Banks, most of which turned in better-than-expected financial results in the April-to-June quarter, are likely to pay higher dividends next year on growing excess capital, analysts say.
This is provided that bad loans, which were stable as at July, continue to remain at manageable levels.
The net non-performing loan (NPL) ratio for banks had improved to 2.1 per cent in July from 2.2 per cent in the previous month.
"Healthy asset quality combined with growing excess capital implies there could be plenty of room for capital management.
"We believe that if the NPL situation remains benign by the fourth quarter of 2009, regulators will ease up on capital restrictions which would have positive implications for dividends, particularly for return-on-equity (ROE)-conscious banks such as Bumiputra Commerce, Public Bank and Alliance Bank," said Danny Goh, an analyst at Credit Suisse.
HwangDBS Vickers Research, in a recent report, also highlighted that "possible capital repayment and/or higher dividend payouts could be a feature" among banks going foward, given that they are generally well-capitalised.
Banks like Malayan Banking, Public Bank and RHB Bank had earlier this year moved to boost their capital to prepare for a potential rise in bad loans in the face of a global recession. The moves were largely precautionary.
"Contrary to expectations, however, we are still not seeing widespread increases in delinquencies in the current recessionary environment. It's growing increasingly evident that the delinquency situation has been well contained," ECMLibra Investment Research noted in a report.
Malaysian banks' Tier 1 capital ratio, a measure of their ability to absorb potential write-downs and defaults, now ranges from 8.7 per cent to 12.7 per cent.
This is well above the required regulatory minimum of 4 per cent and also ahead of a typical "optimal" ratio of 8 per cent.
Two developments next year could potentially further boost the capital ratios of the banks.
The first is the implementation of a new financial reporting standard, FRS 139, which Goh said would likely further enhance the capital ratios for most banks.
The other is a move by some banks such as Malayan Banking and CIMB Bank to adopt advanced approaches of Basel II, which would be "neutral to positive" to capital, a banking analyst from a foreign brokerage said.
Valentino Rossi has increased his lead in the 2009 MotoGP championship by winning Sunday's San Marino Grand Prix. Rossi dominated the race finishing ahead of team-mate Jorgen Lorenzo and Repsol Honda rider Dani Pedrosa. 
