KUALA LUMPUR: Malaysian banks could face pressure on their third-quarter earnings from global bond market volatility and potential mark-to-market losses, although strong fundamentals should help cushion the impact.
CIMB Securities Sdn Bhd said a global bond sell-off had created a more challenging operating environment for banks in the third quarter of this year.
Despite this, the research firm maintained its "Overweight" rating on the Malaysian banking sector, citing banks' ability to weather the uncertainty.
"Defensive earnings, resilient asset quality, and ample capital, liquidity, and loan loss buffers should help cushion the impact of near-term market volatility," it said in a note.
CIMB Securities named Public Bank Bhd, RHB Bank Bhd and Hong Leong Bank Bhd as its top picks, maintaining "Buy" calls on all three.
It set target prices of RM5.35 for Public Bank, RM9.00 for RHB Bank and RM26.40 for Hong Leong Bank.
For Public Bank, the research firm highlighted its RM3.5 billion capital return plan, which it expects to support shareholder returns and sustain dividend yields above six per cent between 2026 and 2028.
The plan is also expected to lift the bank's return on equity by 0.7 percentage points.
For RHB Bank, CIMB Securities sees potential for further gains through capital management initiatives, with the bank developing a comprehensive framework ahead of its transition to Basel 3.1 capital requirements.
Meanwhile, Hong Leong Bank's growth prospects are supported by improvements in digital capabilities, above-industry loan growth and strategic partnerships.
CIMB Securities projected dividend yields of 6.46 per cent for Public Bank, 6.90 per cent for RHB Bank and 5.19 per cent for Hong Leong Bank in 2026.
By 2028, the yields are projected at 6.42 per cent, 7.65 per cent and 5.57 per cent respectively.
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