Malaysian bank’s gross impaired loans could rise by 5.6% in FY2025

Hong Leong Bank and Public Bank may be least impacted if GILs rise by 10%-30%.

Malaysian banks’ gross impaired loans (GIL) could rise by 5.6% in FY2025 and 7% in FY2026 on impact of higher tariffs, according to CGS International.

“We believe the higher tariffs imposed by the US on Malaysian exports could reduce business volumes and revenue of Malaysian companies that are reliant on the US market, weakening their debt servicing capabilities and sparking concerns of increased credit risks for Malaysian banks,” the investment house said in a July 2025 report.

CGS International entertained the possibility of GILs rising by 10%–30%, a scenario that could reduce Malaysian banks’ FY2026 net profits by a further 3.2%.

If GILs rise by 10%, the least impacted banks were Hong Leong Bank and Public Bank, with net profits falling by 1% and 1.3%, respectively.

Affin Bank is estimated to be the most impacted, with net profits likely falling by 10.9%, according to CGS International.

If the sector’s GIL rises 30% compared to forecasts, the negative impact on banks’ total FY2026 net profits is 9.6%, CGS International estimated.

The investment house named Hong Leong Bank and Public Bank as its “defensive picks” for investors who are concerned about any increases in credit risks arising from higher US tariffs.

“Based on our analysis, their net profits will only be reduced by 3-4% even if their GILs spike by a massive 30% (unlikely, in our view) versus our forecasts of 6-7% increases in GIL for FY25-26F,” the report said.