CIMB Investment Bank Bhd (CIMB Securities) maintained an OVERWEIGHT call on the banking sector, with analysts also highlighting Public Bank, RHB Bank and Hong Leong Bank as top picks, while stressing that rising capital optionality and resilient earnings fundamentals continue to support valuations even as a more hawkish US Federal Reserve introduces higher-for-longer rate risks.
CIMB said the recent US-Iran de-escalation framework has reduced the risk of a prolonged oil-driven credit shock, shifting focus back to earnings strength, while the global rates environment is expected to remain elevated, bringing volatility in bond yields, foreign exchange movements and liquidity conditions. Analysts noted these pressures are more market-related than credit-related and therefore are unlikely to significantly raise systemic risk for Malaysian banks.
The research house added that its base case assumes Malaysia’s gross domestic product growth of 4.3% in 2026, moderating from 5.2% in 2025, supported by resilient domestic demand and the gradual normalisation of global supply conditions following improvements in Strait of Hormuz shipping flows. Inflation is expected to edge up to 2.2% due to transitory energy-related pressures, while the overnight policy rate is projected to remain unchanged at 2.75%.
CIMB said Malaysian banks are entering a new valuation cycle phase, supported by stable asset quality, contained credit costs and incremental net interest margin upside. Analysts added that strong capital buffers are enabling greater dividend and capital return flexibility, which is becoming a key driver of investor interest in the sector.
Within the sector, CIMB maintained BUY calls on Public Bank, RHB Bank and Hong Leong Bank. It highlighted Public Bank’s RM3.5 billion capital plan which is expected to lift return on equity by 0.7 percentage points and sustain dividend yields above 6% through FY26 to FY28. RHB Bank was flagged as a high-yield play with potential dividend upside supported by cost optimisation and lower credit charges, while Hong Leong Bank was noted for diversified growth drivers including digitalisation, loan expansion and strategic partnerships.
