Maybank Investment Bank Berhad
Date of Report: September 4, 2025
Malaysia Banking Sector 2Q25: Solid Earnings, Attractive Yields, and Top Picks for Investors
Overview: Resilient Performance Amid Economic Challenges
The Malaysian banking sector delivered a decent set of results in 2Q25, overcoming ongoing challenges such as net interest margin (NIM) pressure and slower loan growth. With aggregate return on average equity (ROAE) at 10.1% and dividend yields exceeding 5%, the sector presents attractive opportunities for income-focused investors. However, with prospects of slower economic growth and further NIM compression, Maybank Investment Bank Berhad maintains a NEUTRAL stance, highlighting Hong Leong Bank (HLBK), AMMB, and Public Bank (PBK) as its top picks.
Key Highlights: 2Q25 Results and Sector Trends
- Net Profit Growth: Forecasted at 2.1% for 2025 and 4.9% for 2026.
- Valuations: Sector trades below historical mean PERs, with BIMB, HLBK, and PBK below -1SD.
- Dividend Yields: Most banks offer >5% yields, with HLBK aligning to peers after raising its payout policy.
- Asset Quality: Remains robust, with manageable upticks in impaired loans.
- Loan Growth: Group loan growth slowed to 3.6% YoY at end-June 2025.
- Deposit Growth: Outpaced loan growth at 4.9% YoY, strengthening liquidity.
Peer Valuation Summary: 2025 Estimates
| Stock |
Rec |
Shr Px (MYR) |
Mkt Cap (MYR m) |
TP (MYR) |
Upside (%) |
PER (25E) |
PER (26E) |
P/B (25E) |
P/B (26E) |
ROAE (25E) |
ROAE (26E) |
Yield (25E) |
Yield (26E) |
| Maybank |
NR |
10.00 |
120,811 |
NR |
NA |
11.9 |
11.3 |
1.3 |
1.2 |
10.7 |
10.9 |
6.1 |
6.4 |
| Public Bank |
BUY |
4.27 |
82,884 |
5.05 |
18% |
11.4 |
10.8 |
1.4 |
1.3 |
12.4 |
12.5 |
5.2 |
5.6 |
| CIMB |
HOLD |
7.24 |
77,904 |
7.60 |
5% |
10.1 |
9.5 |
1.1 |
1.0 |
10.9 |
10.9 |
5.5 |
5.8 |
| HL Bank |
BUY |
20.00 |
43,354 |
22.80 |
14% |
9.2 |
8.8 |
1.0 |
1.0 |
11.2 |
11.3 |
5.0 |
5.3 |
| RHB Bank |
HOLD |
6.48 |
28,265 |
7.20 |
11% |
8.9 |
8.7 |
0.8 |
0.8 |
9.6 |
9.5 |
6.8 |
6.9 |
| HLFG |
BUY |
17.30 |
19,852 |
21.80 |
26% |
5.8 |
5.5 |
0.6 |
0.6 |
10.7 |
10.8 |
3.6 |
3.6 |
| AMMB |
BUY |
5.47 |
18,162 |
6.05 |
11% |
9.1 |
8.8 |
0.8 |
0.8 |
9.6 |
9.5 |
5.5 |
5.7 |
| ABMB |
HOLD |
4.39 |
7,596 |
4.80 |
9% |
9.6 |
9.2 |
0.9 |
0.8 |
9.8 |
9.4 |
4.3 |
4.4 |
| BIMB |
HOLD |
2.30 |
5,213 |
2.40 |
4% |
9.7 |
9.5 |
0.7 |
0.6 |
6.9 |
6.9 |
6.2 |
6.3 |
Company Analysis: In-Depth Review of Malaysian Banks
Maybank
- Loan Growth: 1.3% YoY, weighed by international and investment banking segments.
- Domestic Loan Growth: Malaysia +6.8%, Singapore +4.3%.
- Operating Profit: 7,869 million MYR (6M25), up 3% YoY.
