Malaysian banks will enter 2026 with a well-balanced sheet, good earnings, and increased confidence among analysts. TA Securities believes that the future of the banking sector is optimistic as indicated by robust capital buffers, stable increases in loans, and controlled cost management. Consequently, the Malaysian banks are in a good position to compensate the shareholders by paying them a high level of dividends in the face of the global and domestic macroeconomic problems. By a number of large lenders stating that they would increase capital distributions, investors are becoming more optimistic on returns in the sector. TA Securities has reaffirmed its positive position with an overweight call to the Malaysian banks.
TA Securities Maintains Bullish View on Malaysian Banks
TA Securities reiterated its optimistic expectations on Malaysian banks, owing to good visibility of earnings and strong capital position of the sector. The research house indicates that the growth in earnings among the covered stocks is expected to increase to 5.3% in 2026 due to the efforts of defending margins and enhancing efficiency in operations. Malaysian banks are likely to maintain dividend policies despite macroeconomic uncertainties and at the same time fulfill the commitments of the shareholders. This is the cause of the anticipation of the increased dividends of Malaysian banks by the next year.
Strong Capital Buffers Support Higher Dividends
The high capital strength of the sector is one of the major elements that allow Malaysian banks to increase dividends. The common equity Tier 1 (CET1) capital ratio of the industry as at October was 14.1, with comfortable levels that surpassed regulatory minimum levels. This abundance of capital allows banks to offer more flexibility in shareholder payouts with no financial instability impact. TA Securities observed that capital buffers are healthy, which contributes to its further overweighting on the sector.
Banks Announce Aggressive Capital Distribution Plans
Some of the top lenders already declared intentions in line with the theme of Malaysian banks’ higher dividends. The second biggest bank in the country, CIMB Group Holdings Bhd, intends to repay up to RM2 billion in dividends to the shareholders of the company within two years. Public Bank Bhd is already looking forward to increasing its dividend payout ratio guidance to 60% in 2025, and AMMB Holdings Bhd expects to increase its payouts by 2 times in 5 years. These announcements point to increased faith in sustainability of earnings.
Loan Growth and Margin Stability Outlook
According to industry, loan growth is expected to stay constant at 5.7% in 2026 which is a result of consumer financing and business lending. The performance of small and medium enterprises is likely to remain excellent as it offers a consistent growth engine. In the meantime, the net interest margins would become stabilised as banks concentrate on liability management and build the lower cost bases of deposits. All these trends support further expectations of higher dividends of Malaysian banks in the medium term.
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