PETALING JAYA: Malaysian banks are entering the second quarter of calendar year 2026 (2Q26) with improved earnings resilience, driven by incremental upside in net interest margins (NIMs), while non-interest income (NOII) could stage a sequential recovery amid stabilising market conditions and continued growth in recurring fee-based income.
In a report, CIMB Research said current asset quality metrics and national clearing code (NCC) would support earnings and validate its view that “Malaysian banks are entering this phase with thick buffers.”
“Banks are clearly more cautious, but the bias is towards maintaining or modestly increasing overlays rather than releasing them, unless the macroeconomic backdrop surprises positively,” it added.
From a positioning standpoint, CIMB Research said the near-term downside risk to earnings from higher NCC is limited, given existing buffers.
However, the upside from large writebacks is also low, placing greater emphasis on fund-based income, NOII and operating expense management as key earnings drivers, rather than credit writebacks.
During the recent 1Q26 earnings season, CIMB Research noted that six banks – Affin Bank Bhd
, Alliance Bank Malaysia Bhd, AMMB Holdings Bhd, RHB Bank Bhd, Hong Leong Bank Bhd (HLB) and Public Bank Bhd – reported results that were within its expectations and broadly consistent with consensus estimates.
Malayan Banking Bhd (Maybank) was the only bank that missed expectations, the research house said.
Across CIMB Research’s coverage universe, banks demonstrated a common trend of steady operating income growth, with Maybank being the exception.
Its performance was affected by unrealised mark-to-market losses on securities trading related to interest-rate swaps and foreign currency positions.
CIMB Group Holdings Bhd, whose headline operating income for the first quarter of financial year 2026 (FY26) remained muted at RM5.4bil, declined 1.6% year-on-year (y-o-y) and 0.2% quarter-on-quarter (q-o-q).
However, on a constant-currency basis, operating income rose 3.5% y-o-y.
Meanwhile, Public Bank continued to deliver the best results among banks under CIMB Research’s coverage, maintaining the highest return on equity at 12%, compared with the banking sector average of 10.6% in 1Q26.
RHB Bank also recorded impressive progress across its financial targets.
Most notably, its NIM recovered by four basis points (bps) q-o-q and two bps y-o-y.
Overall, the brokerage said there were no major earnings revisions across its coverage universe, apart from minor housekeeping adjustments, with the exception of Maybank and HLB.
CIMB Research cut its FY26, FY27 and FY28 earnings forecasts for Maybank by 4.6% to 4.7% after lowering its FY26 to FY28 income assumptions for the Global Markets division by 20%.
It also trimmed its FY26, FY27 and FY28 earnings forecasts for HLB by 1% to 2%.
The research house reiterated its “overweight” stance on the banking sector, citing its defensive earnings profile and dividend optionality.
Its top “buy” picks are Public Bank, with a target price of RM5.50, RHB Bank at RM9.20 and HLB at RM26.40.
