PETALING JAYA: There may be an upside to the dividend outlook for medium to larger banks this year as excess capital and lower gross impaired loans (GILs) incentivised rewards to shareholders.
MBSB Research noted that multiple banks had either announced special dividends or intend to raise their dividend payouts.
“The dividend outlook for this year remains bright although any further upside to pre-existing dividend payout levels will likely come from big-to-medium banks,” it said, adding that smaller banks undergoing rapid business expansion have limited capital to give away.
It pointed to the lower GILs allowing space to lower common equity tier 1 (CET1), a measure of banks’ core capital, with asset quality and Bank Negara Malaysia’s decision on CET1 ratio being determinants enabling banks to set less capital aside.
“If 2026’s loan growth is indeed not as strong as expected, this gives a lot more room for capital giveaway as in 2025,” it said.
The central bank’s December 2025 banking statistics showed loan growth came in weaker than expected, weighed by weaker business loans.
“Our main concern is that working capital loans have been dwindling over the course of the last two years, despite an abundance of growth catalysts,” it said.
“It may be the case that geopolitical uncertainty and currency volatility remain strong disincentives,” it added.
It had maintained a “positive” recommendation on banking stocks, although the valuations have become less attractive due to the recent share price run-up.
“Capital management announcements are a catalyst for the banking share price rally, further announcements are needed to keep the momentum going,” it said.
