KUALA LUMPUR (Dec 31): Malaysia’s banks are set to deliver higher dividends from healthy earnings growth and strong capital position in 2026, TA Securities said.

Capital buffers in the sector remain comfortably above the regulatory minimum, the research house said in keeping its 'overweight' sector call on Wednesday. Earnings growth of stocks under coverage are expected to accelerate to 5.3% in 2026 amid efforts to protect profits, the house noted.

“Despite macroeconomic headwinds, most banks appear well-positioned to sustain dividend policies and shareholder commitments into 2026,” TA Securities said.

The house has “buy” calls on all eight banks under coverage — largely in line with the consensus.

Several banks have announced their plans to step up capital distributions at a time of strong capital positions. CIMB Group Holdings Bhd (KL:CIMB), the country’s second-largest bank, plans to return up to RM2 billion to shareholders over the next two years.

Smaller rival Public Bank Bhd (KL:PBBANK) is preparing to raise its dividend payout ratio guidance to 60% for 2025, while AMMB Holdings Bhd (KL:AMBANK) seeks to double payouts within five years.

The industry’s common equity Tier 1 capital ratio — a measure of a bank’s capital strength based on the highest quality of regulatory capital — stood at 14.1% as of October, a level generally considered high by analysts.

Industry loans growth is expected to remain steady at 5.7% next year, driven by expansion in consumer loans and business lending, with the small-and-medium enterprises segment continuing to outperform, according to TA Securities’ forecasts.

Net interest margins, a measure of profitability from interest charged on loans after deducing returns paid on deposits, could stabilise in 2026 as banks focus on liability management and lower-cost deposit growth, the research house said.