RAM RATINGS PROJECTS MALAYSIAN LOAN GROWTH OF 4.0-5.0 PCT IN 2026

KUALA LUMPUR, March 6 (Bernama) -- RAM Rating Services Bhd (RAM Ratings) projects Malaysia’s system loan growth to come in at 4.0 per cent to 5.0 per cent in 2026, broadly in line with its gross domestic product (GDP) growth projection of 4.0 per cent to 5.0 per cent. 

It said the GDP estimate was underpinned by domestic demand, driven by favourable labour market conditions, increased tourist arrivals, and an accommodative interest rate environment.

“Nevertheless, escalating Middle East geopolitical tensions and persistent global trade uncertainties have amplified downside risks and could weigh on economic activity and sentiment.

“However, it is still premature to assess the full impact of these risks,” it said in a statement today. 

RAM Ratings said asset quality remains a key anchor of the banking system’s resilience.

“Gross impaired loan ratio fell further to a historical low of 1.37 per cent as at end-December 2025 and is expected to stay intact in 2026,” it said.

Average net interest margins (NIMs) contracted to 2.03 per cent in 2025 from 2024’s 2.06 per cent, owing to the 25 basis points overnight policy rate cut in July last year, as well as intense deposit and loan competition, it said. 

“But, NIMs are anticipated to see a mild expansion in 2026 given the full-year impact of deposit repricing,” it said.

For 2025, RAM Ratings noted that Malaysian banks delivered steady earnings, with several banks increasing dividend payouts as strong capital buffers built up during the pandemic were returned to shareholders.

It said that strong asset quality and easing credit costs supported profitability, even as NIMs narrowed slightly following a policy rate cut and intense funding competition.

“The average pre-tax return on assets and return on equity of eight selected local banks inched higher to 1.42 per cent and 14.3 per cent, respectively,” it said, adding that the eight banks were Affin Bank Bhd, Alliance Bank Malaysia Bhd, AMMB Holdings Bhd, CIMB Group Holdings Bhd, Hong Leong Bank Bhd, Malayan Banking Bhd, Public Bank Bhd and RHB Bank Bhd.

RAM Ratings senior vice-president of financial institution ratings Wong Yin Ching said excess capital accumulated during the COVID-19 pandemic allowed several banks to progressively increase dividends while maintaining healthy capital positions.

“System capital ratios moderated but remain comfortably above regulatory requirements and closer to pre-pandemic norms,” said Wong.

-- BERNAMA