Public Bank Bhd’s share price has recently come under pressure, but analysts at CIMB Securities Sdn Bhd believe the fallout from its ongoing legal dispute will be limited, with the bank’s financial fundamentals expected to remain resilient.

The sell-off in the bank’s stock appears to have been triggered by recent headlines surrounding a legal judgement against it, in addition to broader concerns about the economic outlook. Earlier this month, the Federal Court of Malaysia ruled against Public Bank, upholding a decision that found it liable for RM90 million in damages to National Feedlot Corporation (NFC), its chairman, Datuk Seri Mohamad Salleh Ismail, and three related entities.

Brief Background of the Case

At the heart of the case are claims that confidential information concerning NFC’s accounts and a property transaction at KL Eco City was wrongfully disclosed. A former employee of the bank was identified as being involved in the alleged breach.

The Federal Court, on 18 June, awarded RM90 million in damages after dismissing the bank’s appeal on 26 May. The judgement, delivered by a panel comprising Chief Judge of Malaya Tan Sri Hasnah Mohammed Hashim, Chief Judge of Sabah and Sarawak Tan Sri Abdul Rahman Sebli, and Federal Court judge Datuk Abu Bakar Jais, apportioned RM30 million each under equitable, exemplary, and aggravated damages.

CIMB Isn’t Worried About the Bigger Picture

Despite the ruling, CIMB Securities remains optimistic about Public Bank’s near-term outlook. “We anticipate limited impact from the lawsuit. We maintain a Buy rating on PBB, as its dividend yield is expected to remain decent,” the firm said in a research note. The brokerage has retained its target price of RM5.10 for the stock.

Analysts highlighted the bank’s sound asset quality and the prospect of stable dividends, which are expected to be supported by forthcoming regulatory changes under Basel III, slated for implementation in 2026. These changes could potentially free up capital for distribution.

Public Bank’s Core Strengths Will Help Cushion Any Long-Term Financial Impact

Nevertheless, the report flagged certain risks that could weigh on earnings, including a possible rise in credit costs, muted loan growth, and continued pressure on funding expenses. In a more adverse scenario, Public Bank’s credit costs could climb to 33 basis points, a level last seen during the height of the Covid-19 crisis.

“If we also factor in two additional policy rate cuts of 25 basis points each, our dividend per share forecast may be revised slightly lower. The dividend per share would drop by only 1.0 sen, from 21.5 sen currently to 20.5 sen, based on a dividend payout ratio of 59.4%.

“However, dividend yield remains quite decent at more than 4.8% for financial year 2025 forecast even under this scenario,” the firm added.

While legal liabilities may cast a temporary shadow over Public Bank’s share performance, analysts remain confident that its core strengths will help cushion any long-term financial impact.

(Source: NST)

• TAGS:
• CIMB Securities Sdn Bhd
• Court Ruling
• Legal Dispute
• Public Bank
• Public Bank Share Price
• RM90 Million Damages