Kuala lumpur:<Text>

The banking sector is expected to appear steadfast in 2026 driven by sustained credit growth; net interest margin expansion; resilient non-interest income (NOII); and stable national clearing code (NCC), according to AmInvestment Bank Bhd.

According to BERNAMA News Agency, AmInvestment Bank stated in a research note that sector profit is projected to grow 4.9 percent in 2026 compared to 0.9 percent in 2025, with return on equity (ROE) expected to remain strong at 9.5 percent.

The report highlights key events to watch in 2026, including potential delayed impacts from US President Donald Trump's tariff policies, the trajectory of domestic Overnight Policy Rate (OPR) and US Federal Reserve's (Fed) rate, the performance of the ringgit against the US dollar, the political climate ahead of the 16th general election, and the competitive landscape for loans and deposits.

AmInvestment Bank's 2026 base case anticipates Malaysia's e conomy to progress with a gross domestic product (GDP) growth of 4.5 percent, OPR to be steady at 2.75 percent, and a benign competitive environment among banks.

Following a year of slower growth due to global trade uncertainties from Trump's policies, Malaysia's economy is expected to continue its progress in 2026. The economic team forecasts GDP growth of 4.5 percent, supported by resilient private consumption due to favorable labor market conditions, salary growth, sustained government cash assistance, and a civil servant pay hike.

Additional drivers include the implementation of large approved investment projects from 2024-2025 and improving business confidence. Visit Malaysia 2026 is also expected to accelerate momentum in the services sector, contributing to tourism and its multiplier effects, which account for 15 percent of GDP.

The bank anticipates persistent credit demand across household and business segments, boosting banking sector revenue. Sec tor loan growth is forecasted at 5.5 percent for 2026, with a loans-to-GDP growth ratio of 1.2 times, within the historical 10-year range of 0.4-2.1 times.

Bank Negara Malaysia is expected to maintain an accommodative monetary policy, keeping OPR at 2.75 percent in 2026 to support robust economic growth. Headline inflation is projected at a manageable 1.8 percent, with sector NOII expected to grow 2.9 percent and sector NCC to remain stable at 23 basis points in 2026, within the normalized pre-pandemic run-rate of 20-30 basis points.

AmInvestment Bank has upgraded Malaysian banks to 'overweight' from 'neutral,' despite recent strong rallies. The bank sees potential for the sector to re-rate into 2026, supported by an early-stage capital management cycle, undemanding valuations at 0.92 times price-to-book, resilient earnings visibility, and a Fed easing cycle supporting foreign buying and emerging markets rotation.

AmInvestment Bank believes Malaysian finan ciers are at the early stages of a capital management story, with further potential for re-rating into 2026, following a path similar to Singapore, due to well-capitalized balance sheets, durable ROE generation, and undemanding valuations.

Notably, Malaysian banks are still early in this journey, just two months into it, while Singapore peers have seen progress even 10 months post-capital management announcements.