Public Bank Bhd: Anticipated Earnings Compression Amid Policy‑Rate Adjustment
Public Bank Bhd (KL:PBBANK), Malaysia’s third‑largest bank by assets, is forecast to record a modest decline in its third‑quarter 2025 earnings. Research from CIMB Securities projects a core net profit of RM 1.68 billion for the quarter ended 30 September 2025, representing a 4.5 % drop from the prior quarter and a 12 % decline year‑on‑year. The downgrade is attributed to the asset‑liability mismatch that followed Bank Negara Malaysia’s 25‑basis‑point (bps) cut to the overnight policy rate (OPR) in July, which has compressed the bank’s net interest margin (NIM) to an estimated 2.14–2.15 % for the period.
Drivers of the Compression
| Item | Impact | Rationale |
|---|---|---|
| Floating‑rate loan income | Immediate erosion | OPR cut led to a rapid repricing of floating‑rate exposures, cutting fee and interest income before deposit rates adjust. |
| Fixed‑deposit rates | Delayed response | Fixed‑deposit repricing typically lags six to nine months; hence, the bank’s funding costs remain elevated for the remainder of the quarter. |
| Pricing pressure in retail and SME segments | Margin squeeze | Intense competition among banks in the consumer and SME markets has forced downward pricing on loan products, reducing fee income. |
| Fund‑based income | Expected decline | The combined effect of the above factors is projected to reduce fund‑based income by roughly 4.5 % sequentially. |
The NIM compression is expected to be three to four basis points lower than the previous quarter, reflecting the immediate cost‑side impact of the policy cut relative to the revenue side.
Market Context
Bursa Malaysia’s benchmark index, the FTSE Bursa Malaysia KLCI (FBM KLCI), opened the week on a positive note, gaining 2.56 points to 1,628.23 after a modest rise on Friday. The index’s performance has been supported by a strengthening ringgit, which has attracted buying interest in the finance sector. However, the broader market remains vulnerable to global equity volatility, as evidenced by recent downturns on Wall Street and in regional markets. Bursa Malaysia’s trading volume and turnover have fluctuated, with a recent session recording RM 92.65 million in turnover and a 0.40 % decline at the close, underscoring the market’s sensitivity to macro‑economic signals.
Forward‑Looking Perspective
Despite the short‑term earnings drag, Public Bank’s core business model remains resilient. Its diversified portfolio—spanning consumer banking, retail commercial lending, SME financing, and private unit trust operations—provides a stable income base. The bank’s robust branch network of 265 outlets and 2,100 self‑service terminals across Malaysia, Hong Kong, China, Cambodia, Vietnam, Laos, and Sri Lanka ensures continued customer reach and cross‑border growth opportunities.
The upcoming months will test the bank’s ability to manage the asset‑liability mismatch as deposit rates begin to realign. If the bank can leverage its strong balance sheet and capital position, it may mitigate the impact of the OPR cut and maintain competitive pricing. Investors should monitor the bank’s quarterly cash‑flow generation and NIM trajectory, as these will be critical indicators of its capacity to weather the short‑term compression and resume earnings growth in the longer horizon.
