UOB Kay Hian
Date of Report: 27 August 2025
Public Bank Berhad 2Q25 Results: Robust Growth and Resilient Buffers Position Malaysia’s Leading Retail Bank for Upside
Overview: Public Bank Berhad Maintains Momentum Amid Higher Costs
Public Bank Berhad, Malaysia’s third-largest domestic banking group by assets, continues to demonstrate its resilience and strong fundamentals in the face of sector headwinds. With a market capitalization of RM85.8 billion and commanding 14.8% of system assets and 16.2% loan market share, Public Bank remains a cornerstone of the Malaysian financial sector.
UOB Kay Hian maintains its BUY recommendation, setting a target price of RM5.25 per share, implying an 18.7% upside from the current RM4.42. The bank’s valuation stands at 1.66x 2026F price-to-book (P/B), supported by a projected 12.6% return on equity (ROE). Notably, Public Bank’s valuation is hovering near pandemic lows, offering attractive entry points for investors.
Key Highlights from 2Q25 Results
- Net Profit: RM1.76 billion (down 1.2% YoY, flat QoQ) impacted by one-off legal costs.
- 1H25 Net Profit: RM3.51 billion (+2% YoY), slightly below expectations, representing 47% of full-year estimates.
- PPOP Growth: Pre-provision operating profit rose 7% YoY in 1H25, reflecting robust core revenue momentum.
- Loan Growth: Annualized domestic loan growth of 6% (above sector average of 4%), with overall loans up 5.1% YoY.
- Non-Interest Income: Surged 17.5% YoY, driven by higher trading income (+84.5%), forex gains (+29.9%), and insurance contributions.
- Asset Quality: Gross impaired loan (GIL) ratio held stable at 0.54%, with domestic GIL at just 0.4%. Loan-loss coverage robust at 154%, far above industry average.
| Metric |
2Q25 |
1Q25 |
2Q24 |
YoY Change (%) |
QoQ Change (%) |
| Net Interest Income (RMm) |
2,410.7 |
2,380.3 |
2,318.0 |
+4.0 |
+1.3 |
| Non-Interest Income (RMm) |
778.1 |
765.8 |
671.8 |
+15.8 |
+1.6 |
| Operating Expenses (RMm) |
1,299.5 |
1,259.5 |
1,199.4 |
+8.3 |
+3.2 |
| Net Profit (RMm) |
1,760.2 |
1,745.3 |
1,781.7 |
-1.2 |
+0.9 |
| NIM (%) |
2.19 |
2.20 |
2.19 |
0.00 |
-0.01 |
| ROE (%) |
12.2 |
12.2 |
12.9 |
-0.7 |
0.0 |
Financial Performance and Outlook
- Net Interest Margin (NIM): Slightly compressed to 2.19% in 2Q25 due to funding cost pressures; management expects further mid-to-high single-digit compression in 2025.
- Cost-to-Income Ratio: Rose to 35.6% in 2Q25, impacted by one-off legal expenses and higher costs.
- Credit Cost: Remains benign at 3bp in 2Q25, with management overlays now at RM1.0 billion; limited direct tariff exposure as export-related loans are below 3% of the loan book.
- Dividend Outlook: Management guides for a 60% payout ratio, with yields expected to rise from 4.3% in 2024 to 5.7% by 2027.
| Year |
Net Interest Income (RMm) |
Non-Interest Income (RMm) |
Net Profit (RMm) |
EPS (sen) |
ROE (%) |
Dividend Yield (%) |
| 2024 |
9,451 |
2,823 |
7,118 |
36.7 |
12.4 |
4.3 |
| 2025F |
9,770 |
3,032 |
7,274 |
37.5 |
12.3 |
5.1 |
| 2026F |
10,342 |
3,181 |
7,709 |
39.7 |
12.6 |
5.4 |
| 2027F |
10,932 |
3,337 |
8,117 |
41.8 |
12.8 |
5.7 |
Balance Sheet Strength and Operating Ratios
Public Bank’s balance sheet continues to grow in strength, with customer loans projected to increase from RM420.5 billion in 2024 to RM498.1 billion by 2027. Customer deposits are expected to rise from RM433.3 billion in 2024 to RM515.5 billion in 2027. The bank’s capital adequacy ratios remain well above regulatory requirements, and asset quality metrics such as NPL ratio and loan loss coverage are among the best in the sector.
| Metric |
2024 |
2025F |
2026F |
2027F |
| Tier-1 CAR (%) |
14.3 |
15.1 |
15.3 |
14.7 |
| Total CAR (%) |
14.3 |
17.2 |
17.3 |
16.6 |
| NPL Ratio (%) |
0.5 |
0.5 |
0.5 |
0.5 |
| Loan Loss Coverage (%) |
166.2 |
184.1 |
205.7 |
235.9 |
| Loan/Deposit Ratio (%) |
97.0 |
97.2 |
96.9 |
96.6 |
Management Guidance and Strategic Initiatives
- 2025 Guidance: ROE ~13%, loan and deposit growth of 5-6%, net credit cost in single digits, NIM mid-to-high single-digit compression, dividend payout ratio 60%.
- NIM pressures: Wholesale funding costs remain a challenge. Management plans to diversify into more stable sources such as bonds.
- Provision Buffers: Public Bank holds the sector’s strongest provision buffers, presenting future upside via potential writebacks not yet factored into estimates.
ESG (Environmental, Social, Governance) Commitments
- Environmental: Public Bank launched green loan campaigns for energy efficient vehicles and is advancing paperless initiatives across operations.
- Social: Strong gender diversity with 33% female Board directors and 48% female representation in senior management.
- Governance: 55% of Board members are Independent Non-Executive Directors, reinforcing robust governance standards.
Valuation and Investment Thesis
Public Bank’s current valuation, at 1.5x P/B for FY25 and 11.8x P/E, is trading at a substantial discount compared to historical averages. Combined with resilient asset quality, stable earnings growth, and sector-leading provision buffers, the bank is well-positioned to weather macroeconomic headwinds and capitalize on recovery trends. The risk-reward profile is further enhanced by attractive dividend yields and solid ESG practices.
Conclusion: Why Public Bank Berhad is a Top Pick for Malaysian Banking Exposure
Public Bank Berhad stands out as a defensive, high-quality play in Malaysian banking. Its robust fundamentals, strong balance sheet, and prudent management offer investors confidence amid uncertainties. With its valuation at multi-year lows and consistent operational execution, Public Bank presents an opportunity for both capital appreciation and dividend income, making it a compelling choice for investors seeking exposure to Malaysia’s financial sector leaders.
