MBSB Keeps 'Neutral' Call On Banking Sector As Headwinds Persist

KUALA LUMPUR, Aug 11 (Bernama) -- MBSB Investment Bank Bhd has maintained a “neutral” call on the banking sector as headwinds persist, while tailwinds vary on a case-by-case basis, with the market continuing to watch this week’s key economic data release.

MBSB expected a drag from net interest margin compression, with non-interest income windfall providing some offsets.

“At the same time, most banks are already well-buffered; hence, expect only a few instances of larger macroeconomic provisions.

“Major recoveries of a large oil and gas exposure are only expected to begin in the second half of 2025,” it said in a note today.

For asset quality, the investment bank said that while overall asset quality should not worsen dramatically, it anticipated an uptick in select segments, with several banks highlighting rising impairments in residential mortgages.

“We see a mediocre loan growth outlook, and some banks may face asset quality pressures, though recoveries provide more upside.

“Simultaneously, local economic outlook remains weak, slowing growth prospects and dampening investors’ sentiment,” it said.

Citing Bank Negara Malaysia (BNM), MBSB said BNM reported sluggish loan growth this quarter, though leading indicators saw a promising recovery from last quarter’s festive slump.

It also said that dividend yields remained especially attractive, with several banks intending to increase payouts.

On its counter in focus, it maintained a “buy” call on Public Bank Bhd, with a target price of RM4.77, supported by its excellent asset quality as the group’s retail-led approach makes it less dependent on business loans.

At 11 am, Public Bank rose three sen to RM4.36, with 1.54 million shares traded.

-- BERNAMA