Digital banks grow deposits 

PETALING JAYA: Three out of the five licensed digital banks which have begun operations are showing encouraging numbers, but they are unlikely to pose near to medium-term threats to conventional banks, says UOB Kay Hian (UOBKH) Research.

The three digital banks which are operational are GXBank, Boost Bank and AEON Bank, while Ryt Bank and KAF Digital Bank remain in the pilot phase and are currently undergoing controlled testing with selected users to fine-tune their platforms ahead of a broader public rollout.

There has been a rapid build-up in deposit taking with GX Bank leading in both assets and customer deposits.

According to UOBKH Research, as of September 2024, GXBank reported RM2.4bil in total assets and RM2.2bil in deposits.

AEON Bank recorded RM711mil in assets and RM339mil in deposits as at November last year, while Boost Bank, which had commenced operations in late first half of 2024, posted RM819mil in assets and RM573mil in deposits as of March 2025.

GXBank’s rapid deposit traction was driven by aggressive promotional campaigns and market leading saving account deposit rates of up to 3%. However, these initiatives have since been scaled back as the bank transitions into its second year.

AEON Bank and Boost Bank similarly launched high-yield savings accounts, although Boost Bank has adopted a more disciplined strategy, maintaining a lower cost of funds at 1.7%, compared with 3% for its peers.

“Despite these encouraging numbers, the combined asset base of all three operational digital banks remains small, collectively accounting for less than 1% of the total banking sector’s RM3.7 trillion in assets as of end-April 2025.

“Even at the regulatory cap of RM3bil per digital bank over their first three to five years, the cumulative RM15bil ceiling represents just 0.4% of the industry’s current total assets,” said UOBKH Research in report.

It noted that the three digital banks remain loss-making and they had guided it could take more than three years on average to break even.

At the same time, established banks continue to advance their own digital agendas and retain broader product capabilities and distribution networks.

“Amid external uncertainties, we favour banks with attractive valuations, high provision buffers and capital management potential for added defensiveness. Our top picks are Hong Leong Bank Bhd, Public Bank Bhd and AMMB Holdings Bhd.”

It said AMMB stands out for its capital management, supported by strong CET1 ratios, while Hong Leong Bank and Public Bank offer defensiveness in the current volatile environment, trading below mean price-to-book and backed by their solid provision buffers.