Malaysian Banks’ Profitability Eases In 1Q 2026 -- RAM Ratings
KUALA LUMPUR, June 15 (Bernama) -- Malaysian banks’ first quarter 2026 (1Q 2026) financial performance softened slightly, weighed down by higher provisions even as loan growth gathered pace, said RAM Rating Services Bhd.
In a statement today, the rating agency said that the average pre-tax return on assets and return on equity of eight selected local banks moderated to an annualised 1.33 per cent and 13.5 per cent, respectively (1Q 2025: 1.38 per cent and 14.1 per cent).
“Banks’ earnings growth could still face some pressure in 2026, as geopolitical risks may linger despite recent positive developments in the West Asia military conflict,” it said.
RAM Ratings said that the banking system’s loan growth picked up to 5.4 per cent year-on-year (y-o-y) as at end-March 2026 (2025: 4.8 per cent), underpinned by stronger demand for business financing, while household credit moderated.
“RAM projects overall loan growth to come in at between 4.0 per cent and 5.0 per cent for full-year 2026, depending on developments in West Asia and their second-order effects on domestic macroeconomic conditions,” it said.
It said that net interest margins (NIMs) remained stable y-o-y in 1Q 2026, with eight selected local banks recording an average NIM of 2.04 per cent (1Q 2025: 2.04 per cent).
“Margins had compressed in the second half of 2025 following a 25-basis point overnight policy rate (OPR) cut in July, but have since ticked up as most deposits have repriced lower.
“At this juncture, RAM expects the OPR to remain stable for the rest of the year,” it said.
On the asset quality front, RAM Ratings said that the system’s gross impaired loan ratio remained low at 1.40 per cent as at end-March 2026 (end-December 2025: 1.37 per cent; end-December 2024: 1.44 per cent), supported by banks’ proactive credit management.
“The eight banks’ average credit cost ratio rose to 19 basis points (bps) (1Q 2025: 9 bps), largely reflecting the absence of a sizeable overlay reversal by one bank seen in the previous corresponding period and additional overlays set aside by several banks during the quarter.
“For full year 2026, credit costs are anticipated to come in higher y-o-y at around 15 bps (2025: 11 bps) but remain manageable,” it said.
RAM Ratings said that despite macroeconomic headwinds, banks’ balance sheets remained resilient.
“The system’s capitalisation stayed robust, with a common equity tier-1 capital ratio of 14.2 per cent as at end-March 2026, providing ample loss absorption buffers.
“Deposit growth improved to 4.8 per cent y-o-y (2025: 4.5 per cent), driven by banks’ continued focus on current and savings account balances to safeguard margins,” it added.
-- BERNAMA