AMMB HOLDINGS BERHAD 26 AUGUST 2025_EN

LATEST COMPANY ANNOUNCEMENT

AMMB HOLDINGS BHD

Bursa: AMBANK

Q1 FY2026

Associate: Anne Ching

18 August 2025

AmBank Group delivers RM516 million in PATMI for Q1FY26, driven by good revenue growth and NIM improvement

AMMB Holdings Berhad (AMMB, AmBank Group or the Group) announced its results for the financial quarter ended 30 June 2025 (Q1FY26).

Summary of Q1FY26 Results1

• Net income grew 9.5% YoY to RM1,290.7 million, driven by higher Net Interest Income (NII) on the back of strong Net Interest Margin (NIM) expansion and higher Non-Interest Income (NoII)
• NII grew 7.4% YoY to RM924.7 million, lifted by a 12-basis point (bps) expansion in NIM to 2.01%. NoII grew 15.2% YoY to RM366.0 million, driven by higher trading gains in Group Treasury and Markets (GTM) as well as higher fees earned in Business Banking and Wholesale Banking. However, Investment Banking and Wealth Management segments faced challenges amidst cautious investor sentiment, resulting in lower fee income
• Expenses increased 8.3% YoY to RM563.9 million, driven by higher personnel cost. Cost-to-Income (CTI) ratio of 43.7% compared to Q1FY25 of 44.2%
• Profit Before Provisions (PBP) of RM726.8 million was 10.5% higher YoY, driven by positive operating leverage
• Net impairment charges were higher at RM72.4 million, mainly attributable to higher Stage 3 provisions and lower writeback of forward-looking provision YoY
• Profit Before Taxation (PBT) increased 1.4% YoY to RM654.4 million
• Profit After Taxation and Minority Interests (PATMI) improved 3.2% YoY to RM516.2 million
• Annualised Return on Equity (ROE) at 10.0% while Return on Assets (ROA) improved to 1.05%
• Basic Earnings Per Share (EPS) grew 3.4% YoY to 15.64 sen per share and Net Assets per Share (NA) at RM6.23 (FY25: RM6.24)
• Gross loans, advances and financing fell a marginal 0.5% YTD to RM138.2 billion
• Gross impaired loans (GIL) ratio was higher at 1.71%, with loan loss coverage (LLC) ratio (including Regulatory Reserves) of 100.1%
• Customer deposits fell 2.5% YTD to RM138.0 billion. Time deposits grew 0.6% YTD to RM91.1 billion.
• Current account and savings account (CASA) balances fell 8.1% YTD to RM46.9 billion, giving a CASA mix of 34.0%
• Liquidity is healthy and ample as Liquidity coverage ratio (LCR) for all entities were above 160%
• The Group’s Common Equity Tier 1 (CET1) capital ratio stood at 14.90%, with Total Capital Ratio (TCR) at 17.68%. Including Q1FY26 unaudited profits, CET1 strengthened to 15.32%, while TCR increased to 18.10%

AmBank Group Chief Executive Officer, Mr Jamie Ling commented, “We delivered a good set of results in Q1FY26. There was good income growth supported by strong NIM improvement. Capital position strengthened further and liquidity remains ample. Overall, a satisfactory first quarter performance, delivered in more volatile market conditions.”

Financial Highlights

The Group recorded a 9.5% YoY growth in net income of RM1,290.7 million (Q1FY25: RM1,178.5 million), contributed by improvements in both NII and NoII. NII grew 7.4% YoY to RM924.7 million (Q1FY25: RM860.9 million), on the back of a 12-bps NIM expansion to 2.01% (Q1FY25: 1.89%). Loans and financing grew 4.2% YoY, with Business Banking and Wholesale Banking loans growth of 12.2% and 10.0% YoY respectively.

NoII was 15.2% higher YoY to RM366.0 million (Q1FY25: RM317.6 million) largely driven by higher trading gains in securities from GTM as well as higher fee income from Corporate Banking and Business Banking, partially offset a decline in fee income from Investment Banking and Wealth Management.

Overall expenses increased 8.3% YoY to RM563.9 million mainly due to higher personnel costs. However, good income growth resulted in CTI improving to 43.7% (Q1FY25: 44.2%). Accordingly, PBP grew 10.5% YoY to RM726.8 million (Q1FY25: RM657.9 million).

Net impairment charges were higher at RM72.4 million (Q1FY25: RM12.3 million), due to higher Stage 3 provision from Business Banking and lower forward-looking writeback YoY.

The Group’s PATMI improved 3.2% YoY to RM516.2 million (Q1FY25: RM500.2 million), achieving an annualised ROE of 10.0% (Q1FY25: 10.2%) while ROA improved to 1.05% (Q1FY25: 1.02%).

