2026 based on the six-month extended deadline provided by Suruhanjaya Syarikat Malaysia and this would help address part of the share overhang issue.

Maybank IB looks forward to clearer commitment in addressing the distribution of the Teh family’s 12.28% shareholding by way of a restricted offer for sale over five years, to address the other share overhang issue.

PBB’s foreign shareholding hit an all-time low of 23.09% as at end-December 2025 – renewed foreign interest would be positive.