MALAYSIAN BANKS TO STAY APPEALING AMID TRADE TENSIONS - HLIB

KUALA LUMPUR, April 21 (Bernama) -- Hong Leong Investment Bank Bhd (HLIB) said Malaysian banks are expected to be among the more attractive sectors for investors seeking refuge from United States President Donald Trump’s trade war.

The investment bank said the sector's robust dividend yield of 5.0 per cent presents a compelling carry proposition, offering a natural cushion against capital downside and providing an effective price floor amid market volatility.

“Moreover, valuations remain undemanding while the sector’s earnings outlook is fairly resilient,” it said in a note today.

The bank cut its 2025 gross domestic product growth forecast for Malaysia to 4.0 per cent from 4.9 per cent, and flagged that Bank Negara Malaysia may reduce the overnight policy rate (OPR) by 25 basis points to 2.75 per cent in the second half of 2025 to support growth.

While banks typically face margin compression following an OPR cut, HLIB said the impact may be more limited compared to past unexpected reductions.

“This is primarily because banks are likely to take a more proactive stance in anticipation of easing by shortening fixed deposit (FD) tenures to allow quicker repricing at lower cost, and moderating FD growth to avoid overexposure ahead of adjustments.

"Also, we expect pricey campaign FD rates to moderate more substantially within six to nine months post-OPR cut, as banks capitalise on the opportunity to stretch their net interest margin (NIM) expansion," it said. 

Still, HLIB estimates that every 25 basis point policy rate cut would compress sector NIM by 5.0 to 6.0 basis points.

On the non-interest income front, HLIB said OPR cuts have historically supported trading gains, particularly through stronger performance in government securities.

It expects banking sector profit to rise by 0.6 per cent for every 1.0 per cent increase in non-interest income.

HLIB maintained “buy” ratings on Affin Bank (target price: RM3.15), AMMB Holdings (RM6.30), BIMB (RM3.05), CIMB (RM9.20), Maybank (RM11.35), Public Bank (RM5.30) and RHB Bank (RM7.80). 

-- BERNAMA