GIL ratio was higher at 1.71% (FY25: 1.54%) with a LLC (including Regulatory Reserves) of 100.1% (FY25: 103.6%).

Total gross loans, advances and financing fell a marginal 0.5% YTD to RM138.2 billion (FY25: RM138.9 billion) mainly due to repayment of Wholesale Banking loans (-RM1.2 billion or -5.7% YTD), partly cushioned by loans growth in Business Banking (+RM0.6 billion or +1.2% YTD). Loans in Retail Banking remained flat YTD.

Total customer deposits fell 2.5% YTD to RM138.0 billion (FY25: RM141.5 billion). Time deposits grew 0.6%YTD to RM91.1 billion (FY25: RM90.5 billion) while CASA decreased 8.1% YTD to RM46.9 billion (FY25: RM51.0 billion), CASA mix of 34.0% (FY25: 36.0%).

The Group’s CET1 remained solid at 14.90% (FY25: 14.82%), with TCR at 17.68% (FY25: 17.49%). If Q1FY26 unaudited profits were included, CET1 would be at 15.32% and TCR at 18.10%.

Divisional performance (Q1FY26 vs Q1FY25)

Retail Banking – PAT of RM11.6 million (Q1FY25: PAT of RM46.6 million)

Profit After Taxation (PAT) declined to RM11.6 million mainly due to lower income coupled with higher operating expenses and higher net impairment charge.

Income fell 7.1% YoY to RM339.0 million (Q1FY25: RM364.9 million) due to a 3.3% YoY decline in NII from margin compression in mortgage and auto financing, along with a 26.9% YoY decline in NoII mainly from

Retail Wealth Management. Operating expenses increased by 4.7% YoY to RM256.8 million (Q1FY25: RM245.4 million) while net impairment charge of RM67.2 million (Q1FY25: RM58.4 million) increased 15.1% YoY due to higher forward-looking provision.

Gross loans, advances and financing fell 1.8% YoY to RM67.3 billion due to decline in auto financing partially offset by growth in mortgages, cards and personal financing. Total deposits increased 4.8% YoY to RM56.8 billion.

Business Banking – PAT of RM196.6 million (Q1FY25: PAT of RM236.3 million)

PAT fell by 16.8% YoY to RM196.6 million mainly due to higher operating expenses and higher net impairment charges.

Income grew 3.4% YoY to RM442.6 million (Q1FY25: RM428.1 million) driven by a 3.1% increase in NII from strong loans growth, as well as a 4.2% growth in NoII from higher fee income and foreign exchange income.

Operating expenses increased 9.2% YoY to RM147.7 million (Q1FY25: RM135.3 million). A net impairment charge of RM36.4 million was recorded (Q1FY25: impairment writeback of RM16.3 million) due to higher ECL Stage 3 provisions.

Gross loans, advances and financing increased 12.2% YoY to RM49.3 billion, while total deposits declined 6.2% YoY to RM37.1 billion.

Wholesale Banking – PAT of RM270.6 million (Q1FY25: PAT of RM162.8 million)

PAT grew 66.2% YoY to RM270.6 million mainly driven by higher income and net impairment writeback.

Income grew 53.7% YoY to RM413.3 million (Q1FY25: RM269.0 million) driven by effective liability management efforts, higher YoY loans growth and higher NoII of RM111.8 million (Q1FY25: RM37.2 million) from trading gain of securities. Operating expenses increased 7.8% YoY to RM92.0 million (Q1FY25: RM85.3 million). Net impairment writeback was higher at RM30.7 million (Q1FY25: RM26.8 million) due to higher recoveries.

Gross loans, advances and financing increased 10.0% YoY to RM19.8 billion, while total deposits increased by 3.7% YoY to RM49.9 billion.

• Corporate and Transaction Banking – PAT of RM80.3 million (Q1FY25: PAT of RM79.3 million)

PAT increased by 1.2% YoY to RM80.3 million mainly attributable to higher income, partially offset by higher operating expenses and lower writeback of net impairment.

Income increased 6.8% YoY to RM138.1 million (Q1FY25: RM129.3 million), mainly driven by a YoY growth of 4.1% and 22.5% in NII and NoII respectively from higher YoY loans growth and fee income.

Operating expenses increased 14.9% YoY to RM56.8 million (Q1FY25: RM49.4 million). Net impairment writeback was lower at RM23.2 million (Q1FY25: RM24.5 million) due to lower forward-looking writeback.

Gross loans, advances and financing increased 10.0% YoY to RM19.8 billion, while total deposits increased 19.5% YoY to RM13.7 billion.

• Group Treasury and Markets – PAT of RM190.3 million (Q1FY25: PAT of RM83.5 million)

PAT was higher at RM190.3 million (Q1FY25: RM83.5 million) mainly due to higher income and higher impairment writeback on financial investments.

