NET INTEREST MARGINS OF BANKS TO RECOVER IN 2H 2026, GIVEN STABLE OPR OF 2.75 PCT - KENANGA IB

KUALA LUMPUR, Jan 2 (Bernama) -- Banks’ net interest margin (NIM) is anticipated to recover in the second half of 2026 (2H 2026), assuming the Overnight Policy Rate (OPR) remains stable at 2.75 per cent throughout the year, according to Kenanga Investment Bank Bhd (Kenanga IB).

In a note today, the investment bank said that, with the OPR remaining stable throughout 2026, deposits would be able to fully reprice.

“The sector earnings could find support from a recovery in NIMs from the second quarter of 2026, when fixed deposits have fully repriced (post-July 2025 OPR cut).

“However, on an annualised basis, we could still see a low-single-digit compression across the industry. We anticipate OPR to remain stable at 2.75 per cent throughout 2026, which would keep this outlook intact,” it said.

Kenanga IB opined that banks are likely to adopt a more selective market-share strategy, which could weigh on near-term accretion to return on equity (ROE).

“The banks have yet to provide their 2026 guidance, preferring to close their respective 2025 books first.

“A more meaningful reacceleration in loan growth will hinge on whether the impact from United States tariffs proves less disruptive, mainly to the manufacturing and tech-related sectors, supported by sustained investment inflows,” it said.

Meanwhile, RHB Investment Bank Bhd (RHB IB) remained positive that the combination of an approval loan pipeline build-up and delays in disbursements should translate into stronger loan growth ahead (in December 2025 and potentially spilling over into 2026).

The bank said that following a year-on-year (y-o-y) loan application and approval growth picked up, rising 11.7 per cent y-o-y (October 2025: -2.0 per cent y-o-y) and 9.2 per cent y-o-y (October 2025: -2.3 per cent y-o-y) respectively.

“System loan growth remains on track to meet our estimates, while a robust nonhousehold loan pipeline should be supportive of overall loan growth ahead. Liquidity, capital, and asset quality indicators stayed healthy, further reinforcing the domestic banking system’s resilience,” said RHB IB.

In addition, both banks maintained an ‘overweight’ rating on the banking sectors, with top picks including CIMB Bank, Hong Leong Bank, Maybank and AmBank.

-- BERNAMA