KUALA LUMPUR (Feb 9): Malaysian banks’ plan to dish out higher dividends could stretch their capital position even as internal generation will outpace asset growth, Moody’s warned on Monday.
Capitalisation could decline in some cases where banks choose to further optimise capital structure, the ratings agency said in a report on Malaysia’s banking system outlook, noting increasing dividend payout ratios in the last two years at some banks.
“Capitalisation could be stretched in some cases where banks choose to pay high dividends,” Moody’s flagged.
Malaysian 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.
For now, Malaysian banks will remain “well capitalised, supported by internal capital generation that will be much higher than asset growth” as the sector generates 10%-11% return on equity, Moody’s said.
System-wide common equity tier 1 capital ratio — a measure of a bank’s capital strength based on the highest quality of regulatory capital — was broadly steady at 14.7% at the end of June 2025, a level generally considered high by analysts.
The ratings agency flagged high risks from global uncertainties due to heightened geopolitical tensions and the full impact of higher tariffs on global growth.
There are also “pockets of small businesses” that will face repayment challenges due to domestic cost pressures, including labour and fierce competition, as well as external trade weakness, Moody’s said.
Firms facing repayment challenges appear largely confined to wholesale and retail trade, as well as construction, the agency noted.