- ROAE: 10.7% (2025E), dividend yield 6.1% (2025E).
- NIM: 2.05% (2024), expected to compress to >2.00% in 2025.
- CET1 Ratio: 14.7% group, 13.5% commercial bank.
- Payout Ratio: 73% (FY25E).
Public Bank (PBK)
- Loan Growth: 5.8% YoY (2Q25), robust compared to peers.
- Deposit Growth: 3.8% YoY (2Q25).
- Operating Profit: 4,723 million MYR (6M25), up 8% YoY.
- ROAE: 12.4% (2025E), dividend yield 5.2% (2025E).
- NIM: 2.21% (2024), guided to 2.12-2.16% for 2025.
- Asset Quality: GIL ratio at 0.54% (2Q25), up from 0.49% pre-COVID.
- Loan Loss Coverage: 154% (2Q25).
- Payout Ratio: 60% (FY25E).
- Share Overhang: Concerns over family stake sale are considered overblown given high trading liquidity.
CIMB
- Loan Growth: 1.0% YoY (2Q25), slowest among peers.
- Deposit Growth: 2.2% YoY (2Q25).
- Operating Profit: 5,970 million MYR (6M25), down 2% YoY.
- ROAE: 10.9% (2025E).
- NIM: 2.21% (2024), guided to 2.13-2.16% for 2025.
- Asset Quality: GIL ratio at 2.15% (2Q25), down from 3.07% pre-COVID.
- Loan Loss Coverage: 101% (2Q25).
- Payout Ratio: 55% (FY25E).
Hong Leong Bank (HLBK)
- Loan Growth: 7.8% YoY (2Q25), among the highest in the sector.
- Deposit Growth: 8.4% YoY (2Q25).
- Operating Profit: 1,942 million MYR (6M25), up 14% YoY.
- ROAE: 11.2% (2025E), dividend yield 5.1% (2025E).
- NIM: 1.90% (2024), guided to 1.8-1.9% for 2025.
- Asset Quality: GIL ratio at 0.54% (2Q25), down from 0.84% pre-COVID.
- Loan Loss Coverage: 97% (2Q25), 259% including regulatory reserves.
- Payout Ratio: 46% (FY25E), raised from 33% in FY24.
RHB Bank
- Loan Growth: 5.9% YoY (2Q25).
- Deposit Growth: 4.7% YoY (2Q25).
- Operating Profit: 2,216 million MYR (6M25), down 2% YoY.
- ROAE: 9.6% (2025E), dividend yield 6.8% (2025E).
- NIM: 1.87% (2024), guided to 1.80-1.83% for 2025.
- Asset Quality: GIL ratio at 1.51% (2Q25), down from 1.97% pre-COVID.
- Loan Loss Coverage: 78% (2Q25), 117% including regulatory reserves.
- Payout Ratio: 60% (FY25E).
AMMB
- Loan Growth: 4.2% YoY (2Q25).
- Deposit Growth: 1.8% YoY (2Q25).
- Operating Profit: 1,362 million MYR (6M25), up 10% YoY.
- ROAE: 9.6% (2025E), dividend yield 5.5% (2025E).
- NIM: 1.94% (2024), guided to 1.97-1.98% for 2025.
- Asset Quality: GIL ratio at 1.71% (2Q25), unchanged from pre-COVID.
- Loan Loss Coverage: 74% (2Q25), 92% including regulatory reserves.
- Payout Ratio: 50% (FY25E), targeting potentially up to 60%.
Alliance Bank Malaysia (ABMB)
- Loan Growth: 9.9% YoY (2Q25), highest among peers.
- Deposit Growth: 12.5% YoY (2Q25).
- Operating Profit: 610 million MYR (6M25), up 12% YoY.
- ROAE: 9.8% (2025E), dividend yield 4.3% (2025E).
- NIM: 2.45% (2024), guided to 2.37-2.43% for 2025.
- Asset Quality: GIL ratio at 1.96% (2Q25), up from 1.86% pre-COVID.
