Banking Sector Poised For Steady 2026 On Credit Growth, NIM Expansion -- AmInvestment Bank

KUALA LUMPUR, Jan 5 (Bernama) -- The banking sector is expected to appear steadfast in 2026 driven by sustained credit growth; net interest margin expansion; resilient non-interest income (NOII); and stable national clearing code (NCC), according to AmInvestment Bank Bhd. 

AmInvestment Bank said in a research note today that as a result, sector profit is projected to grow 4.9 per cent in 2026 versus 0.9 per cent in 2025, while return on equity (ROE) is expected to hold up well at a 9.5 per cent.

“Key events to look out for in 2026 include any delayed impact from US President Donald Trump’s tariff policies, even though the global economy has thus far shown resilience; the trajectory of domestic Overnight Policy Rate (OPR) and US Federal Reserve’s (Fed) rate; ringgit’s performance against US dollar; political mood ahead of the 16th general election, coupled with the competitive landscape for both loans and deposits,” it said.

Therefore, AmInvestment Bank said its 2026 base case is for Malaysia’s economy to chug along with gross domestic product (GDP) growth of 4.5 per cent; OPR to be maintained at 2.75 per cent; and benign rivalry among banks. 

It said following a year of slower growth amid global trade uncertainty stemming from Trump’s policies, Malaysia’s economy is expected to chug along in 2026.

“Our economic team forecasts GDP growth of 4.5 per cent this year underpinned by resilient private consumption from favourable labour market conditions, alongside salary growth, sustained government cash assistance and civil servant pay hike.

“Besides, the implementation of large approved investment projects from 2024-2025, and improving business confidence are further drivers lifting the local economy.

“Another catalyst is Visit Malaysia 2026, where tourism (accounting for 15 per cent of GDP) and its multiplier effects are expected to accelerate services sector momentum,” it said.

Hence, AmInvestment Bank expects credit demand to persist across both the household and business segments, fuelling prospects for banking sector revenue.

“We are forecasting sector loan growth of 5.5 per cent for 2026; this translates to loans-to-GDP growth ratio of 1.2 times, which is within the historical 10-year range of 0.4-2.1 times.

“We also expect Bank Negara Malaysia to maintain its accommodative monetary policy and keep OPR at 2.75 per cent in 2026, to sustain robust economic growth,” it said. 

The investment bank projects headline inflation to be at a manageable level of 1.8 per cent this year; sector NOII to grow 2.9 per cent in 2026; while sector NCC is seen to remain fairly stable at 23 basis points (bp) in 2026 and is within the normalised pre-pandemic run-rate of 20-30 bp.

AmInvestment Bank upgrades Malaysian banks to ‘overweight’ from ‘neutral’ despite rallying strongly in recent months.

AmInvestment Bank views the sector still has room to re-rate into 2026, underpinned by an early-stage capital management cycle; undemanding valuations at 0.92 times price-to-book; resilient earnings visibility; and Fed easing cycle supporting foreign buying and emerging markets rotation play.

“We believe Malaysian financiers are only at the cusp of the capital management story, with further scope for re-rating into 2026. This follows a familiar path seen in Singapore, thanks to well-capitalised balance sheets, durable ROE generation, and undemanding valuations,” it said.

Notably, it said Malaysian banks are still early into this journey (just two months in), while Singapore peers drifted higher, even 10 months post-capital management announcements.

-- BERNAMA