Financial Services | Banks
10 July 2025
Banks
BNM Lowers OPR By 25bps; NEUTRAL
Stocks Covered: 8
Last 12m Earnings Revision Trend: Negative
Top Picks
| Company | Rating | Target Price |
|---|---|---|
| Maybank (MAY MK) | BUY | MYR10.90 |
| Hong Leong Bank (HLBK MK) | BUY | MYR24.30 |
| CIMB (CIMB MK) | BUY | MYR8.40 |
- NEUTRAL, Top Picks: Malayan Banking, Hong Leong Bank and CIMB. Yesterday, Bank Negara Malaysia (BNM) lowered the overnight policy rate (OPR) by 25bps to 2.75% (vs RHB Economics’ expectation of an unchanged OPR in 2025). This decision is not expected to impact the banks materially, as the statutory reserve requirement (SRR) was pared down to 1% (from 2%) in May, and there is potential for banks to realise trading profits. While RHB Economics sees BNM holding the OPR steady into 2026, we do not see the cut as the start of an easing cycle – given the lack of fresh catalysts.
- BNM cuts OPR to 2.75%. The Monetary Policy Committee has cut the OPR to 2.75% from 3.0% as a pre-emptive move, as it sees the balance of risks to growth tilted towards the downside from slower global trade, weaker sentiment and lower-than-expected commodity production. RHB Economics expects BNM’s future OPR decisions to be data-dependent, but thinks the OPR could remain at 2.75% for the rest of the year – provided GDP growth is within the range of 4-5%. The central bank plans to release its revised GDP forecast for 2025 by end-July, and its governor Dato’ Seri Abdul Rasheed Ghaffour has stated that he does not expect a major revision to the figures.
- Impact from 25bps cut per se is not too significant … We believe that the banks’ earnings sensitivity to a 25bps rate cut is manageable (Figure 1), with sector PATMI affected by about -1% to -2% on a full-year basis. By our calculations, BIMB’s earnings are most sensitive to policy rate changes, due to a high proportion of floating-rate loans and a relatively large CASA mix. Broadly, we find that the earnings of smaller banks are more sensitive to rates, vs the big banks – due to a less diversified income mix (greater reliance on NII) and higher operating leverage.
- … further mitigated by SRR cut and trading profits. In mitigation, BNM’s move to release additional liquidity into the system via May’s reduction in the SRR to 1% from 2% should help to offset the bulk of the impact from the OPR cut. By our estimates, sector PATMI could rise by c.1.3% from the 1ppt decline in SRR (assuming 3-month KLIBOR returns). Meanwhile, some banks had mentioned earlier that their fixed income books were sitting on healthy unrealised profits on the back of favourable bond yield movements. We think banks could take the opportunity to realise some of these profits to further help cushion the impact of the OPR cut.
- We maintain our forecasts pending the 2Q25 reporting season, and as the impact of the OPR cut should be broadly cushioned by the SRR reduction. In our view, the sector’s lacklustre performance in recent months was due to: i) Concerns and uncertainties over the impact of the US tariff policy, which fuelled expectations that BNM would need to cut the OPR to support growth, ii) a soft 1Q25 reporting quarter, and iii) decelerating loan growth. Yesterday’s OPR move could help clear part of the overhang. We do expect better total returns from the sector in 3Q25, chiefly due to dividends. Beyond that, however, the sector lacks fresh catalysts so further upside could be capped.
Analysts
+603 2302 8106
david.chongvc@rhbgroup.com
+603 2302 8123
nabil.thoo@rhbgroup.com
+603 2302 8103
ammaraffan@rhbgroup.com
Company Financials
| Company Name | Rating | Target (MYR) | % Upside (Downside) | P/E (x) Dec-25F | P/B (x) Dec-25F | ROAE (%) Dec-25F | Yield (%) Dec-25F |
|---|---|---|---|---|---|---|---|
| Affin | Neutral | 2.45 | (6.8) | 13.5 | 0.5 | 4.1 | 3.0 |
| AMMB | Neutral | 5.70 | 12.0 | 8.5 | 0.8 | 9.5 | 6.1 |
| BIMB | Neutral | 2.30 | 0.9 | 9.6 | 0.7 | 7.0 | 6.3 |
| CIMB | Buy | 8.40 | 27.9 | 8.9 | 1.0 | 11.1 | 6.2 |
| Hong Leong Bank | Buy | 24.30 | 25.5 | 8.8 | 1.0 | 11.2 | 4.1 |
| Malayan Banking | Buy | 10.90 | 12.4 | 11.3 | 1.2 | 10.9 | 6.4 |
| MBSB | Neutral | 0.67 | (5.0) | 12.3 | 0.6 | 4.8 | 5.7 |
| Public Bank | Neutral | 4.75 | 11.5 | 11.1 | 1.4 | 12.7 | 5.4 |
Sector Analysis
Sector ROA and ROE trends
The chart shows a dip in sector ROA and ROE in 2020, followed by a steady recovery. ROE is projected to remain stable at around 10.8-10.9% for 2024-2026.
