MIDF Amanah Investment Bank (MIDF Research) and Maybank Investment Bank (Maybank IB) are both optimistic about the Malaysian banking sector, maintaining the POSITIVE rating. Both the research houses highlighted the resilience of the Malaysian banking sector experiencing strong loan growth, and outstanding asset quality and dividend yields, despite some short-term challenges.
The top picks for the banking sector include AMMB Holdings Bhd, CIMB Group Holdings Bhd, and Hong Leong Bank Bhd, reflecting strong prospects for these institutions amid changing banking landscape.
Around 2:40pm Dec 3, the stock of AMMB traded at RM5.31, CIMB stood at RM8.20, and Hong Leong Bank at RM20.46.
MIDF Research has projected a 5.9% profit growth in 2025, with a stable Return on Equity (ROE) of 10.5%.
The analysts noted that despite challenges such as deposit competition and lending rate pressures, the sector remains poised for steady growth, buoyed by a 6.0% year-on-year increase in loans for October 2024. The positive trend is also reflected in the growth of business loans, up 4.6% year-on-year, particularly in the construction and working capital segments.
Retail loans saw a 7.2% year-on-year increase in October, driven by demand for residential and passenger car loans. MIDF Research also highlighted a significant improvement in asset quality, with the Gross Impaired Loan (GIL) ratio dropping to 1.53%, the lowest since April 2021.
Analysts suggest that any profit-taking should be viewed as an opportunity to accumulate, as the sector is backed by solid dividend yields and stable asset quality.
Despite a slight dip in loan applications, attributed to seasonality, MIDF Research remains confident that the economic outlook will support continued credit growth.
Meanwhile, Maybank IB has projected a solid operating environment for Malaysian banks, predicting also a 5.9% profit growth for 2025.
Analysts noted that in the third quarter of 2024, non-interest income (NOII) surged 20%. This robust performance is expected to moderate slightly in 2025.
However, Maybank IB is confident that credit costs will remain manageable, supported by a stable economic backdrop. They anticipate that lending rate pressures will ease, and Net Interest Margin (NIM) will stay stable, aided by a rational level of deposit competition.
According to Maybank IB, domestic loan growth to reach 5.5% in 2025, driven by business loans, while consumer loan demand may soften. Their outlook on the banking sector remains positive, despite risks such as deposit competition and potential slowdowns in credit growth.
Market analysts at Maybank IB have also projected a stable ROE of 10.5% for 2025, with an average dividend yield of 5.1%.