Maybank faces critical FY26 second-half test to prove ROE weakness is cyclical

Malayan Banking Bhd, also known as Maybank, is set to face a critical test in the second half of 2026 (2H26) as it tries to prove that its lower return on equity (ROE) in the first half was merely a cyclical issue rather than a structural problem, according to CIMB Securities Sdn Bhd. Maybank's ROE was 11.6 percent in the first half of 2026 (1H26), which fell short of its 11.8 percent target, even though the core net profit rebounded in the second quarter.

For Maybank to regain confidence in its medium-term ROE goal of 13 to 14 percent under its ROAR30 strategy, execution in 2H26 will be vital. The bank's main focus areas include defending the net interest margin (NIM) at the upper end of its 2.05 to 2.10 percent guidance through growth in current and savings accounts, funding mix optimization, and selective asset repricing.

Additionally, Maybank must maintain a disciplined balance between margins and asset growth, limit asset quality deterioration, especially in Malaysian retail, auto, and small and medium enterprise exposures, and keep credit costs around 20 basis points with loan loss coverage above 100 percent. The bank also aims to keep its cost-to-income ratio around 49 percent despite increased investments in technology and artificial intelligence.

To achieve these objectives, Maybank will need to optimize its capital and risk-weighted assets following the Etiqa-Maybank Ageas Holdings Bhd transaction, including dividend upstreaming and careful use of its dividend reinvestment plan. Hong Leong Investment Bank Bhd (HLIB) anticipates Maybank's NIM will continue to face pressure in 2H26 due to increased deposit competition and higher funding costs in Malaysia, as well as unfavorable asset-liability repricing in Singapore and Indonesia.

Moreover, additional funding requirements for the Etiqa-Maybank Ageas acquisition might exacerbate the pressure. However, stronger loan growth could somewhat offset these challenges. HLIB expects Maybank's NIM to reach 2.08 to 2.10 percent, as per its unchanged FY26 guidance of 2.05 to 2.10 percent. Despite the Etiqa-Maybank Ageas acquisition, HLIB expects Maybank's dividend prospects to remain robust, driven by sustainable capital generation and potential higher dividend upstreaming from key subsidiaries, including Maybank Ageas after the acquisition. HLIB maintains a Hold recommendation on Maybank with a target price of RM11.10.