TA Research remains “overweight” on the domestic banking sector.
PETALING JAYA: Banks are exiting the year 2025 the way they began it – steady, cautious and quietly strong.
Lenders are expected to chart loan growth of 5.7% this year as credit demand steadies across both households and businesses, according to TA Research.
This is marginally faster than the 5.5% growth rate seen in 2024.
TA Research remains “overweight” on the domestic banking sector, anchored by resilient asset quality, capacity to support credit flows and decent earnings visibility.
The research house projects consumer loans to climb 6.3% in 2025, while business lending expands 4.9%, signalling renewed corporate appetite for expansion and investment.
In 2024, household loans also led credit growth at 6%, outpacing business loans (4.8%). This year, up until September, the domestic banking sector’s total loans grew by 3.4%.
This was underpinned by a 3.8% and 2.7% year-to-date increase in consumer and business loans, respectively.
The month of September, specifically, saw the sector’s total loans expand stronger by 5.5% year-on-year (y-o-y) and 0.5% month-on-month (m-o-m).
TA Research pointed out that business loans grew at a stronger pace in September by 5.5% y-o-y and 0.7% m-o-m.
By purpose, working capital loans grew by a modest 3.8% y-o-y.
By sector, loan contractions persisted y-o-y in several segments led by education, health and others (minus 10.3%), followed by construction (minus 5.8%), agriculture, forestry and fishing (minus 4.7%), mining and quarrying (minus 3.7%) and transportation and storage (minus 0.2%).
Nevertheless, momentum remained healthy across most other sectors.
“Capital market activities remained robust in September 2025, with net funds raised by the private sector through new shares and debt securities issuance amounting to RM124.4bil (excluding redemptions),” stated TA Research in a note to clients.
“Of this, funds raised via new issues of shares or warrants stood at RM4.36bil and the new issues of debt securities grew to RM120.1bil.”
As for household loans, the segment has been more cautious, with growth easing to 5.5% y-o-y in September as compared to 6.3% a year earlier.
On a m-o-m basis, September loans grew by 0.3%. Despite the growth moderation, TA Research said overall household loans continue to be anchored by residential mortgages, which make up around 63% of total household loans.
It is worth noting that the pace for residential mortgages has also eased, rising by 6.1% y-o-y in September 2025 versus 7.4% in September 2024.
Meanwhile, the purchase of non-residential properties rose by 4.1% versus 3.9% a year ago.
Elsewhere, momentum also softened across most key subsegments, such as hire purchase and advances taken for personal uses.
Loans for the purchase of securities contracted further, falling 0.9% y-o-y, reflecting continued caution amid subdued market sentiment.
Meanwhile, credit card receivables rose by 8.6% y-o-y, up from 8.3% a year ago.
The research house also noted that impaired loans declined in September by 3.7%, with household and business impaired loans down 1.8% y-o-y and 6.1% y-o-y.
“Overall asset quality remains stable, as the net impaired loans ratio stood at 1.4%, an improvement from 1.5% a year ago.”
Deposit growth has accelerated, with total deposits (excluding repo) rising 5.2% y-o-y and 0.7% m-o-m in September 2025.
