KENANGA Investment Bank Bhd (Kenanga IB) has reaffirmed its loan growth forecast for Malaysian banks at between 5.5 and 6.0 per cent for calendar year 2025 (CY2025), citing expectations that the high base effect will ease in the second half of the year (2H CY2025).
In a research note issued today, Kenanga IB acknowledged that near-term loan growth may remain subdued due to elevated comparatives from the previous year and persisting global economic headwinds, including uncertainties related to tariff policies under former US President Donald Trump.
"However, we expect momentum to pick up pace towards year-end as the high base effect dissipates and domestic economic expansion supports growth," it said.
The investment bank added that stronger loan growth is anticipated in the second half of CY2025, supported by increased foreign investment expected to boost gross domestic product (GDP). Its in-house projection places GDP growth for 2025 at 4.8 per cent, underpinned by inflation remaining within Bank Negara Malaysia’s targeted range of 2.0 to 3.5 per cent.
While Kenanga IB expects the overnight policy rate (OPR) to hold steady at 3.0 per cent, a sensitivity analysis conducted by the bank suggested that a 25 basis point cut would result in a moderate earnings impact of between 1.0 and 3.0 per cent.
Despite ongoing challenges, the bank maintained its “overweight” stance on the banking sector, citing improving investor sentiment in the latter half of the year, partly driven by seasonal activity and residual uncertainty around trade policy.
Among its sector preferences, Kenanga IB continues to favour banks with strong fundamentals and defensible growth. AmBank Group was highlighted for its improved return on equity (ROE), attributed to a strategic focus on core earnings rather than market share expansion in lower-margin segments.
Malayan Banking Bhd (Maybank) was also named as a top pick, with Kenanga noting its strong asset quality and expectations that its earnings growth will outperform the industry, even as it maintains a leading market position.
CIMB Bank Bhd was similarly spotlighted, with the bank forecast to achieve an ROE of 11.5 per cent for financial year 2025 (FY2025), up from 11.2 per cent in FY2024. Kenanga projected long-term ROE for the group to reach 12 per cent.
Conversely, Maybank Investment Bank Bhd (Maybank IB) has revised its loan growth projection for the industry to 4.8 per cent from 5.5 per cent previously, aligning with a downward adjustment in its GDP forecast to 4.3 per cent from 4.9 per cent.
“Industry loan growth remained stable at 5.2 per cent year-on-year (y-o-y) as at end-March 2025. Household (HH) loan growth eased slightly to 5.9 per cent y-o-y from six per cent y-o-y at the end of February 2025.
“Meanwhile, non-HH loan growth rose marginally to 4.3 per cent y-o-y from 4.1 per cent y-o-y in February. Encouragingly, lending for the purchase of land, industrial buildings, and factories remains robust,” the bank said.
Maybank IB also reported that loan applications on a three-month moving average basis improved in March 2025, bolstered by increases in applications for auto, mortgage, and non-residential property loans. However, applications for construction loans declined, while those for working capital edged up slightly.
“Conversely, we are wary of the fact that deposit growth slowed further to 2.6 per cent y-o-y end-March 2025 versus 3.3 per cent y-o-y end-February 2025. Current Account and Savings Account growth slowed to 3.4 per cent y-o-y end-March 2025 from 4.1 per cent y-o-y end-February 2025,” it added. - May 2, 2025
