Malaysian bank asset quality holds but bad loans seen rising to 1.5%

The acceptance rate for repayment assistance remains low, said CGSI.

Malaysian banks’ asset quality remains resilient against effects of the Middle East conflict, according to CGS International (CGSI), although gross impaired loans (GIL) are likely to rise for the whole year.

“In view of the elevated oil price, we do not totally discount the possibility of a deterioration in banks’ asset quality in 2026F and hence, we project a slightly higher GIL ratio of between 1.4% and 1.5% at end-2026F,” said CGSI analyst Wilson Ng.

A few banks have offered repayment assistance to most of their borrowers, Ng noted, based on analyst conference calls in May.

“On a positive note, the acceptance rate for this is still low (below 10%), according to these banks, reflecting most businesses’ still healthy financial positions that should enable them to weather the elevated oil prices,” Ng said.

The banking industry’s loan growth improved to 5.6% in April 2026, expanding from the 5.4% at end-March, as both business loans and household loans widened during the month.

Loan growth is expected to remain strong in the May-June period.

Bank Negara Malaysia (BNM) announced an approximately $1.3b (MYR5b) stabilisation relief facility for small and medium enterprises (SME SRF) last 28 April 2026.