| Year | Sector ROA | Sector ROE (RHS) |
|---|---|---|
| 2019 | 1.00% | 9.9% |
| 2020 | 0.52% | 5.1% |
| 2021 | 0.95% | 9.4% |
| 2022 | 0.97% | 9.8% |
| 2023 | 1.07% | 10.7% |
| 2024F | 1.06% | 10.9% |
| 2025F | 1.06% | 10.8% |
| 2026F | 1.06% | 10.9% |
Earnings sensitivity to OPR and SRR changes
Figure 1: Earnings sensitivity to a 25bps rate cut
| Bank | Sensitivity |
|---|---|
| Affin | -2.2% |
| AMMB | -2.0% |
| BIMB | -4.4% |
| CIMB | -0.9% |
| HLBK | -1.0% |
| MAY | -0.7% |
| PBK | -2.5% |
| Sector | -1.2% |
Figure 2: Earnings sensitivity to 1%-pt cut in SRR
| Bank | Sensitivity |
|---|---|
| Affin | 3.9% |
| AMMB | 1.9% |
| BIMB | 2.4% |
| CIMB | 1.1% |
| HLBK | 1.0% |
| MAY | 1.1% |
| PBK | 1.3% |
| Sector | 1.3% |
Sector Valuations
Figure 3: Summary of MY Banks’ valuations
| Bank | Rec | Price (MYR/s) | TP (MYR/s) | Mkt Cap (MYRm) | EPS chg FY25F (%) | EPS chg FY26F (%) | P/E FY25F (x) | P/E FY26F (x) | P/B FY25F (x) | P/B FY26F (x) | ROE FY25F (%) | ROE FY26F (%) | Div yield FY25F (%) | Div yield FY26F (%) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Malayan Banking | Buy | 9.70 | 10.90 | 116,925 | 2.7 | 5.6 | 11.3 | 10.7 | 1.21 | 1.17 | 10.9 | 11.1 | 6.4 | 6.6 |
| Hong Leong Bank^ | Buy | 19.36 | 24.30 | 41,967 | 8.9 | 5.1 | 8.6 | 8.2 | 0.94 | 0.87 | 11.3 | 11.1 | 4.4 | 4.9 |
| CIMB | Buy | 6.57 | 8.40 | 70,070 | 1.7 | 4.7 | 8.9 | 8.5 | 0.96 | 0.91 | 11.0 | 11.0 | 6.2 | 6.5 |
| Public Bank | Neutral | 4.26 | 4.75 | 82,690 | 4.3 | 4.4 | 11.1 | 10.6 | 1.37 | 1.30 | 12.7 | 12.5 | 5.4 | 5.7 |
| AMMB^ | Neutral | 5.09 | 5.70 | 16,869 | (2.1) | 3.3 | 8.6 | 8.3 | 0.78 | 0.75 | 9.3 | 9.2 | 6.1 | 6.6 |
| BIMB | Neutral | 2.28 | 2.30 | 4,914 | (5.3) | 9.8 | 9.6 | 8.7 | 0.66 | 0.63 | 7.0 | 7.4 | 6.3 | 6.9 |
| Affin | Neutral | 2.63 | 2.45 | 5,110 | (3.4) | 13.5 | 13.5 | 11.9 | 0.54 | 0.52 | 4.1 | 4.5 | 3.0 | 3.4 |
| MBSB | Neutral | 0.71 | 0.67 | 5,797 | 16.0 | 15.2 | 12.3 | 10.7 | 0.58 | 0.57 | 4.8 | 5.4 | 5.7 | 6.6 |
| Sector Avg | 3.6 | 5.3 | 10.3 | 9.8 | 1.11 | 1.06 | 11.0 | 11.1 | 5.8 | 6.1 |
Note: ^FY25-26F refers to FY26-27F. MY Banks refer only to the banking stocks under our coverage
Figure 4: MY Banks’ 12-month forward P/E
This chart displays the 12-month forward P/E ratio for Malaysian banks from January 2009 to January 2025. The data shows fluctuations around a mean of 11.7x. The current level is approximately 10.2x, which is below the historical mean and close to the -1 standard deviation line.
Figure 5: MY Banks’ 12-month forward P/BV vs ROE
This chart plots the 12-month forward Price-to-Book Value (P/BV) against the Return on Equity (ROE) from January 2009 to January 2025. It shows a general positive correlation between ROE and P/BV. The current forward P/BV is approximately 1.02x, below the mean of 1.29x.
RHB Guide to Investment Ratings
- Buy: Share price may exceed 10% over the next 12 months
- Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
- Neutral: Share price may fall within the range of +/- 10% over the next 12 months
- Take Profit: Target price has been attained. Look to accumulate at lower levels
- Sell: Share price may fall by more than 10% over the next 12 months
- Not Rated: Stock is not within regular research coverage
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