Malaysia’s Banking Sector Forecast to Maintain Solid Earnings and Growth
Malaysia’s banking sector is projected to achieve a 3% growth in earnings for 2025, according to a report by UOB Kay Hian (UOBKH). This positive outlook is primarily supported by expected loan growth of around 5% and stable interest-related financial indicators.
Key Performance Drivers
The resilience in earnings is based on several stable factors:
Loan Growth: The sector is expected to sustain its lending activity, building on the 5.4% loan growth recorded in August 2025.
Asset Quality: The quality of bank assets is improving.
Cost Management: Banks are expected to maintain stable credit costs and face manageable pressure on Net Interest Margin (NIM).
Income Potential: There is a potential for upside from non-interest income streams.
Attractive Valuations
UOBKH remains optimistic about the sector, noting that valuations are attractive. Banks in the sector are currently trading at a Price-to-Book (P/B) ratio of 1.10x and offer a high dividend yield of 6% for 2025 (expected to rise to 6.5% in 2026).
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