KUALA LUMPUR (March 24): Malaysian banks’ outlook is still intact amid the ongoing Middle East crisis, CGS International said and advised investors to start buying their shares now.

Banking stocks under coverage see little to no direct impact while the indirect negative impact on banks would come from elevated oil prices, which could affect Bank Negara Malaysia’s decision to cut the overnight policy rate and banks’ asset quality, the research house said in a sector note.

“We believe banks’ earnings would be largely defensive against any negative impact from elevated oil prices,” CGS International said and kept its ‘overweight’ call. “We advise investors to accumulate banking stocks now.”

Malaysian banking stocks have largely retreated from their peaks in 2026 since the outbreak of the Iran war this month, tracking global market movements. CIMB Group Holdings Bhd (KL:CIMB) lost more than 11% from its high while Hong Leong Bank Bhd (KL:HLBANK) declined 10%.

Oil prices have swung wildly but remained elevated near US$100 (RM394.50) per barrel as the conflict shows no signs of abating despite reports of a pause and peace talks emerging over the weekend.

A 25-basis-point reduction in the benchmark interest rate would lower banks’ net profit by an average 1.6%, with the negative effect ranging from 1.2% for Malayan Banking Bhd (KL:MAYBANK) and 5.3% for Bank Islam Malaysia Bhd (KL:BIMB), according to CGS International’s analysis.

Meanwhile, every 10% increase in banks’ gross impaired loans — bad debts as a proportion of overall loans — would trim the sector’s net profit by 3%, the research house said, noting that the impact would range between 1% for Hong Leong Bank and 9.9% for Affin Bank Bhd (KL:AFFIN).

Overall, the impact would be a minimal, “low-single-digit-rate” impact to banks’ net profits, the research house said while highlighting the sector’s attractive 2026 dividend yield of 5.5%.