PETALING JAYA: January’s banking data points to a firmer footing in the sector that started 2026 with leading indicators pointing to sustained underlying demand and a likely pickup in momentum, says RHB Research.
While system loan growth moderated slightly to 4.7% year-on-year in January from 4.8% in December, the more forward-looking signals remained encouraging, an analyst told StarBiz.
According to RHB Research, January loan leading indicators remained healthy, with loan applications rising 6% year-on-year and approvals surging 27%.
The research house pointed out that household applications and approvals were up by 16% and 14% year-on-year (y-o-y), with loan applications for purchase of passenger cars and residential properties up 19% and 18% while approvals for such loans rose 14% and 13%.
Meanwhile, non-household loan applications slipped 4% y-o-y, but the approval pipeline jumped 42% y-o-y.
“Possibly, this is a case of delayed drawdowns of pipelines built up last year, which is a matter of timing and should translate to stronger loan growth down the road.
“Hence, we are keeping our expectations for system loan growth to pick up pace to 5% to 5.5% in 2026,” RHB Research added.
BIMB Research similarly noted that household loans remained firm, supported by stronger demand for securities purchases, vehicles and credit cards.
By contrast, non-household lending softened amid slower activity in sectors such as manufacturing, agriculture and business services.
“We project system loan growth of 5% to 6% in 2026 or roughly one to 1.2 times gross domestic product expansion,” it said.
On the funding side, deposits remained the key laggard, growing 2.8% year-on-year in January .
However, the quality of funding improved. Current Account and Savings Account (Casa) balances expanded by 8%, lifting the system Casa ratio to about 32% and 31.4% on BIMB Research’s measure.
This shift toward cheaper funding is positive for margins, particularly as interest spreads edged higher to 2.59% in January .
“Inflation remained manageable (headline at 1.6% and core at 2.3%) with unemployment remaining stable.
“Our economics team maintains its view that the overnight policy rate will hold at 2.75% throughout 2026,” BIMB Research pointed out.
Asset quality remained broadly stable despite a slight uptick in impaired loans.
The gross impaired loan ratio held at 1.4%, with only marginal increases across both household and non-household segments.
Meanwhile, capital buffers remained robust, with Common Equity Tier 1 ratios around the mid-14% range and total capital at 18.1%.
Taken together, the data paints a picture of a banking system transitioning from a slow start toward a potentially stronger trajectory.
The analyst believed that loan growth could have begun the year below expectations but the improvement in applications and approvals suggested latent demand was building.
“Combined with stable credit quality, resilient capital positions and improving funding mix, the sector appears well-positioned to deliver moderate earnings growth and maintain attractive dividend yields in 2026,” he said.
