PBBANK: Financial Entity Delivers Robust Results Amidst Challenging Environment; Target Price Sees Uplift

A leading financial institution has reported a solid performance for the third quarter of 2025 (3Q25), with net profit reaching MYR1.8bn. This result brings the nine-month (9M25) total to MYR5.3bn, aligning with both the institution’s and market consensus full-year estimates. The robust outcome was significantly bolstered by strong non-interest income growth and prudent credit cost management, factors interpreted as contributing to exceeding initial expectations.

Performance Review

Quarter-on-quarter, net profit saw a 5% increase, although it was down 4% year-on-year. For the nine-month period, net profit remained flat year-on-year. Operating income grew 6% year-on-year for 9M25, primarily due to an impressive 18% surge in non-interest income derived from treasury and insurance activities. While net interest income growth was more modest at 3% year-on-year, driven by a 6% year-on-year loan growth, this was somewhat offset by a 5 basis points (bps) compression in the Net Interest Margin (NIM). Crucially, the institution also benefited from management writebacks of MYR68m in 3Q25, contributing to a year-to-date total of approximately MYR300m in management overlays. This proactive credit management helped to mitigate overall credit costs, keeping them within guidance despite a slight increase to 3bps (from 1bp in 9M24).

Challenges and Strategic Responses

The financial landscape presented challenges, notably a sharp 8bps quarter-on-quarter NIM compression in 3Q25, following a central bank policy rate cut earlier in the year. This compression, which implied a 5bps reduction from the 2024 average, was primarily attributed to sustained competitive pressure on asset yields, funding costs, and seasonal competition for deposits. Despite these headwinds, the institution maintained steady loan growth, led by retail and SME segments, and saw capital ratios remain robust.

Future Outlook

Management anticipates NIM to remain compressed in 4Q25. Looking ahead, the institution is committed to strategic loan growth in more profitable segments, such as SME, over mortgages. It also plans to intensify cross-selling initiatives across its lending and non-interest income products, including unit trusts, bancassurance, and general insurance. While the immediate outlook suggests continued NIM pressure, the institution’s capital position remains strong, and it maintains its target dividend payout ratio of approximately 60%. Analyst forecasts for FY25-27F PATMI have been fine-tuned, with minor trims of 2%, 1%, and 1% respectively, post-results release, reflecting ongoing adjustments to market dynamics.

Investment Rating

The investment bank, TA Securities, has reaffirmed its “BUY” recommendation for the financial entity. The target price has been uplifted to RM0.25, representing a significant 25.0% upside from the last traded price of RM0.20. This positive outlook reflects confidence in the institution’s ability to navigate market challenges through strategic growth and prudent management of its financial levers.