Public Bank Bhd is expected to sustain resilient core earnings and shareholder returns despite a significant goodwill impairment at its Hong Kong subsidiary, analysts say. The impairment, which Public Bank announced recently, relates to a full goodwill write-down of HK$1.96 billion at its 73.23%-owned Public Financial Holdings Ltd, following an impairment review.

The RM1 billion impairment charge is anticipated to affect the bank’s reported earnings for the financial year ending December 31, 2026 (FY26), although its non-cash nature should limit impacts on capital adequacy, dividend capacity, and operating performance. Analysts largely view the charge as an accounting adjustment reflecting asset valuation rather than a sharp decline in the fundamental business outlook.

CIMB Research estimates the impairment attributable to minority interests at RM748.1 million, representing about 10% of its prior FY26 net profit forecast. The research firm projects the charge will reduce earnings per share (EPS) and net assets per share by four sen each but excludes the impairment from its core net profit projection for the year. CIMB expects Public Bank’s core net profit to remain broadly flat at RM1.85 billion for the third quarter of FY26, reflecting a 0.5% year-on-year increase and a 1.5% rise from the previous quarter. This stability is attributed to steady non-interest income from wealth management and foreign-exchange activities, offset partially by a modest contraction in net interest margin to 2.05%.

Despite trimming its FY26, FY27, and FY28 net profit forecasts by 12.5%, 2.1%, and 2.5% respectively, CIMB Research has maintained a “buy” rating with a slightly lowered target price of RM5.35 from RM5.50. One industry analyst noted that while the goodwill impairment is unlikely to derail Public Bank’s earnings resilience, investors will remain attentive to margin pressures and the performance of its Hong Kong operations. The banker’s capital return plan and steady dividend prospects are seen as key factors supporting positive investor sentiment.

Hong Leong Investment Bank (HLIB) Research also interprets the charge as primarily an accounting reset, estimating the impairment at RM772.5 million. HLIB included the amount in reported earnings but excluded it from core earnings forecasts, assuming no repeat impairment events. It warned, however, that the write-down underscores a more difficult operating environment in Hong Kong, given rising long-term interest rates that increase funding costs and compress margins. HLIB modestly lowered its earnings forecasts for FY26 to FY28, adjusting them by 0.1%, 0.4%, and 0.3%, respectively, while retaining a “buy” rating and revising its target price downward to RM5.10 from RM5.30. The firm named Public Bank its top pick for the fourth quarter of 2026, highlighting its defensive earnings profile and potential for a dividend yield around 6%, supported by a RM3.5 billion capital return programme.

UOB Kay Hian Research took a more cautious stance, maintaining a “hold” recommendation with an unchanged target price of RM5.54, based on a 1.74 times forecast 2027 price-to-book value. UOBKH estimates the impairment at RM746 million, or roughly 10% of FY26 earnings, but notes the charge amounts to less than 1% of Public Bank’s market capitalization. The research house also anticipates that a reduced equity base could raise return on equity by about 20 basis points in 2027, assuming other factors remain constant.

Overall, the impairment is viewed as a significant but mostly non-recurring adjustment that does not materially alter the bank’s core operating outlook or capital strength. Market watchers will continue to monitor margin trends and developments in the Hong Kong subsidiary closely.