Malaysia Banking Sector Earnings Remain Resilient Despite Margin Pressures

Analysts expect the Malaysia banking sector to maintain resilient earnings following the latest reporting season, although net interest margins declined sequentially for most lenders and may remain under pressure into the first half of fiscal 2026.

Kenanga Research said system loans rose 5.4% year-on-year in October, aligning with its 2025 target of around 5.5%, while deposits grew 3.7% as customers shifted to shorter-tenure fixed deposits ahead of festive-season liquidity needs.

The firm expects the overnight policy rate to remain at 2.75% through 2026 and forecasts softer loan growth of 5%–5.5% amid potential US tariff risks.

HLIB Research also kept an overweight call on the Malaysia banking sector, citing attractive valuations, dividend yields above 5% and improving asset quality, with gross impaired loans easing to 1.39% this quarter.