Malaysian banks are expected to deliver loan growth of about 4.5–5.5% in 2026, with analysts characterising the coming year as one of steady but unspectacular expansion following post‑pandemic normalisation. A note from CGS International cited by Asian Banking & Finance projects system loans to grow in the mid‑single‑digit range, driven primarily by household mortgages, auto financing and SME lending, while large corporate demand stays more selective. The brokerage argues that loan pipelines remain healthy thanks to infrastructure projects and ongoing recovery in consumer spending, even as Bank Negara Malaysia keeps policy rates on hold for now and markets start to price potential easing. It added that the 2025 slowdown in approvals has already reset expectations, making 2026 a year of “stabilisation” rather than acceleration.
Net interest margins, however, are likely to stay under pressure as funding costs remain elevated and competition for retail deposits persists. Banks have already repriced deposits upward over the past 18–24 months, and any future policy rate cuts would typically be passed through faster on loan yields than on liability costs, squeezing spreads. That said, analysts see room for non‑interest income to partially offset margin headwinds, particularly via fees from wealth management, bancassurance and transaction banking. Sector asset quality is expected to remain broadly resilient, with credit costs normalising from unusually low levels but still below historical averages, helped by tight underwriting and the absence of widespread distress after pandemic relief measures rolled off. Within the sector, larger banks such as Maybank, CIMB and Public Bank are seen as better placed to navigate the environment due to diversified income streams, scale advantages in technology and funding, and strong capital buffers. Smaller and mid‑tier lenders may feel the squeeze more acutely, especially those with higher reliance on price‑sensitive deposits or concentrated SME books. CGS International’s base case assumes no systemic deterioration in asset quality but flags that household leverage and pockets of SME weakness remain key watchpoints if growth disappoints or external shocks hit exports. Overall, the brokerage maintains a broadly neutral view on Malaysian banks, suggesting that investors will focus less on rapid loan expansion and more on capital management, dividends and evidence that margins and credit costs are settling into a predictable new range.
