PETALING JAYA: CIMB Securities has maintained its “overweight” call on the banking sector, keeping its financial years 2026-2028 earnings forecasts and valuation assumptions unchanged.
It said Malaysian banks are entering a new phase of their valuation cycle, with greater capital and dividend optionality supporting higher price-to-book valuations.
CIMB Securities said the combined effect of the US-Iran de-escalation roadmap and a more hawkish US Federal Reserve (Fed) marks an important reset for the Malaysian banking sector heading into the second half of this year (2H26).
The easing of geopolitical tensions has significantly reduced the probability of a prolonged and severe oil shock-induced credit cycle, shifting investors’ focus away from asset quality downside risks and back towards earnings fundamentals.
In parallel, a higher-for-longer global rate environment introduces new challenges through increased bond yield volatility, foreign-exchange volatility, tighter liquidity conditions and more uneven capital flows, it said.
Importantly, these risks are largely market-related rather than credit-related ones, and therefore, command a lower risk premium from investors.
“That said, our core thesis remains unchanged.
“As Malaysian banks enter 2H26, capital and dividend optionality remain alongside improved earnings resilience driven by incremental net interest margin upside, and relatively contained credit costs, supported by solid capital and loan loss buffers.”
An analyst told StarBiz that currently, the banking sector still afforded investors some “good” investment options.
CIMB Securities said the shift in the Fed’s narrative introduces additional tail risks associated with higher-for-longer rates, but these pressures are unlikely to culminate in a banking crisis.
It said at the macro level, its base-case assumptions are currently premised on the reopening of the Strait of Hormuz and the gradual unwinding of supply disruptions.
It noted that Malaysia’s growth is expected to moderate to 4.3% in 2026 (from 5.2% in 2025) but remain resilient, while inflation may rise modestly to 2.2% on transitory energy-related pressures.
Against this backdrop, the overnight policy rate may stay unchanged at 2.75%, per the latest commentary from CIMB’s Treasury and Markets Research team dated June 19, it added.
It also said the core thesis behind its “overweight” call on the banking sector – namely, capital and dividend optionality – remains intact as Malaysian banks enter 2H26.
“In our view, this continues to support the investment case for Public Bank Bhd
, RHB Bank Bhd, Hong Leong Bank Bhd, AMMB Holdings Bhd, Malayan Banking Bhd and CIMB Group Holdings Bhd, given the potential for enhanced shareholder returns,” it said.
It said the dominant risk factor in 1H26 was credit risk due to supply chain disruptions and fragilities.
In 2H26, meanwhile, the banking sector will likely face more challenges from market risks.
“Encouragingly, Malaysian banks enter 2H26 from a position of strength, supported by resilient asset quality, robust capital buffers, and improving earnings fundamentals/visibility.
“In other words, despite a more hawkish Fed going forward, we do not foresee the emergence of a banking crisis or a recession creating widespread unemployment and credit defaults in Malaysia,” the research house said.
