It said these stocks recorded a modest 5% growth in July 2022, lower than the almost 10% gain between January 2022 and early May 2022.

“Still, Malaysian banks have fared relatively better than regional peers in Singapore and Indonesia, which are down 7% and 5% (respectively) in US dollar terms,” it said in a note today.

RHBIB believes Malaysian banks will continue to outperform the broader market, offering decent earnings growth of 5% and dividend yield, while trading at an undemanding 1.0 times price-to-book value ratio.

It added that its economists expected Bank Negara Malaysia to raise interest rates by 25 basis points (bps) to 2.5% in September 2022, its third hike for the year.

On loan growth, RHBIB believes banks will sustain their loan growth in the second half of 2022 as consumption and business activities rebound to pre-pandemic levels.

The investment bank projected that the banking sector will see its earnings grow 5.4% in FY2022, capped by the Cukai Makmur (Prosperity Tax).

Overall, it said the domestic economic recovery, reopening of international borders, and special RM10,000 Employees’ Provident Fund withdrawal from April 2020 should sustain banks’ business momentum and support the delivery of another set of decent results for the second quarter of 2022.

However, the recovery outlook was getting clouded, it said, noting that global inflation will worsen with the Russia-Ukraine war likely to drag on for quite a while longer.

“Aggressive monetary tightening across the world would also exacerbate the risk of recession,” it said.

RHB economists expected gross domestic product growth to moderate to 4.5% in 2023 from 5.3% in 2022.