Fitch optimistic about Malaysian banks’ outlook

Fitch Ratings has projected a positive outlook for Malaysian banks over the next 18 months, highlighting a favourable operating environment.

The rating agency forecasts GDP growth of 4.4 per cent to 4.5 per cent in both 2024 and 2025, which is expected to sustain credit demand and support banks’ revenue generation.

Fitch anticipates a gradual recovery in banks’ net interest margins over the coming quarters as funding conditions improve.

Additionally, market-related income is projected to remain high, benefiting from continued market volatility. These factors should offset increased operating costs and preserve profitability.

While the banking system’s operating environment score currently aligns with the sovereign rating of BBB+/Stable, Fitch indicates that an upgrade for banks is unlikely without a corresponding upgrade in the sovereign rating.

This constraint on banks’ Viability Ratings, which ultimately influence their Issuer Default Ratings, stems from their predominantly domestic operations.

Attribution: Fitch Ratings report

Subediting: M. S. Salama