Malaysia's banking sector is set to benefit from anticipated cuts to the US Fed Fund Rate, with interest rates in Malaysia expected to remain stable amid a strengthening MYR. This environment is expected to favour banks' margins and non-interest income, bolstered by improved economic prospects and attractive valuations.
A report by Maybank Investment Bank (Maybank) highlights that no cuts to domestic rates are anticipated, with the Overnight Policy Rate (OPR) projected to stay at 3% through 2024 and 2025.
Maybank maintains a POSITIVE stance on the sector, noting that the stability in domestic rates is likely to support average net interest margins (NIMs), which could see potential upside into 2025. The report underscores that industry current account/savings account (CASA) balances have resumed growth, easing margin pressure, while Malaysian Government Securities (MGS) are forecasted to provide marked-to-market gains.
The current climate is deemed favourable for foreign investment, with improved economic conditions and the strengthening MYR creating a conducive environment for foreign flows back into Malaysian banks. Foreign investors have recently shown renewed interest in banks such as AMMB, CIMB, and Maybank, reflecting the sector's robust outlook.