- Loan Loss Coverage: 104% (2Q25).
- Payout Ratio: 41% (FY25E).
BIMB
- Loan Growth: Guided for 6-7% in 2025.
- ROAE: 6.9% (2025E), dividend yield 6.2% (2025E).
- NIM: 2.13% (2024), guided to >1.9% for 2025.
- Asset Quality: GIL ratio at 6.9% (2Q25).
- Loan Loss Coverage: 104% (2Q25).
- Payout Ratio: 60% (FY25E).
Sector Operating Metrics: Growth, Margins, and Asset Quality
| Metric |
1Q25 |
2Q25 |
YoY Change |
| Interest Income (MYR m) |
25,914 |
25,555 |
-4% |
| Net Interest Income (MYR m) |
11,307 |
11,325 |
+1% |
| Non-Interest Income (MYR m) |
5,848 |
6,174 |
+14% |
| Operating Profit (MYR m) |
12,193 |
12,500 |
+5% |
| Core Net Profit (MYR m) |
8,820 |
8,914 |
+3% |
| Gross Impaired Loans (MYR m) |
28,612 |
29,193 |
+4% YTD |
| Average NIM (%) |
2.07 |
2.07 |
-2 bps YoY |
| Cost/Income Ratio (%) |
45.1 |
44.7 |
Flat YoY |
Sector Outlook: Moderate Growth, Margin Pressure, and Resilient Dividends
- GDP Growth Forecasts: Malaysia revised to 4.2% (from 4.9%), OPR lowered to 2.75% (from 3.00%).
- Loan Growth Forecast: 5.0% for 2025 and 2026, with household lending stable at 5.8% YoY.
- NIM Pressure: 25bps OPR cut in July 2025 expected to compress NIMs by 2-3bps on average.
- Operating Expenses: Expected to moderate to 4.4% in 2025 and 4.1% in 2026 as personnel costs normalize.
- Asset Quality: GIL ratios improved to 1.42% (Jul 2025), better than pre-COVID levels.
- Credit Costs: Trimmed to 21bps for 2025/26, supported by management overlays across banks.
- CET1 Ratios: Remain stable and comfortably above regulatory minimums for all banks.
Dividend Analysis: Attractive Yields Across the Sector
| Company |
DPS (FY25E) |
DPS (FY26E) |
Yield (FY25E) |
Yield (FY26E) |
Payout Ratio (FY25E) |
| HLBK |
102.0 sen |
108.0 sen |
5.1% |
5.4% |
46% |
| AMMB |
30.2 sen |
31.6 sen |
5.6% |
5.9% |
50% |
| PBK |
22.0 sen |
24.0 sen |
5.2% |
5.6% |
60% |
| Maybank |
61.0 sen |
64.0 sen |
6.2% |
6.5% |
73% |
| RHB |
44.0 sen |
45.0 sen |
6.7% |
6.9% |
60% |
Valuation: Most Banks Trade at Attractive Multiples
- All banks are trading below historical mean PERs, with BIMB, HLBK, and PBK below -1SD levels.
- Sector PERs for 2025: Range from 8.6x (AMMB, RHB) to 11.5x (Maybank, PBK).
Risks: Upside and Downside Factors
- Upside: Stronger-than-expected GDP growth, improved liquidity, resilient margins.
- Downside: Weaker GDP, further rate cuts, CASA growth slowdown, asset quality deterioration.
Conclusion: Sector Neutral with Clear Top Picks
The Malaysian banking sector continues to demonstrate resilience, supported by robust asset quality, steady operating profits, and attractive dividends. However, NIM compression and macroeconomic headwinds warrant caution. Investors seeking top exposure in the sector should consider HLBK for its defensive profile and improved yields, AMMB for funding cost management and dividend upside, and PBK for its well-managed balance sheet and solid non-interest income growth. With most banks trading at compelling valuations, the sector presents income and value opportunities for patient investors.
Contact Details: Maybank Investment Bank Berhad
- 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur
- Tel: (603) 2059 1888
