PETALING JAYA: The banking sector is expected to stay resilient into the final quarter of 2025, with analysts projecting steady loan growth, sound asset quality and attractive dividend yields despite lingering headwinds from rate cuts and external uncertainties.
Maybank Investment Bank Research (Maybank IB) noted that August numbers pointed to a stable operating environment with fairly decent loan growth of 5.4% year-on-year (y-o-y), and stable asset quality. It observed that deposit growth continued to lag lending but flagged comfort in current account savings accounts expansion.
Maintaining its “neutral” stance on the sector, Maybank IB recommended a “buy” call on Hong Leong Bank Bhd
(HLB), AMMB Holdings Bhd, Public Bank Bhd and Hong Leong Financial Group Bhd.
It highlighted HLB’s “strong asset quality, high loan loss coverage and a very liquid balance sheet” and AMMB’s proactive funding cost management. According to MBSB Research, the sector remains resilient with extremely attractive dividend yields, supported by robust earnings and large-scale recoveries.
It maintained a “positive” call, stressing that “liquidity outlook is bright” as elevated liquidity ratios would give banks flexibility to release pricier fixed deposits or optimise loan-to-deposit balances. However, it cautioned that “loan growth outlook is not amazing – most banks are expecting mediocre to weak figures” amid heightened competition in mortgages and narrowing small and medium enterprises yields.
HLIB Research struck an upbeat tone, maintaining its “overweight” stance. It noted that asset quality stayed sound and the elevated loan loss coverage level of 90% provideed good buffers.
It reiterated a “buy” call on Affin Bank Bhd, AMMB, CIMB Group Holdings Bhd, Malayan Banking Bhd, Public Bank and RHB Bank Bhd. It anticipated net interest margin compression, underpinned by the 25-basis-point overnight policy rate cut in July. But it argued that undemanding valuations and around 5% yields made the sector’s risk-reward profile compelling.
CIMB Research expected credit expansion to gain traction later this year. “We expect loan growth to pick up in the fourth quarter of 2025,” it said, although August loan applications and approvals showed no month-on-month growth after July’s surge.