Income increased 97.0% YoY to RM275.2 million, primarily due to effective liability management efforts and higher NoII of RM88.1 million (Q1FY25: RM17.8 million) from trading gain of securities.

Investment Banking and Funds Management – PAT of RM19.7 million (Q1FY25: PAT of RM37.1 million)

PAT declined by 46.9% YoY to RM19.7 million mainly attributable to lower income and higher operating expenses, coupled with lower writeback of net impairment.

Income fell 15.1% YoY to RM84.8 million (Q1FY25: RM99.9 million) attributable to lower fee income from Corporate Finance, Equity Capital Markets, Private Banking as well as Stockbroking and Futures. Operating expenses rose 5.4% YoY to RM60.7 million (Q1FY25: RM57.6 million). Writeback of net impairment was lower at RM0.9 million (Q1FY25: RM2.6 million). Funds Management delivered a PAT of RM16.6 million (Q1FY25: RM19.0 million). Average AUM (including Private Banking) grew 2.3% YoY to RM63.6 billion (Q1FY25: RM62.2 billion).

Islamic Banking – PATZ of RM135.5 million (Q1FY25: PATZ of RM137.6 million)

Profit After Taxation and Zakat (PATZ) fell 1.5% YoY to RM135.5 million. Total income expanded 15.1% YoY to RM343.5 million (Q1FY25: RM298.3 million) mainly attributable to a 11.1% YoY growth in Net Financing Income to RM300.9 million. Operating expenses increased 9.4% YoY to RM135.0 million (Q1FY25: RM123.4 million) while net impairment charge was higher at RM31.7 million (Q1FY25: impairment writeback of RM5.4 million) due to higher ECL and forward-looking provisions.

Insurance – PAT of RM32.4 million (Q1FY25: PAT of RM29.4 million)

PAT up 10.3% to RM32.4 million primarily driven by higher investment income and higher net earned premiums, partially offset by higher claims. The results of the Group’s life insurance, family takaful and general insurance businesses were equity accounted to reflect the Group’s effective equity interests in the respective joint ventures and associate.

Others – Loss After Taxation (LAT) of RM14.9 million (Q1FY25: LAT of RM12.1 million)

This segment comprises support functions for the Group's main business units and non-core operations.

Higher LAT mainly due to lower income and higher operating expenses.

Outlook for FY26

Mr Jamie Ling concluded, “We are managing through a period of turbulence and achieved a good start to our new financial year. The OPR reduction will have some impact on NIM in the near term. As our economy adjusts to the 19% tariff imposed on most Malaysian exports to the US, we are confident that economic growth will remain resilient.”

Source: AMMB Media Release

COMPANY PROFILE

AMMB HOLDINGS BHD

KLSE: AMBANK

AMMB Holdings Berhad is a Malaysia-based investment holding company. The Company's business segments include Retail Banking, Business Banking (BB), Wholesale Banking, Investment Banking, Fund Management, and Group Funding and Others. Retail Banking segment offers products and Islamic financial solutions which includes auto finance, wealth management, remittance merchant business solutions and deposits. BB segment is focused on the small and medium sized enterprises, which comprises enterprise banking and commercial banking. Wholesale Banking segment comprises corporate banking, and group treasury and markets. Investment Banking segment provides a range of integrated solutions and services, which include corporate finance and stockbroking services. Fund Management segment manages a range of investment mandates and unit trust funds across the risk-return spectrum for individuals, corporates and institutions, and provides fund distribution support services for institutional distributors.

Home | AmBank Group

Board of Directors

NAME	DESIGNATION
Tan Sri Md Nor bin Md Yusof	Independent Non-Executive Chairman
Soo Kim Wai​	Non-Independent Non-Executive Director
Seow Yoo Lin	Senior Independent Non-Executive Director
Farina Binti Farikhullah Khan​	Independent Non-Executive Director
Hong Kean Yong	Independent Non-Executive Director
Dato' Kong Sooi Lin	Independent Non-Executive Director
Felicity Ann Youl	Independent Non-Executive Director

AMMB Holdings Berhad

Senior Management

NAME	DESIGNATION
Jamie Ling	Group Chief Executive Officer, AmBank Group
Shafiq Abdul Jabbar	Group Chief Financial Officer, AmBank Group
Eqhwan Mokhzanee Muhammad	Chief Executive Officer, AmBank Islamic
Tracy Chen Wee Keng	Chief Executive Officer, AmInvestment Bank
Datuk Jamzidi Khalid	Managing Director, Wholesale Banking
Christopher Yap Huey Wen	Managing Director, Business Banking
Aaron Loo Boon Seng	Managing Director, Retail Banking
Datuk Iswaraan Suppiah	Group Chief Operations Officer, AmBank Group
Wong Eng Teng	Group Chief Fintech & Technology Officer, AmBank Group
Faradina Binti Mohammad Ghouse	Group Chief Compliance Officer, AmBank Group
Jeroen Thijs	Group Chief Risk Officer, AmBank Group
Rohani Binti Mustaffa	Group Chief Human Resource Officer, AmBank Group
Shamsul Bahrom Bin Mohamed Ibrahim	Group Chief Internal Auditor, AmBank Group
Koid Phaik Gunn	Group Company Secretary, AmBank Group
Amanah Aboobucker	Chief Sustainability Officer, AmBank Group

