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Maybank remains positive on Malaysia's banking sector outlook

Malaysian banks have sufficient provisions to buffer against potential asset quality issues, according to Maybank Investment Bank (Maybank IB). The bank made the statement as it remains positive on the outlook of the country's banking sector following interest rate increases. Maybank said rate hikes benefit banks in terms of the return on equities, which could return to over 10% in the financial year 2023. It also expects Malaysia's central bank, Bank Negara Malaysia, to raise the domestic overnight policy rate by 50 basis points in H2, taking the total rate hike to 75bps in 2022, with a further 50bps increase in 2023. It noted that rate hikes generally have a positive short-term impact on banks' net interest margins through higher loan yields on variable rate loans and higher bond yields.

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