PETALING JAYA: Malaysian banking stocks are expected to post low to single-digit percentage growth for the second quarter ended June 30, 2025 (2Q25) in profit after tax and minority interest (Patmi) on stronger operating income led by non-interest income with mixed net interest income as well as contributions from associates, says RHB Research.
The research house, which has maintained a “neutral” rating on banking stocks, said growth expectations have been reset lower, with no expectations of major Patmi downgrades, although there could be possible downside risks to loans growth and net interest margin (NIM).
“Most banks are set to announce interim dividends too, which we see driving near-term sector outperformance,” it said, flagging that credit cost could rise from the absence of chunky writebacks rather than asset quality pressures.
Loans growth for 2Q25 could show a deceleration from 7% year-on-year (y-on-y) in 2Q24 after taking into consideration Bank Negara’s banking system data showing 5% increase y-on-y in June 2025 versus June 2024 at 6%, with some banks citing slower drawdowns from non-retail due to tariff uncertainties and forex impact.
“While domestic NIM could likely expand quarter-on-quarter (q-on-q) partly helped by the statutory reserve requirement cut and banks frontrunning July’s overnight policy rate cut, NIM from overseas operations should see continued pressure from falling benchmark rates and tight liquidity conditions,” it noted.
“On the other hand, declining bond yields (2Q25 average Malaysian Government Securities 10-year yield down c.20 basis points q-on-q) is positive for trading gains, while market volatility and uncertainty should benefit forex and hedging activities. We think these could compensate for any weakness from lower loan and wealth-related fees,” it added.
RHB Research said operating expenditure among banks would likely be mixed but expect them to exercise tight control amid tougher conditions to grow revenue. “On asset quality, first-order impacts from the US tariffs appear contained and there have been no major tariff-related asset quality issues observed,” it said.
Its top picks remain Malayan Banking Bhd
with target price (TP) of RM10.90, Hong Leong Bank Bhd with TP of RM24.30 and CIMB Group Holdings Bhd with TP of RM8.40. All have “buy” ratings.