Senior Management

COMPETITORS

ALLIANCE BANK (Bursa: ABMB)

Alliance Bank Malaysia Berhad is a Malaysia-based company, which is principally engaged in all aspects of the banking business and the provision of related financial services. Its segments include Consumer Banking, Business Banking, Financial Markets, Stockbroking and Corporate Advisory, and Others. The Consumer Banking segment provides a wide range of personal banking solutions covering mortgages, term loans, personal loans, hire-purchase facilities, credit cards and wealth management (cash management, investment services, share trading, bancassurance and will writing). The Business Banking segment covers medium-sized enterprises, and corporate and commercial banking. The Financial Markets segment provides foreign exchange, money market, hedging and investment (capital market instruments) solutions for banking customers. Stockbroking and Corporate Advisory covers stockbroking activities and corporate advisory, which includes initial public offering, equity fund-raising, and others.

https://www.alliancebank.com.my/

RHB BANK BHD (Bursa: RHBBANK)

RHB Bank Berhad is engaged in commercial banking and finance related business and the provision of related services. The Company operates through five segments: Group Community Banking, Group Wholesale Banking, Group International Business, Insurance and Support Center and Others. The Group Community Banking segment offers credit facilities (mortgages, non-residential mortgages, hire purchase, purchase of securities, credit cards and other personal loans and financing), remittances, and deposits collection. The Group Wholesale Banking segment, which includes Group Corporate Banking. The Group International Business segment offers commercial banking related products and services in Singapore, Thailand, Brunei, Cambodia, and Lao. The Insurance segment provides general insurance for retail, small-to-medium enterprise, commercial, and corporate customers. The Support Center and Others segment offers nominee, property investment and rental of premises, and other related financial services.

https://www.rhbgroup.com/

PUBLIC BANK BHD (Bursa: PBBANK)

Public Bank Berhad is engaged in commercial banking and provision of related financial services. Its segments include Hire Purchase, Retail Operations, Corporate, Lending, Treasury and Capital Market Operations, Investment Banking, Fund Management, and Others. Hire purchase segment focuses on the provision of passenger vehicle financing to all levels of customers. Retail segment focuses on providing products and services to individual customers and small and medium enterprises. Its products and services include credit facilities (mortgages, trade, and personal loans), credit cards, remittance services, deposit collection and investment products. Corporate Lending segment cater to the funding needs of large corporate customers, which are public listed companies and their related corporations. Treasury and Capital market segment include trading in treasury related products and services. Fund Management segment includes the sale of trust units and the management of unit trust funds.

https://www.publicbankgroup.com/

MALAYAN BANKING BHD (Bursa: MAYBANK)

Malayan Banking Berhad is a Malaysia-based holding company, which is engaged in providing financial products and services. Its segment includes Group Community Financial Service, Group Global Banking, and Group Insurance and Takaful. The Group Community Financial Service segment includes Consumer Banking, which offers products and services offered to individuals, such as savings and fixed deposits; Small, Medium Enterprise (SME) Banking, which offers products and services, such as long-term loans such as project financing, short-term credit such as overdrafts and trade financing; Business Banking, which offers products and services, such as fee-based services such as cash management and custodian services. The Group Global Banking includes Group Corporate Banking and Global Markets, Group Investment Banking (Maybank IB and Maybank Kim Eng), and Group Asset Management. The Group Insurance and Takaful segment comprises underwriting all classes of general and life insurance business.

https://www.maybank.com/

HONG LEONG BANK (Bursa: HLBANK)

Hong Leong Bank Berhad is a regional financial services company. Its segments include Personal Financial Services, Business & Corporate Banking, Global Markets, Overseas/International Operations, and Other operations. Personal Financial Services segment focuses mainly on servicing individual customers and small businesses. Products and services include mortgages, credit cards, hire purchase and others. Business & Corporate Banking focuses on corporate and small medium enterprises. Products and services include trade financing, working capital facilities, other term financing and corporate advisory services. Global Markets refers to its domestic treasury and capital market operations and includes foreign exchange, money market operations as well as capital market securities trading and investments. Overseas/International Operations includes Hong Leong Bank Berhad Overseas Branches, subsidiaries, and associates. Other operations segment includes head office and other business segment.

