Upbeat prospects for banks next year

PETALING JAYA: Maybank Investment Bank Research (Maybank IB) has upgraded its banking sector rating to “positive” as it foresees 2026 to be an operationally more conducive year.

For banks under its coverage, Maybank IB has projected aggregate net profit to grow by 5% in 2026 and 5.5% in 2027.

For comparison, it has forecast a 3.6% growth this year.

Maybank IB said Malaysia’s estimated economic growth of 4.5% in 2026 supports industry loan growth of about 5%, while in the absence of further rate cuts and with easing liquidity pressure, net interest margins (NIM) are expected to be stable.

Asset quality of the banks also remain impeccable, supportive of benign credit costs while management overlays provide a buffer.

The research house estimated an average return on equity of 10.3% in 2026-2027, compared to 10.2% in 2025.

“We project dividend yields of more than 5% for most banks this financial year, except for Alliance Bank Malaysia Bhd (ABMB) and Hong Leong Bank Bhd, at over 4%.

“Meanwhile, valuations are still undemanding, in our view, with most banks trading close to negative one standard deviation to their historical mean forward price-to-earnings ratio.”

In a separate note, Maybank IB said it had raised its 2025 industry loan growth estimate slightly to 5.2% from 5%.

This was following its upward revision in Malaysia’s gross domestic product growth forecast to 4.7% from 4.2%.

In October 2025, the domestic banking sector’s loan growth was marginally lower at 5.4% year-on-year (y-o-y) from 5.5% y-o-y in September 2025.

Household loan growth slipped to 5.4% y-o-y in October 2025 from 5.5% y-o-y in September 2025, while non-household loan growth was a slower 5.2% y-o-y against 5.5% y-o-y in September 2025.

Annualised loan growth, however, picked up pace to 4.7% from 4.5% with annualised household loan growth at 5.2% and business loan growth at 3.9%.

Including bond issuances, total credit to the private non-financial sector expanded 5.7% y-o-y as of end-October 2025.

Meanwhile, loan applications are trending up based on a three-month moving average (3MMA) basis.

Across the key household segments, mortgages and auto loan applications continued to rise by 8% y-o-y and 9% y-o-y, respectively, but contracted 20% y-o-y and 12% y-o-y for credit cards and personal loans, respectively.

Construction loan applications and working capital loan applications on a 3MMA basis contracted 25% and 8% y-o-y.

As for current account-savings account (Casa), Maybank IB said growth is still “encouraging”.

Casa growth was 7% y-o-y by end-October 2025 against 8.1% y-o-y by end-September 2025.

As for total deposit growth, it was slower at 4.9% y-o-y as at end-October 2025 versus 5.2% y-o-y by end-September 2025, but still faster than 3.3% by end-2024.

Given its positive outlook for the sector, Maybank IB’s top-three banking stock picks are CIMB Group Holdings Bhd, AMMB Holdings Bhd and ABMB.

“We expect an improved operating environment for CIMB’s operations amid lower NIM pressure in Singapore and a stable economic outlook in Malaysia and Indonesia. Moreover, with ongoing capital returns, we expect special dividends to sustain dividend yields at over 6%.

“AMMB’s focus on proactive funding cost management and business banking operations should contribute to growth momentum, as it strives for higher dividend payouts (of potentially up to 60% against our forecasts of 50%).

“We expect improved earnings momentum into the second half of financial year 2026 for ABMB on lower credit costs, and project a three-year net profit compounded annual growth rate of 7% on robust loan growth and more stable margins.”