KUALA LUMPUR (Nov 17): Malaysia’s third largest bank by assets, Public Bank Bhd’s (KL:PBBANK) third-quarter earnings are expected to dip temporarily, dragged by lower interest income from loans after July’s overnight policy rate (OPR) cut, according to CIMB Securities.

The research firm in a note to investors said it expects Public Bank’s core net profit for the third quarter ended Sept 30, 2025 (3QFY2025) to be RM1.68 billion, which is 4.5% lower than last quarter and 12% lower than a year ago. 

This is because floating-rate loans dropped in interest income immediately after the OPR cut, while fixed deposit rates will only be adjusted lower after six to nine months, hurting the bank’s margins for now. Bank Negara Malaysia cut the OPR by 25 basis points to 2.75% in July.

CIMB Securities expects Public Bank’s net interest margin (NIM) to shrink slightly by three to four basis points to about 2.14%-2.15% for 3QFY2025, with a small further drop likely in 4QFY2025.

It has also lowered its full-year FY2025 NIM forecast to 2.12%, as margins are expected to stay low due to strong competition and ongoing rate pressure.

That said, the firm has slightly raised its profit forecasts for Public Bank for FY2025-FY2027 (by 1%-2.4%). It expects the bank to perform better because of stronger loan growth, fewer bad loans, and a possible rate cut in mid-2026 that could boost borrowing.

Public Bank's earnings downside risks should be mitigated by stronger non-interest income — including higher brokerage fees, unit trust sales, foreign exchange gains and investment income — alongside potential overlay write-backs, with minimal credit cost projected, it said.

CIMB Securities maintained its ‘buy’ call on the bank’s stock in the note released last Friday. It added that Public Bank remains a defensive sector pick given its strong capital buffers, asset quality and potential capital-efficiency uplift under Basel 3.1, which could enhance its common equity Tier 1 (CET1) headroom and dividend prospects.

There are now 16 ‘buy’, four ‘hold’ and one ‘underweight’ calls on the stock, according to Bloomberg. The average 12-month target price is at RM5.01 a share.

The stock was trading 0.23% higher at RM4.30 earlier on Monday, valuing the bank at RM83.47 billion. The stock is down 5.7% this year.

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