KUALA LUMPUR, Jan 9 (Bernama) -- The Malaysian banking sector is expected to have robust earnings in 2025, supported by solid gross loan growth and stable asset quality, said MIDF Amanah Investment Bank Bhd.
The investment bank also remains "positive" in the banking sector as a solid economic outlook would be good for growth and earnings.
"The earnings performance of the sector is closely tied to the economy's performance, being its backbone.
"Economic activities create demand for financial services such as productive loans for businesses, consumptive loans and transactional deposits," it said in a note.
MIDF projects that Malaysia’s gross domestic product (GDP) will continue growing, albeit at a more normalised level, at +4.6 per cent next year.
The investment bank also believes that the 2025 dividend outlook remains bright.
"We expect this dividend expectation and defensive feature of banks to be a key proposition in 2025 given the possibility of the market to remain volatile," it said.
MIDF expects net interest income (NII) growth to remain robust due to stable net interest margin (NIM) and sturdy loan growth; the normalisation of non-interest income (NOII) growth; operating expenses (OPEX) to come in at a more contained level; and asset quality to continue improving with no stress expected.
It said NII saw better performance as the prolonged deposit competition in 2023 waned. Hence, MIDF does not expect significant changes from the current trend going into 2025.
MIDF also observed that there has been a segmentation among banks, with some focusing on different segments and not competing on a broad front. For example, some banks have reduced focus on residential mortgages due to the razor-thin margins.
"This has allowed NIM compression to be manageable thus far.
“Overall, we expect gross loans to continue growing due to robust economic activities. We forecast gross loan growth of +5 per cent for 2025," it said.
-- BERNAMA
