PETALING JAYA: Malayan Banking Bhd
(Maybank) is not out of the woods yet, with volatility in Malaysian Government Securities (MGS) yields and elevated funding costs casting a shadow over its earnings outlook, according to Hong Leong Investment Bank (HLIB) Research.
Maybank is Malaysia’s largest listed bank by assets and market capitalisation.
“Following a recent management briefing with Maybank, we remain ‘neutral’ with a slight bias toward caution on its earnings outlook,” it said in a note.
HLIB Research added that while an eventual hike in the overnight policy rate (OPR) should support Maybank’s net interest margin (NIM), benefits may lag the ongoing funding repricing.
It said Maybank’s management highlighted increasingly intense deposit competition, with some prevailing fixed deposit pricing deemed “irrational”, and reiterated that Maybank would participate selectively rather than chase deposits at uneconomic rates.
While its strong current account and savings account franchise and increasingly diversified funding sources – including commercial papers, senior onshore issuances, public US dollar Euro Medium Term Note and Cagamas structures – provide relative protection, funding costs are already being front-loaded ahead of any OPR move.
In contrast, Standardised Base Rate-linked assets cannot reprice until the OPR changes, creating an unfavourable near-term sequencing for NIM.
“Management estimates that a 25-basis-point (bps) OPR hike could eventually add about one to three bps to NIM, aided by faster asset repricing of one to two months versus three to six months for liabilities.
“We remain cautious, however, as the eventual uplift would still hinge on deposit beta and competitive behaviour, while higher borrowing costs could translate into heightened credit pressure,” it said.
On higher MGS yields, the research house said it could weigh on FVTPL earnings and FVOCI reserves through mark-to-market losses, but stressed that the impact is primarily valuation-driven rather than reflective of underlying credit deterioration, given that its securities portfolio largely comprises government securities held for liquidity purposes.
FVTPL is fair value through profit or loss and FVOCI is fair value through other comprehensive income.
While yields retraced to about 4% at end-September from their recent peak of 4.18% on Sept 11 before hovering at about 3.9% currently, HLIB Research believes it remains premature to call an end to the yield upcycle.
With the federal funds rate potentially moving higher again and MGS yields remaining sensitive to US Treasury movements, mark-to-market volatility could persist into the fourth quarter of 2026.
Meanwhile, underlying non-interest income should see offsetting moving parts, with resilient wealth and fee flows partly cushioning softer markets income and potential delays in deal closures.
“Overall, we see no indication of a material earnings shock,” HLIB Research said.