https://www.hlb.com.my/

BANK ISLAM (Bursa: BIMB)

Bank Islam Malaysia Berhad (the Bank) is a Malaysia-based Islamic Bank. The Bank is principally engaged in the Islamic banking business and the provision of related financial services. The Bank's segments include Consumer Banking, Corporate and Commercial Banking, Shareholders unit and Treasury. The Consumer Banking segment includes financing, deposits and other transactions and balances with retail customers. The Corporate and Commercial Banking segment includes corporate finance activities, financing, deposits and other transactions and balances with corporate customers, commercial customers and small and medium enterprises. The Treasury segment undertakes funding activities through borrowings and investing in liquid assets, such as short-term placements and corporate and government debt securities. The Shareholders unit segment operates shareholders’ funds. The Bank has approximately 135 branches and over 900 self-service terminals across Malaysia.

http://www.bankislam.com.my/

AFFIN BANK (Bursa: AFFIN)

Affin Bank Berhad (the Bank) is the financial holding company. The Bank is engaged in banking and related financial services. The principal activities of the subsidiaries are the Islamic banking business, investment banking and stock-broking, money-broking, property management services, nominee, trustee services and information technology services. The Bank's Commercial Banking segment focuses on the business of banking in all aspects, including Islamic Banking operations. Its Investment Banking segment focuses on the business of a merchant bank, stock-broking and other related financial services. Its insurance segment includes the business of underwriting all classes of general and life insurance businesses in Malaysia. Other segments include the operation of investment holding companies, money-broking, information technology and other related financial services. Its subsidiaries include Affin Islamic Bank Berhad, Affin Holdings Bhd, Affin Hwang Investment Bank Berhad and others.

https://www.affingroup.com/homepage

HONG LEONG FINANCIAL GROUP BHD (Bursa: HLFG)

Hong Leong Financial Group Berhad is a diversified financial company that provides a broad range of financial products and services. It offers an integrated suite of conventional and Islamic financial products and services. The principal activities of the Company are those of investment holding and provision of services to its subsidiaries. The principal activities of the subsidiaries consist of commercial banking business, Islamic banking services, insurance and family takaful business, investment banking, futures and stockbroking and asset management business. Its segments include commercial banking, investment banking and asset management, insurance, and other operations. The commercial banking segment is engaged in commercial banking business. The investment banking and asset management segment is engaged in investment banking, futures and stockbroking, fund, and unit trust management. The insurance segment is engaged in life and general insurance and family takaful business.

http://www.hlfg.com.my/

CIMB GROUP HOLDINGS BERHAD (Bursa: CIMB)

CIMB Group Holdings Berhad is a Malaysia-based company engaged in banking and financial services. The Company's segments include Consumer Banking, Commercial Banking, Wholesale Banking and CIMB Digital Assets & Group Funding. The Consumer Banking segment covers both conventional and Islamic financial products and services such as residential property loans, non-residential property loans, wealth management, bancassurance, remittance and foreign exchange, deposits, and Internet banking services. The Commercial Banking segment provides banking credit facilities, trade financing, cash management, online business banking platform, remittance and foreign exchange, as well as general deposit products. The Wholesale Banking segment comprises investment banking, corporate banking, treasury and markets, transaction banking, equities and private banking. It is present in all 10 ASEAN nations: Malaysia, Indonesia, Singapore, Thailand, Cambodia, Brunei, Vietnam, Myanmar, Laos and Philippines.

https://www.cimb.com/

THE INDUSTRY

BursaMKTPLC: AMMB.KL

Malaysia’s Banking Sector Surges With 5.8% Loan Growth in May 2024

Kenanga Investment Bank (Kenanga) reported today that Malaysia’s banking sector experienced robust growth in May 2024, with system loans increasing by 5.8%, aligning closely with their CY24 projections amidst sustained demand for mortgages and hire purchase accounts. Business loans, particularly from the retail and service sectors, also saw an uptick, likely driven by improved consumer spending and the economic outlook.

The sector anticipates the Overnight Policy Rate (OPR) to remain stable at 3% throughout CY24, reflecting a cautious stance with potential downward pressures. Kenanga maintains an OVERWEIGHT recommendation on banking stocks, bolstered by expectations of continued resilience supported by infrastructure projects and investment initiatives.

Household loans showed resilience, expanding by 6.5% in May 2024, primarily led by residential properties and transport vehicles. In contrast, business loans grew by 4.8%, driven by increased working capital needs, particularly evident in the service industries. Despite a flat month-on-month performance for business loans, sustained growth in household loans underscored ongoing demand for mortgage and home purchase financing.

Loan applications in May 2024 edged up by 3% year-on-year, rebounding from the previous month’s festive season dip. Mortgage applications continued to drive growth, highlighting persistent demand for affordable housing solutions amidst favourable financing conditions.

