KUALA LUMPUR (June 9): The first quarter was underwhelming for Corporate Malaysia, prompting Maybank Investment Bank to slash earnings forecasts and caution of a smaller upside ahead for investors.

Even the banking sector disappointed, with five out of eight lenders posting weaker-than-expected results, the research house said in a strategy note. Going forward, banks will likely be hampered by slowing economic growth as well as external uncertainties, Maybank IB said.

“We believe the KLCI still has upside though” the market is expected to be volatile, the house said and cut its KLCI year-end target to 1,660 from 1,700.

Maybank IB is joining other research houses in downgrading their outlook for the KLCI following a weak showing in the first three months of the year. The FBM KLCI has rebounded off the April lows during the global market turmoil but is still down more than 7% year-to-date.

Investors are also cautious ahead of the 24% US reciprocal tariff slated to come into force on July 9 while Malaysia negotiates with the Trump administration to lower sweeping import duties.

Banks, which make up the bulk of the aggregate earnings in the market, have also been downgraded at Maybank IB to "neutral" from "positive" previously. Public Bank Bhd (KL:PBBANK), Hong Leong Bank Bhd (KL:HLBANK) and RHB Bank Bhd (KL:RHBBANK) were among the banks that reported results that came in below estimates.

Together, their cumulative year-on-year loan growth moderated to 4.4% in the first quarter from 5.5% growth at the end of 2024 while net interest margins slipped by an average of two basis points quarter-on-quarter, the house noted.

Overall, Maybank IB lowered its KLCI earnings growth forecast for 2025 to 2.5% from 6.1% after trimming loan growth and net interest margins while raising credit costs.

The house is still positive on domestic-driven sectors — consumer, real estate investment trust, renewable energy and healthcare. “We expect some recovery” in the second half, Maybank IB added.