PETALING JAYA: The Malaysian banking sector will remain resilient, underpinned by ample liquidity and healthy capital buffers, despite ongoing uncertainties brought about especially by geopolitical tensions, says Public Bank Bhd
.
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.
Public Bank released its results for the first quarter of financial year 2026 (1Q26) yesterday, with both turnover and net profit seeing marginal year-on-year improvements (y-o-y) at RM7.32bil and RM1.75bil respectively.
Earnings per share therefore stayed steady at 9.07 sen.
Elaborating on its performance for 1Q26, the group highlighted that net interest and Islamic banking income increased by RM28.2mil or 1%, supported by healthy loans and financing growth.
“Non-interest income (NOII) increased by RM21mil (2.7%), mainly driven by higher unit trust related fee income, general insurance income and other income, partially offset by decline in investment income and banking fee income.
“For the period under review, other operating expenses increased by RM35.6mil while impairment on loans and financing increased by RM13.1mil, with credit cost at five basis points,” said Public Bank in a filing with Bursa Malaysia.
On the other hand, it reported that other comprehensive loss in 1Q26 increased by RM228mil to RM243.2mil, which was mainly due to loss on revaluation of financial investments in the current quarter, as compared to a gain reported in 1Q25.
Nevertheless, Public Bank said this was partially mitigated by gain on cash flow hedges in the current period and lower losses on foreign currency translation in respect of foreign operations.
It further observed that its profitability continues to be supported by healthy loans and customer deposits growth, as gross loans grew by RM6.4bil or at an annualised rate of 5.7% to RM452.1bil as at March 31, mainly contributed by domestic financing to small and medium enterprises (SMEs).
Hire purchase financing and residential property financing also saw achieved annualised growth of 11.2%, 8.7% and 4.4% respectively.
“Total deposits from customers increased by RM6bil or at an annualised rate of 5.3% over the same period to RM453.1bil as at March 31, 2026.
“The group’s gross impaired loans ratio remained stable at 0.51% as at March 31, 2026, significantly lower than the industry’s gross impaired loan ratio of 1.4%,” Public Bank pointed out.
Compared to the preceding quarter ended Dec 31, however, bottomline nudged 6.6% lower from RM1.88bil, as turnover also experienced a fractional drop from RM7.42bil.
Public Bank said net interest and Islamic banking income decreased by RM27mil or 0.9% compared to 4Q25, mainly due to a shorter interest accrual period.
It said loan/financing impairment allowance increased to RM52.1mil as compared to a net writeback of RM17.1mil in 4Q25 which was due to the normalisation of credit charge.
“NOII decreased by RM41.4mil or 5% mainly due to lower banking fee, unit trust-related income and foreign exchange income. However, other operating expenses remained stable with a marginal decrease of RM6mil or 0.5%,” said the group.
Providing a sneak peek on how the banking sector at large should be faring in the current results season following Public Bank’s results release, head of equity sales at Rakuten Trade Vincent Lau is expecting similar performance patterns.
“We are still expecting earnings growth from our banks, especially since 1Q26 is a look into the past.
“Moving forward into 2Q26 however, could be a different story, perhaps with a cautious tone to it,” he told StarBiz, referring to the possible production slowdown in June as mentioned by economic adviser Nurhisham Hussein.
Lau believes Malaysian lenders, like Public Bank, will continue to exercise prudence on lingering external volatilities, as he hopes that the visit of US President Donald Trump to Beijing will be fruitful in terms of ironing out several immediate political and economical issues especially those involving Iran.
He is looking at banks to also increase their loan provisioning moving into the second and third quarters as a precautionary move, unless Trump and China’s President Xi Jinping are able to influence things in the Middle East.
Meanwhile, assistant manager of research at iFast Capital Kevin Khaw is anticipating lenders to maintain a balance between growth and asset quality, especially with both system loan growth and gross impaired loans (GIL) holding at 5.4% y-o-y and 1.4% y-o-y respectively.
“We believe this trend is sustainable despite the subsidy rationalisation and a broader sales and service tax, thanks to a still-firm labour market, an accommodative overnight policy rate (OPR), and a resilient gross domestic product (GDP).
“We also expect the banks who have a larger part in corporate and trade loans will perform better compared to those in retail and SME loans,” he told StarBiz.
Of interest however, Khaw is currently “mildly constructive” on sector net interest margins (NIM), noting that while the 25 basis points (bps) OPR cut in July last year had compressed margins in the second half of 2025, he observed that NIMs typically recover in a V-shape nine to twelve months post-cut as fixed deposits reprice.
Commenting on Public Bank’s provision for loan impairments that rose to RM52.1mil in 1Q26 compared to RM39mil a year earlier, Khaw opined it is more a “normalisation” step than a cautious move, as the jump is off an exceptionally low base, particularly with annualised credit cost still at only five bps on its book.
He said it reflects portfolio growth and prudent topping-up rather than emerging stress, especially with the bank’s GIL still standing at 0.51%.
“Net credit costs are expected to increase modestly to approximately 20 bps in 2026, which still sits within the pre-lockdown 20 to 30 bps range.
“Where I do expect banks to lean more cautious is on management overlays, in the context of the ongoing Middle East conflict and potential T20 subsidy rationalisation,” said Khaw.
Portfolio manager at Tradeview Capital Ng Tzyy Loon feels that Public Bank’s performance, while encouraging, likely represents the upper end of sector quality rather than the overall industry, given its conservative underwriting culture built over decades.
Overall, he said the banking sector loan-loss-provision and GIL are quite healthy despite some concerns on SMEs, as the key variable is unemployment, before adding: “As long as Malaysia’s labour market holds, the household loan books of most banks remain manageable.”
Of note, he said a majority of Public Bank’s provision is concentrated in the consumer segment, and its increase in loan provisions is consistent with the cost of living pressure.
“Hence, it is crucial to watch how concentrated a bank is in consumer-related lending.
“Given the more vibrant investment environment, we do expect the NOII to provide more earnings upside for the banks,” said Ng.