The Gross Impaired Loan (GIL) ratio remained stable at 1.63%, reflecting a healthy asset quality environment across the banking industry. However, industry loan loss coverage moderated to 90.8%, indicating a measured approach towards managing risks, particularly among SMEs facing inflationary pressures.

Stable growth in deposits was observed, with system deposits increasing by 4.9% year-on-year and 0.45% month-on-month in May 2024. Current Account Savings Account (CASA) balances held steady at 28.5%, supporting liquidity management despite slightly lower interest rates on fixed deposits.

Kenanga reiterates its OVERWEIGHT stance on the banking sector, citing ongoing loan growth, an improved GDP outlook, and enhanced margin retention capabilities amidst macroeconomic challenges. The sector remains attractive, with dividend yields ranging from 6% to 7%, offering stability amid market volatility.

Top picks for Kenanga in the banking sector for 3QCY24 include CIMB, expected to sustain its growth momentum with a robust return on equity (ROE) and attractive dividend yield. RHB is favoured for its leading dividend prospects, projected at 7%–8% among peers, while ABMB stands out as a small-cap favourite due to its strong fundamentals and competitive positioning.

For investors eyeing Malaysia’s banking sector, Kenanga’s outlook underscores a favourable investment climate supported by solid financial metrics and strategic growth prospects.

Source: Malaysia's Banking Sector Surges With 5.8% Loan Growth in May 2024 - BusinessToday

Malaysian banks will deliver resilient operating performance in 2024, says S&P Global Ratings

KUALA LUMPUR: Malaysian banks will overcome external headwinds to deliver a resilient operating performance in 2024 with strong domestic economic conditions expected to support borrowers and limit slippages into non-payment, said S&P Global Ratings today.

Its credit analyst Nikita Anand said asset quality for Malaysian banks would benefit from the country's stable economic conditions and low unemployment rate.

"Banks are writing back provisions on bad loans because the COVID-19 hit wasn't as bad as expected. That will offset strains on margins in other areas -- namely from likely cuts in policy rates later in 2024," she said in a statement today.

S&P Global Ratings said non-performing loans (NPLs) could peak at levels lower than its forecast of 2.0 per cent to 2.5 per cent in 2024.

It noted that in the first three quarters since end-2022, rated banks in Malaysia have seen a manageable 3.0-14.0 basis point (bps) increase in NPLs for domestic loans and these have mainly come from small and mid-sized enterprises and retail borrowers who exited repayment assistance.

Meanwhile, NPLs ticked up more in overseas loans.

"In our view, overseas loans in higher economic risk markets such as Thailand, Cambodia and Vietnam will continue to face asset-quality stress. However, these exposures remain small for Malaysian banks," Nikita said.

S&P Global Ratings said Malaysian banks have contained their asset quality risks and more than adequately provided for potential bad loans.

As a result, credit costs (a gauge of provisions for bad loans) have fallen to a very low average of 20 bps of total loans annualised for the nine months ended Sept 30, 2023, lower than 30 bps for 2022.

The ratings agency expects credit costs to stay low in 2024, declining closer to the pre-pandemic average of about 15 bps, given some large banks still maintain sizable pandemic-related provisions which they could write back in 2024 especially if repayment trends continue to be promising.

"In our opinion, most banks will maintain prudent coverage ratios of 90-100 per cent of NPLs, higher than pre-pandemic levels, for the next three to four quarters at least. An exception to this is RHB Bank.

The bank's provision coverage on NPLs has fallen to 75 per cent, lower than pre-pandemic coverage of about 85 per cent and of other rated Malaysian banks,” said S&P Global Ratings.

Meanwhile, S&P Global Ratings forecast sector loan growth could revive to five to six per cent in 2024 from four to five per cent in 2023, benefiting from lower inflation and a likely rate cut.

On the downside, Malaysian banks are earning less net interest margin (NIM) on their loans and another 3.0-5.0 bps compression in margins is likely in 2024, based on the forecast of a 25-bps rate cut in the second half of 2024.

"Higher credit growth and lower credit costs should more than offset margin pressure. The Malaysian banking sector's profitability, as measured by return on assets, could be sustained at 1.4 per cent over the next year," Nikita said.

S&P Global Ratings said economic and property market disruptions were key downside risks and although not its base case, "higher-for-longer" rates and cost pressures could increase financial strain for leveraged, low-income households and small to mid-size enterprises.

It added that Malaysian banks' asset quality is highly sensitive to any sharp rise in unemployment rates following a large share of household loans, most of which are mortgages, and high household leverage.

