Malaysian banks face 1.6% net profit decline per 25bp OPR cut: report

OPR cuts could mean a profitability decline of -1.2% for Maybank and -5.3% for Bank Islam.

Malaysian banks do not expect or see negligible direct impact from tensions in the Middle East, although they are cautious about how oil prices will affect the central bank’s overnight policy rate (OPR), according to CGS International (CGSI).

“We estimate that every 25-basis point (bp) cut in OPR would lower banks’ net profit by 1.6%, mainly due to faster downward repricing of loans compared to the repricing of fixed deposits (FDs),” said CGSI analyst Winson Ng.

The impact ranges from -1.2% for Maybank and -5.3% for Bank Islam, Ng said.

The rise in oil prices would jack up raw material prices and even operating costs for certain companies. This in turn could potentially dent their capacity to repay their debts, and in theory can lead to higher gross impaired loans for banks.

However, Ng said that Malaysian banks can be cushioned thanks to their hefty management overlay, estimated at MYR4.33b at end-December 2025. This would be adequate to cover up to 37.8% increase in gross-impaired loans, Ng said.

“We believe banks’ earnings would be largely defensive against any negative impact from elevated oil prices,” Ng said.