Public Financial Holdings (00626) has issued an announcement stating that the Group has conducted an impairment assessment on the goodwill with a carrying value of HK$1.964 billion as of December 31, 2025, and expects to make a full provision against the carrying value of the goodwill.
The goodwill impairment has taken into account: since the third quarter of 2026, a sharp rise in long-term market interest rates has been observed, necessitating an upward adjustment to the discount rate used for the goodwill assessment; and because the majority of the Group's loan portfolio is priced at fixed rates or by reference to the Hong Kong dollar prime rate, which typically remains stable throughout the interest rate cycle, the adverse impact of rising market interest rates on the Group's funding costs and net interest margin has required a downward adjustment to the interim cash flow projections.
After the goodwill impairment, the consolidated asset value and net asset value will simultaneously decrease by HK$1.964 billion, or approximately HK$1.8 per share.
Based on an assessment of the following: (i) the Group's most recent unaudited consolidated management accounts for the nine months ended September 30, 2026; (ii) the expected financial performance for the fourth quarter of 2026, taking into account the aforementioned goodwill impairment, the impact of market interest rate changes on the Group's net interest income, changes in the market value of investment properties, and impairment provisions for the loan portfolio; and (iii) other information known to the Board, the Group expects to record an after-tax loss of between HK$1.9 billion and HK$2 billion for the financial year ending December 31, 2026 (profit warning), compared to an after-tax profit of HK$80 million for the financial year ended December 31, 2025.
The goodwill impairment is a non-cash item and will not affect the Group's operating cash flows. It is also only recorded at the group level and will not affect the financial condition and regulatory ratios that must be complied with by the Company's two principal operating subsidiaries, namely Public Bank (Hong Kong) Limited (Public Bank (Hong Kong)) and Public Finance Limited (Public Finance).
The consolidated Common Equity Tier 1 capital ratio and Total Capital ratio of the Public Bank (Hong Kong) Group (including Public Bank (Hong Kong) and its principal subsidiary Public Finance) are above 25.5% and 26.5%, respectively. The consolidated Liquidity Maintenance Ratio and Core Funding Ratio of the Public Bank (Hong Kong) Group are above 60% and 150%, respectively.
The Group's capital and liquidity positions remain strong and well above regulatory requirements, sufficient to meet its business and operational needs.