PETALING JAYA: Analysts remain positive on Public Bank Bhd
, citing its strong capital buffers and upcoming capital optimisation initiatives that could support shareholder returns and sustain its premium valuation.
CIMB Research has maintained its “buy” call on the banking group with an unchanged target price of RM5.50, implying potential upside from the current share price of around RM4.69.
The research house said the bank remains well-positioned for stronger capital efficiency under the upcoming Basel 3.1 regulatory framework.
“Public Bank is poised for a potential capital efficiency uplift of greater than or equal to 100 basis points or bps (per management guidance) when the revised capital adequacy framework for Standardised Approach banks under Basel 3.1 comes into force on July 1, 2026,” the research house said.
The regulatory transition is expected to improve capital headroom for lenders like Public Bank by lowering risk-weight requirements and improving risk-weighted asset efficiency.
The optimistic outlook comes as the bank unveiled a proposed share buyback programme of up to 1.94 billion shares, representing 10% of its issued share capital, after securing approval from Bank Negara Malaysia earlier this month.
According to the report, the initiative is aimed at optimising the bank’s capital by deploying surplus financial resources that are not immediately required for other purposes. Shares repurchased under the programme may be cancelled, held as treasury shares for future resale, or distributed to shareholders as share dividends at the board’s discretion.
At the current market price, a full 10% buyback could cost about RM9.1bil funded entirely from retained profits, which stood at RM47.2bil as of December 2025.
While this could result in a reduction of roughly 250 bps in the bank’s common equity tier one capital ratio, analysts believe the impact is manageable, given the group’s strong capital buffers.
However, CIMB Research does not expect the buyback to be executed aggressively. Instead, the programme is likely to serve as a mechanism to stabilise share price movements and reinforce the bank’s underlying value.
Looking ahead, the research house expects capital optimisation and potential special dividends to emerge as key catalysts in the second half of 2026 (2H26).
“Public Bank has indicated that any special dividends would be paid on top of the existing 60% payout ratio, with a more detailed capital management roadmap expected in 2H26, once the new capital adequacy ratios become effective,” CIMB Research said.
An analyst told StarBiz that monetising these shares could potentially pave the way for special dividends, although the timing remains uncertain.
Notably, Public Bank’s gross impaired loan ratio remained low at about 0.5% in financial year 2025.
