Majority Of Local Banks Hold Above-Average ESG Ratings

KUALA LUMPUR, March 10 (Bernama) -- Majority of Malaysian banks have environmental, social and corporate governance (ESG) ratings that surpass average benchmarks, aligning well with international standards and rivaling those of Singapore banks, said CIMB Securities Sdn Bhd.

In a note today, CIMB Securities said that a number of Malaysian banks are rated leaders under the Morgan Stanley Capital International (MSCI) ESG ratings.

“Most of the Malaysian banks are rated AA, including AMMB, CIMB, Maybank, and RHB — matching the AA ratings awarded to Singaporean banks, namely DBS, OCBC, and UOB.

“Hong Leong and RHB secured an A rating, which falls under the MSCI average category. There are no MSCI ratings yet for Affin and Alliance bank,” it said.

CIMB Securities said that while ESG ratings are not yet a key component of valuation, ESG leaders are likely to attract premium valuation in the longer run, as a better ESG rating means less risk of business disruptions, unfavourable rulings, and operational risks.

“This may be reflected in lower cost of equity. We retain our ‘overweight’ call for the sector, with Hong Leong, AMMB, and RHB continuing to be our favoured selections,” it added.

Meanwhile, RHB Investment Bank Bhd said that results briefings for 2025 point towards a modest and stable year, as banks remain watchful over geopolitical developments.

“Domestically, a resilient gross domestic product and the ongoing execution of various development plans should be positive for loan demand.

“However, deposit growth continues to trail loan growth, and we will be keeping an eye out on whether deposit competition heats up to support the banks’ funding needs,” it said.

It said that banks with overseas operations are also wary of rate cuts and less favourable liquidity conditions putting potential pressure on net interest margin.

“On asset quality, the banks continue to monitor any pockets of softness, although these appear confined to certain segments and portfolios,” it said, adding that it is also maintaining an ‘overweight’ call on the sector.

-- BERNAMA