Public Bank Faces HK$2 Billion Loss Due to Goodwill Impairment

KUALA LUMPUR: Public Bank Bhd (KL:PBBANK) is facing a substantial financial challenge as its 73.23%-owned subsidiary, Public Financial Holdings Ltd (PFHL), has announced a projected after-tax loss of between HK$1.9 billion and HK$2 billion for the financial year ending December 31, 2026. This loss is attributed to a full impairment of goodwill amounting to approximately HK$1.96 billion (about RM1.1 billion), according to filings with the Hong Kong Stock Exchange and Bursa Malaysia.

The impairment stems from rising long-term interest rates, which have increased the discount rate applied to goodwill valuations, as well as downward revisions to medium-term cash flow projections. PFHL indicated that higher funding costs are exerting pressure on net interest margins, particularly as a significant portion of its lending portfolio is fixed-rate or linked to the stable Hong Kong dollar prime rate. This situation has led to a challenging operating environment for the bank.

“The profit warning does not have any operational effect on Public Bank and its other subsidiaries.”Public Bank Bhd, company statement

Despite the anticipated losses, Public Bank has stated that the impairment is a non-cash accounting item that will not affect its operational cash flow. Additionally, the profit warning is not expected to impact the financial positions or regulatory capital ratios of its key Hong Kong subsidiaries, namely Public Bank (Hong Kong) Ltd and Public Finance Ltd. The bank's capital and liquidity positions remain above regulatory requirements, ensuring it can meet its business and operational needs.

“The projected FY2026 loss was based on its latest unaudited management accounts and expected fourth-quarter performance.”Public Financial Holdings Ltd, profit warning announcement

Public Bank has also noted that the profit warning could result in a reduction of consolidated net assets and earnings per share by four sen (approximately USD 0.01). This comes as the bank is in the process of privatizing PFHL, having proposed to acquire the remaining 26.77% stake held by minority shareholders at HK$2.50 per share, amounting to HK$734.75 million (about RM400 million). This privatization initiative was announced last month and will be executed through a court-sanctioned scheme of arrangement.

Public Bank's management emphasized that the profit warning is based on unaudited management accounts for the nine months ended September 30, 2026, and projected fourth-quarter performance. These figures are subject to change as they have not yet been audited or reviewed.