Malaysian banks’ loan loss provisioning to rise in Q2 but will be largely stable

GILs rose in May but declined in June, as corporates likely made repayments.

Malaysian banks’ loan loss provisioning (LLP) is expected to rise in Q2 2025 but should be largely stable year-on-year (YoY), said CGS International.

“We are not overly concerned about our expected quarter-on-quarter increase in LLP as Q2 2025’s LLP would likely be largely stable year-on-year,” the investment house said.

The credit charge-off rate would also likely stay low at circa 15 basis points (bp), significantly below the pre-COVID-19 level of 25bp, it said.

The industry’s gross impaired loans (GILs) ballooned by 2.3% month-on-month in May but declined 1.4% MoM in June 2025. This seemingly erratic movement in GIL during the two months was caused by certain corporate loans getting repayments in June, the investment house said.

Loan growth eased to a 5.1% Yoy growth in June, from a 5.3% growth in May.

“The moderation mainly came from business loan growth, down 5% YoY at end-May 2025 to 4.5% You at end-June,” it noted.

Banks are on track to achieve their projected loan growth of between 4.5%–5.5%, although it could come closer to the lower end of the range, CGS International said.