S&P Global Ratings said the solid capitalisation of about 15.0 per cent common majority equity Tier-1 ratio as of June 30, 2023, and provisioning buffers of 1.6 per cent of total loans, would help banks to absorb a moderate rise in credit stress. – Bernama

Source: Malaysian banks will deliver resilient operating performance in 2024, says S&P Global Ratings | The Star

Budget 2025: Reactions from the banking industry

Jamie Ling, group CEO, AmBank Group

WITH the total Budget 2025 allocation of RM421bil, a historic high, the budget is a fiscal tightrope of a balance between the short-term demands and long-term fiscal sustainability needed to support economic growth in the coming years.

With the development expenditure continuing to be high at RM86bil next year, this is positive as the government continues to reflate the economy and invest in our future.

Malaysia’s 2025 economic outlook remains favourable, driven by AmBank Group’s projection of 4.6% GDP growth (Budget 2025: 4.5-5.5%) and private consumption growth of 4.9% (Budget 2025: 5.9%).

The economy’s growth momentum is also expected to be supported by ongoing infrastructure projects and increased investments in new technology-related sectors.

The wage growth should also support consumer spending and the cost of living by improving disposal income.

Industrialisation remains a critical pillar of Malaysia’s economic growth and nation-building.

This Budget supports the economy by providing the necessary allocations to increase the economic multiplier to trade and the services sector, including financial services.

Budget 2025 offers a promising outlook for Malaysia’s SMEs, and we particularly laud the continuation of the SJPP initiative and SME loan of RM3.8bil by Bank Negara, which will propel our corporations to a higher level.

We commend the government’s continued emphasis on this sector to nurture future industry champions.

At AmBank Group, we share this commitment, as we, too, are committing more capital to support our SME customers' growth agenda.

Datuk Khairussaleh Ramli, president and group CEO of Maybank, and chairman of The Association of Banks in Malaysia

BUDGET 2025, anchored on three pillars of driving positive economic progress, generating transformative reforms, and ensuring the continued prosperity of the people, aims to address poverty reduction and support better wealth distribution towards a sustainable and inclusive economic growth. This is apt towards strengthening Malaysia’s position as a high performing nation, in line with the holistic Madani Economy framework and other national policies. The banking industry will continue to care for the welfare of the employees especially those in the lower income categories.

The reinforced commitment towards fiscal discipline is commendable by the sustained progress in lowering fiscal deficit to 3.8% next year from 4.3% in 2024 towards the medium term target of 3%.

We also welcome the call for further dialogue on the scoping of Service Tax that will be expanded to commercial businesses including fee based financial services as well as the introduction of Dividend Tax. The banking industry’s priority remains to deliver value to customers by providing reliable and trusted banking services.

Catalytic initiatives on infusing the adoption of Artificial Intelligence (AI) and digital transformation across key sectors is significant for the country and the region. This early realisation on the importance of AI, while ensuring it is applied responsibly through the ASEAN AI Safe framework, would heighten ASEAN’s global competitiveness. On this point, special tax deductions given to higher learning institutions offering courses on AI, digital technology, robotics, and among others is certainly a booster for the nation as it will provide high income jobs in the future.

In addition, with Malaysia assuming the ASEAN Chairmanship this year, Maybank through its presence in all 10 ASEAN countries will actively engage and connect individuals, businesses and governments for concerted growth, especially in the areas of sustainability, transition finance, trade finance, Islamic Finance and wealth management. Maybank looks forward to continuing to play its part in the strategic economic zones as well as industries such as data centre, semi-conductor and emerging new technologies.

The allocation of RM20 million towards National Scam Response Centre (NSRC) and launch of National Fraud Portal is a continued initiative to further mitigate scams. Collective efforts by the banking industry and close collaboration with Bank Negara Malaysia and the enforcement agencies have contributed in blocking suspicious transactions, and we remain focused in ensuring the safety of the public transacting online.

On the sustainability front, the Budget remains steadfast in accelerating the nation’s net-zero aspirations. From a financing point of view, Maybank will provide sustainable and transition finance solutions to address climate resiliency efforts, anchored on values-based financial services. On the move to encourage electric vehicle (EV) ownership, Maybank has already secured 29% market share based on the total number of EV sold in Malaysia as of August 2024.

Meanwhile, RM100 million matching funds provided to encourage new Islamic financing innovation based on Islamic values will further enhance the Islamic finance sector. The prospects of growth is immense, and Maybank will continue to offer responsible and effective financing solutions for individuals and businesses, particularly SMEs via our values-based financial solutions.

Maybank reiterates its commitment to support the realisation of Budget 2025, in serving our customers and stakeholders towards financial inclusion and economic empowerment.

Novan Amirudin, CEO, CIMB Group

We laud the government’s bold move to creatively expand the tax base by introducing carbon and dividend taxes and expanding the scope of SST.

This, alongside the reduction of blanket subsidies, enhanced support for MSMEs, and implementation of strategic blueprints like the NETR, NIMP and JSSEZ will give the government more firepower to spend as needed to boost our economy, pursue shared prosperity and further spur foreign direct investments (FDIs).

