KUALA LUMPUR, March 25 — Investment banks remained bullish on Malaysia’s banking sector as its system continued to be resilient and supportive of financial intermediation activities underpinned by healthy capital and liquidity buffers.
Yesterday, Bank Negara Malaysia (BNM) published the second half of its 2024 Financial Stability Review Report.
Hong Leong Investment Bank (HLIB) said the latest stress test continues to suggest that the banking system is robust and can stomach adverse shocks as it employed conservative assumptions to evaluate banks’ resiliency to adverse shocks.
It said that from a top-down perspective, HLIB remained bullish in the sector as it provides good shelter from Trump 2.0.
“Also, it offers a decent dividend yield of five per cent and has visible, defensive earnings with scope to perform pre-emptive provision write-backs,” it said.
Meanwhile, RHB Investment Bank Bhd (RHB IB) opined that the Malaysian banks could offer investors a defensive shelter, given the sector’s stable earnings and decent dividend yields.
It opined the leading financial stability indicators, such as debt servicing capabilities of households and businesses, remain resilient.
RHB IB said the business sector is still resilient, with operating margins having also surged past the pre-pandemic average, thanks in part to a stronger ringgit and stable global commodity prices.
“However, some firms, particularly those from the manufacturing, wholesale and retail trade, and hotels and restaurants sectors, still face elevated input costs (for example, materials and labour),” it said.
RHB IB said household loans grew by a solid 5.9 per cent year-on-year in December 2024, partly due to continued labour market strength and general economic activity, with some support from government incentives.
“Household debt servicing capacity was stable y-o-y, with limited evidence of overstretched borrowers,” it said.
RHB IB noted that BNM did not observe any abnormal growth rates for higher-risk unsecured lending products, while for Buy Now, Pay Later (BNPL) services, asset quality looks manageable despite the sharp rise in transaction volumes and value.
— Bernama
