In a statement, Kenanga Research has maintained its “overweight” rating on the Malaysian banking sector.

The research house said it is confident in the resilience of the sector amid other industries that are likely to be adversely affected by volatility in commodity prices and exchange rates.

Kenanga noted that a stable-rate environment is likely to be sustained in the coming months as it provides an opportunity for banks to recalibrate their profit rates and regain lost margins from past deposits competition.

“We also opine asset quality to be mostly unconcerning as most banks remain highly capitalised, and are prepared to further load up on provisions, if necessary,” it said.

Similarly, Maybank Investment Bank Bhd (Maybank IB) retained its “positive” call for the banking sector after loan growth registered an increase of 4.3% year-on-year in September 2023, slightly trailing its full-year industry loan growth forecast of 4.6%.

“Positively, loan applications have expanded for the second consecutive month, current account savings account (CASA) contraction has narrowed while the industry’s gross impaired loans ratio is improving,” it added.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) has maintained its “neutral” rating on the sector as there are no new positive catalysts to spur share prices significantly higher.

The investment bank projected that the financial year 2024 (FY2024) and FY2025 sector profit will grow at a slower rate of 5% and 4%, respectively, versus 13% in FY2023.

“This is because the net interest margin is unable to recover meaningfully, non-interest income growth is too slow, and there are no national clearing code write-backs.

“Regardless, valuations are not excessive and hence, we feel it is too premature to turn full-on bearish,” said HLIB.