PETALING JAYA: There is a rise in gross impaired loans (GIL) across the banking sector early this year, according to the latest banking statistics in February.
But CGS International (CGSI) Research said the increase remained manageable and is cushioned by strong buffers.
The banking industry’s GIL rose by RM1.35bil or 4.2%, in the first two months of 2026 to RM33.6bil, driven mainly by working capital loans – the biggest at 34.9% of total, residential mortgages at 25.2% and personal financing at 18.4%.
This pushed the GIL ratio up to 1.42% as of end-February from 1.37% last December, although still below 1.45% recorded a year earlier.
“We are not overly concerned about the uptick in GIL as this is cushioned by banks’ hefty management overlay,” CGSI Research said, noting provisions of about RM4.33bil seen at the end of last year provided a significant buffer against asset quality deterioration.
The research house estimated that every 10% increase in GIL could reduce the sector’s net profit by around 3%, but noted that existing overlays could absorb up to a 37.8% rise in impaired loans.
It also expected banks to proactively engage borrowers affected by higher inflation, particularly from elevated oil prices, to limit further deterioration in the GIL this year. Loan growth showed modest improvement, supported by the business segment.
Industry loans expanded 4.9% year-on-year (y-o-y) as oft end-February, from 4.7% a month earlier.
The research housel’s full-year projection of loans growth is at 4.5% to 5.5%.
In February, business loans grew 4.6%, while household loans growth eased slightly to 5.5%.
Despite near-term concerns on asset quality, the research house had maintained an “overweight” stance on the sector, citing potential catalysts including write-backs of management overlays, improving net interest margins and higher dividend payouts.
Among its top picks are Malayan Banking Bhd
, RHB Bank Bhd and AMMB Holdings Bhd with add calls on all the three banks.
The research house is positive on AMMB for its commitment to raising dividend payout ratios, while Maybank is expected to see improved returns on equity and better margin discipline.
