PETALING JAYA: Execution rather than interest rates will define banking performance in 2026, with management discipline becoming the decisive factor as policy settings stabilise, according to BIMB Research.
In its report, the research house said: “If November’s trends carry into 2026 – and with Bank Negara Malaysia likely to keep the overnight policy rate (OPR) flat – the real differentiator will be execution, not rates.”
This should set the tone for a year in which balance-sheet quality and operating choices matter more than macro tailwinds.
“A steady OPR removes both the uplift from rising yields and the drag from funding volatility, putting the burden squarely on management discipline: margin stewardship, funding strength and selective growth,” it said.
As such, BIMB Research said banks should prioritise five areas led by deposit strategy.
They include doubling down on current account and savings account (Casa) retention, sharpening risk-adjusted growth, extracting operating leverage, deploying excess capital assertively and hardening against consumer micro-stress.
“With no widening in spreads, Casa is the first line of defence. Losing it in a flat-rate year is strategic failure,” BIMB Research explained, noting Casa balances are a key earnings anchor.
Growth, it added, should be calibrated rather than aggressive.
“Demand is warming, not booming. Be more liberal in approvals but prioritise high-quality mortgages, small and medium enterprises working capital and well-secured mid-corporate lending,” it noted.
Cost control was highlighted as a return lever in the absence of rate support.
“With no rate beta to rely on, cost discipline becomes the return on equity (ROE) engine,” it said.
On capital management, BIMB Research pointed to shareholder returns, noting with asset quality pristine and ample overlays, there is room for higher dividend payouts, adding that investors would pay for certainty.
It also flagged pockets of vulnerability, cautioning banks to harden against consumer micro-stress, noting that autos and unsecured credit remain the pockets to watch.
According to BIMB Research, it does not cover the broader sector due to the limited pool of syariah-compliant names, leaving Malaysian Building Society Bhd (MBSB) as its sole pick.
It maintained a “buy” rating on MBSB with a target price of 81 sen, citing “management’s steady clean-up” as a catalyst to narrow its valuation gap with peers.
At a sector level, it sees macro conditions turning more supportive, but warned that the December 2025 Bank Negara Malaysia statistics may show softer loan growth alongside firmer Casa accumulation due to an “uncharacteristically prolonged monsoon season”, an impact it views as temporary rather than structural.
Meanwhile, CGS International (CGSI) Research retained an “overweight” stance on Malaysian banks, underpinned by potential rerating catalysts of write-backs in management overlay, improvement in net interest margin in 2026 and expectations for increases in the dividend payout ratios for most banks.
It flagged material deterioration in loan growth and asset quality as downside risks.
Malayan Banking Bhd
replaced Hong Leong Bank Bhd as its top pick, with CGSI Research highlighting a projected expansion in ROE from 10.7% in financial year 2024 to 11.5% in financial year 2027 forecast, alongside an estimated dividend yield of 6.5% for calendar year 2026 forecast, “one of the highest in the sector”.
Industry data point to moderating momentum. Loan growth eased from 5.4% year-on-year at end-October 2025 to 5.2% at end-November 2025, driven by slower business lending, while household loans held steady at 5.7%.
CGSI Research expected growth to soften further to 4.9% by end-December 2025 forecast, in line with its 4.5% to 5.5% projections for both 2025 and 2026, supported by gross domestic product growth of 4.6% in 2026 forecast.
Asset quality remained manageable, with the industry’s gross impaired loan rising RM430.2mil month on month in November, offset by a RM459.6mil decline in total provisions, which CGSI Research attributed to adequately secured corporate defaults and net write-backs on existing impaired loans.
