Single digit 2Q growth for banks predicted
PETALING JAYA: Malaysian banking stocks are expected to post low to single-digit percentage growth for the second quarter of this year (2Q25), says RHB Research.
It said the growth in profit after tax and minority interest (Patmi) would likely come from stronger operating income led by non-interest income with mixed net interest income as well as contributions from associates.
The research house, which maintained a 'neutral' rating on banking stocks, said growth expectations have been reset lower, with no expectations of major Patmi downgrades, although there could be possible downside risks to loans growth and net interest margins (NIM).
'Most banks are set to announce interim dividends too, which we see driving near-term sector outperformance,' the research house said, adding that credit costs could rise from the absence of chunky writebacks rather than asset-quality pressures.
Loan growth for 2Q25 could show a deceleration from 7% year-on-year (y-o-y) in 2Q24 after taking into consideration Bank Negara Malaysia's data showing 5% increase y-o-y in June 2025 versus June 2024 at 6%, with some banks citing slower drawdowns from non-retail sectors due to tariff uncertainties and foreign -exchange impacts.
'While domestic NIM could likely expand quarter-on-quarter (q-o-q) partly helped by the statutory reserve requirement cut and banks frontrunning July's overnight policy rate cut, NIM from overseas operations should see continued pressure from falling benchmark rates and tight liquidity conditions,' it noted.
'On the other hand, declining bond yields, with the average Malaysian Government Securities 10-year yield for 2Q25 down about 20 basis points q-o-q, are positive for trading gains, while market volatility and uncertainty should benefit foreign exchange and hedging activities. We think these could compensate for any weakness from lower loan and wealth-related fees,' it added.
RHB Research said operating expenditure among banks would likely be mixed but expect them to exercise tight control amid tougher conditions to grow revenue.
'On asset quality, first-order impacts from the US tariffs appear contained and there have been no major tariff-related asset-quality issues observed,' it said.
Its top picks remain Malayan Banking Bhd with a target price of RM10.90, Hong Leong Bank Bhd at RM24.30 and CIMB Group Holdings Bhd at RM8.40. All have 'buy' ratings.
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