PETALING JAYA: Bank earnings are expected to remain resilient over the next two years despite moderating economic growth, with dividend strength, disciplined cost management and capital optimisation providing key support as lenders navigate narrower interest margins and evolving regional risks.
While loan growth is expected to ease and asset quality pressures linger in selected segments, research houses believe the sector remains fundamentally sound, underpinned by healthy capital buffers and attractive shareholder returns.
Maybank Investment Bank Research (Maybank IB), MBSB Research and Hong Leong Investment Bank (HLIB) Research all retained constructive views on the sector, although with differing degrees of optimism.
In its latest strategy report, Maybank IB said Malaysia’s 2026 gross domestic product or GDP growth will moderate to 4.9% from 5.2% in 2025, while consumer price inflation is projected to rise to 2% from 1.4%.
Operating profit growth
Against that backdrop, it forecast cumulative operating profit growth of 4.3% in 2026 and 5% in 2027 for banks under its coverage.
“Amid expectations of slower economic growth, inflationary concerns and ongoing pressures on interest margins, we forecast fairly sedate cumulative net profit growth of 2.9% this year, before rebounding 5.4% in 2027,” it said.
It added that aggregate return on average equity or ROE is expected to average 11.1% this year and 11% in 2027.
Maybank IB has maintained a “neutral” rating on the sector, noting that valuations remained reasonable with most banking stocks trading around their historical mean forward price-earnings ratios.
Its preferred stocks are RHB Bank
Bhd, Public Bank Bhd and Hong Leong Bank Bhd (HLB).
Maybank IB also expects dividend yields of at least 5% for most banks this financial year, excluding Alliance Bank Malaysia Bhd (ABMB) and HLB, adding that ABMB, AMMB Holdings Bhd (AmBank), CIMB Group Holdings Bhd, HLB, Public Bank and RHB Bank could potentially increase shareholder returns through special dividends or higher ordinary payout ratios.
Robust dividend prospects
MBSB Research, meanwhile, retained a “positive” stance, citing robust dividend prospects and improving net interest margin (NIM) expectations despite lingering risks from asset quality, operating cost inflation and slower lending momentum.
“Fundamentally, the banking sector remains sound, though what started off as a great year is now merely a decent one after the events of recent months,” it said, pointing to the effects of tensions in the Middle East.
“Profitability and growth may take a bit of a hit, but it is nothing that banks cannot shrug off,” it added.
Although MBSB Research expects some deterioration in small and medium enterprise and retail asset quality following supply chain disruptions, it said any increase in provisioning should remain manageable.
It also believes banks are well placed to expand higher-yielding loan segments as credit concerns ease and the interest rate outlook stabilises.
MBSB Research’s preferred banking stocks remain HLB and CIMB, supported by loan growth, dividend potential and improving profitability.
HLIB Research maintained its “overweight” call on the sector, favouring CIMB and AmBank for their attractive valuations and dividend visibility.
It said the decision to retain Indonesia in the emerging market index removed immediate downgrade risks, although persistent rupiah weakness and execution risks in Indonesia would continue to weigh on the Indonesian operations of Malayan Banking Bhd and CIMB.
Improving earnings drivers
Nevertheless, it expects those headwinds to be partly offset by domestic NIM expansion, capital optimisation initiatives and improving regional earnings drivers, while highlighting CIMB’s capital management plans as supportive of future dividend payouts.
Meanwhile, one analyst told StarBiz that he believes Malaysian banks have sufficient earnings buffers and capital flexibility to absorb the current economic challenges, with selective lenders continuing to offer attractive value and shareholder return potential.
“In general, banks remain well positioned to deliver sustainable returns through disciplined balance sheet management, resilient capital levels and consistent dividend distributions,” he said.
