RHB Research has maintained its Neutral stance on Malaysia’s banking sector, citing pressure on net interest margins, rising bond yields, a gradual increase in gross impaired loans and thinner provisioning buffers despite resilient loan growth.
The research house said system loans expanded 5.7% year-on-year and 0.4% month-on-month in August 2026, bringing annualised year-to-date growth to 5.6%, slightly ahead of its full-year forecast of between 5% and 5.5%.
Non-household lending led the increase, rising 6.8% year-on-year, supported by transport and communications loans, which jumped 21%, utilities at 20%, and education and health at 14%.
Household loans grew 5.0% year-on-year, driven mainly by residential mortgages and auto financing, both of which expanded 5%.
RHB said lending indicators remained healthy, with loan applications up 13.8% year-on-year, approvals rising 19.3% and disbursements increasing 10.2% in August.
For the first eight months of the year, loan applications, approvals and disbursements rose 8.5%, 14.0% and 6.5% respectively, pointing to a healthy pipeline for near-term drawdowns.
System deposits increased 5.2% year-on-year in August, with current and savings account deposits rising 8%, ahead of 4% growth in fixed and other deposits.
The system CASA ratio improved to 32.5%, from 31.4% a year earlier.
However, the loan-to-deposit ratio rose to 89.8%, from 88.8% in July and 89.4% a year ago, while the liquidity coverage ratio eased to 145.9%.
RHB said margin pressure could intensify as lending growth continues to outpace deposit growth, while higher capital-market rates are expected to push up wholesale deposit costs and eventually spill over into retail funding rates.
The research house also flagged the potential impact of higher bond yields on trading income and mark-to-market valuations.
Total gross impaired loans rose 6.1% year-on-year and 1.2% month-on-month, lifting the system GIL ratio slightly to 1.44%, from 1.43% previously.
The increase was driven by wholesale and retail trade, households, transport and communications, and primary agriculture.
Within the household segment, the GIL ratio increased to 1.11%, with auto and personal financing showing notable deterioration.
At the same time, system loan-loss coverage remained broadly stable month-on-month at 81.4%, but was lower than 89.9% a year earlier.
RHB said capital positions remained comfortable, with the CET-1 ratio at 14.1% and the total capital ratio at 17.8%.
The research house maintained AMMB Holdings, Malayan Banking and Hong Leong Bank as its preferred banking names, while retaining a cautious sector view in the absence of strong near-term catalysts.
