Public Bank faces RM1.1bil goodwill hit by HK unit

 

Public Bank Bhd could see its consolidated net assets and earnings per share fall by four sen following an expected HK$1.96 billion (RM1.1 billion) goodwill impairment at its Hong Kong-listed subsidiary Public Financial Holdings Ltd (PFHL).

KUALA LUMPUR: Public Bank Bhd could see its consolidated net assets and earnings per share fall by four sen following an expected HK$1.96 billion (RM1.1 billion) goodwill impairment at its Hong Kong-listed subsidiary Public Financial Holdings Ltd (PFHL).

The impairment is expected to contribute to PFHL recording a net loss of between HK$1.9 billion and HK$2 billion for the financial year ending Dec 31, 2026, compared with a net profit of HK$80 million in 2025.

In a filing with the Hong Kong stock exchange, PFHL said the impairment was driven by higher long-term interest rates, which increased the discount rate used to value goodwill, and weaker medium-term cash flow projections.

Rising funding costs have also squeezed net interest margins, as much of the group's lending portfolio carries fixed interest rates or is linked to Hong Kong's Prime Rate, which tends to remain stable across interest-rate cycles.

The impairment is a non-cash accounting adjustment and will not affect operating cash flow.

Public Bank said the development would have no operational impact on the bank or its other subsidiaries, although it could reduce consolidated net assets and earnings per share by four sen.

The impairment will be recognised at group level and will not affect the financial positions or regulatory capital ratios of its key Hong Kong operating subsidiaries, Public Bank (Hong Kong) Ltd and Public Finance Ltd.

The Hong Kong group's common equity tier 1 capital ratio and total capital ratio remain above 25.5 per cent and 26.5 per cent, respectively.

Its liquidity maintenance ratio and core funding ratio also remain above 60 per cent and 150 per cent.

Separately, Public Bank is seeking to privatise PFHL, in which it holds a 73.23 per cent stake.

This is by acquiring the remaining 26.77 per cent for HK$2.50 per share, or HK$734.75 million.

The offer, announced in September, will be implemented through a court-sanctioned scheme of arrangement, with no increase in the offer price.

The profit warning is based on unaudited management accounts for the nine months ended Sept 30, 2026, projected fourth-quarter performance and other available information.

The figures remain subject to change.

Public Bank reported a net profit of RM3.58 billion on revenue of RM14.9 billion for the six months ended June 30, 2026, with earnings of 18.5 sen per share. - NST