THE MALAYSIAN banking sector will remain resilient, underpinned by ample liquidity and healthy capital buffers.
This is despite ongoing uncertainties brought about especially by geopolitical tensions, says Public Bank Bhd (PBK).
The lender, the country’s third largest bank by asset size, said it will continue to uphold its commitment to further strengthen its role as a financial intermediary in support of national development, on top of sustaining banking prudence and effective risk management to safeguard stakeholder value.
Note that Public Bank’s quarter one 2026 (1Q26) results were broadly within expectation.
While headline profit after tax and minority interest (PATMI) was flat year-on-year (YoY), RHB expects a pickup in growth ahead as net interest margin (NIM) pressure wanes and non-II momentum improves.
More importantly, Public Bank has communicated its plans to return the entire 1ppt or MYR3.5 bil capital released from the adoption of
Basel III reforms to shareholders. This will be done via special dividends over a 3-year period.
YoY, operating income edged up 1% led by stronger non-II while NII inched 1% higher with 5% YoY loan growth largely offset by 8bps NIM squeeze.
Offsetting the uptick in operating income were higher operating expenses (+3% YoY on higher personnel, establishment, and marketing costs), while credit cost was marginally higher at 5bps.
Sequentially, the decline in PATMI was on the back of lower non-II and a net writeback in loan impairment of MYR17 mil enjoyed in 4Q25.
Elsewhere, loans/deposit growth was 5% and 4% YoY. Loan growth was led by the SME segment (+12% YoY) while within retail, auto loans (+8% YoY) was the main driver.
Asset quality ticked up 1% QoQ and YoY but the GIL ratio was stable at 0.51% – management seems comfortable on its outlook, backed by an unchanged MYR800 mil in management overlays and 147% LLC.
More importantly, PBK unveiled its plan to return the 1%-pt capital uplift (MYR3.5 bil) from the upcoming Basel III reforms to shareholders over a 3-year period.
This will be in addition to its ordinary dividend payout, which was retained at 60%.
“Management plans to adopt a balanced approach in returning the excess capital over this period, and we think the first special dividend could be declared in its 4Q26 results,” said RHB.
PBK also guided for a +70bps impact to return on equity from this initiative. As for its share buyback programme, this forms part of its long-term capital management plan and should be viewed separately from the MYR3.5 bil capital return.
Lastly, PBK estimates its exposure to sectors that may be vulnerable to the Middle East situation forms 1% of loans. Also, it thinks its customers in these segments are more resilient with no issues noted so far. —May 15, 2026
Main image: The Malaysian Reserve