Kevin Lam, group managing director and CEO, Hong Leong Bank

WE view Belanjawan 2025 as a positive step towards achieving a sustainable and inclusive economy. We are encouraged by the Government's commitment to balancing economic growth with fiscal responsibility, evident in the continued focus on high-impact projects and ongoing subsidy reforms.

The emphasis on "Raising the Ceiling" through initiatives that promote competitiveness and value-added activities aligns with HLB's focus on supporting businesses and driving innovation in key sectors.

We commend the government for demonstrating policy continuity and follow-through on initiatives from various strategic policies and master plans introduced earlier. This is a testament to their commitment to realizing the visions and aspirations under the MADANI Economy Framework.

While this is another expansionary budget with total allocation topping RM421bil, the highest on record, the government remained mindful of its fiscal responsibility.

This can be seen from various revenue-enhancing initiatives such as broadening taxation (SST, for instance) and spending rationalization, such as ongoing subsidy reforms (targeted subsidy reform for RON95 in mid-2025), and channeling allocations to more productive high-impact and high-spillover projects.

As a result, the fiscal deficit is expected to further narrow to RM80bn or 3.8% of GDP next year, from RM84bn or 4.3% of GDP in 2024, bringing us closer to the 3.5% target outlined in the Medium-Term Fiscal Framework (MTFF) 2025-2027. This is certainly positive for Malaysia's sovereign rating, further supported by continued moderate growth prospects of 4.5-5.5% for 2025, and a manageable inflation outlook at 2.0-3.5%.

HLB supports the various incentives aimed at driving investment and businesses, in line with the Public-Private Partnership (PPP) Master Plan 2030, which includes a PPP financing mechanism, and initiatives to nurture SMEs to become regional champions.

We also applaud the efforts to strengthen the financial ecosystem with a focus on renewables and the green economy. The implementation of new and ongoing infrastructure projects and realization of various approved investments will continue to underpin expansion in private investment and create more job opportunities.

The continuation of cash assistance to targeted segments is a welcome initiative. This, coupled with earlier-announced civil servant pay hikes, is expected to help further alleviate the rising cost of living pressures, aligning with the government's priority of raising the floor by improving the quality of life. This should bode well for consumption and the services sector going forward.

Overall, HLB is confident that Budget 2025 will contribute to the long-term growth and sustainability of the Malaysian economy. We look forward to playing an active role in supporting the government's vision for a more prosperous and inclusive future.

Datuk Mohd Rashid Mohamad, group managing director and CEO, RHB Banking Group

AS we prepare to chair ASEAN, Malaysia is well-positioned to drive economic, social, and environmental resilience. The introduction of special incentives for the Johor-Singapore Special Economic Zone (JS-SEZ) reflects our commitment to enhancing Malaysia’s economic relevance.

This budget champions transformative initiatives while also addressing the impact of subsidy rationalisation on fiscal health.

By streamlining subsidies, the government can redirect funds towards critical areas. Key initiatives such as the National Energy Transition Facilitation Fund, which will allocate over RM300mil in 2025, demonstrate Malaysia’s commitment to a greener future.

The Net Energy Metering (NEM) programme has also been extended to mid-2025, allowing more rooftops to adopt solar photovoltaic (PV) systems, thereby promoting renewable energy adoption.

The Green Technology Financing Scheme (GTFS), with an allocation of RM1bil, and the upcoming carbon tax on the iron, steel, and energy industries, reinforce Malaysia’s sustainability goals and ensure an inclusive transition to a low-carbon economy.

Tax incentives, such as investment tax allowances and income tax exemptions, will also encourage Carbon Capture, Utilisation, and Storage activities.

Furthermore, the budget prioritises social welfare with increased allocations for the Sumbangan Tunai Rahmah (STR) to RM13bil and a minimum wage adjustment to RM1,700, significantly enhancing living standards.

With the allocation of RM40bil as loan facilities and business financing guarantees and allocation of RM50mil Digital Matching Grant can enhance SMEs and MSMEs competitiveness.

Datuk Wan Razly Abdullah, president and group CEO, Affin Bank Bhd

AFFIN Group welcomes the expansionary and prudent budget of RM421 billion that was unveiled in the National Budget 2025, which includes RM335bil for operating expenditure and RM86 billion for development expenditure, aiming towards fostering sustainable and inclusive economic growth.

The fiscal deficit position is targeted to consolidate from 5% of GDP in 2023 to 4.3% of GDP in 2024 and 3.8% of GDP in 2025. We believe the strengthening of fiscal buffers will be significant in the country’s financial resilience to support the economic priorities as well as provide ample fiscal policy space to support economic activity in any situation.

Malaysia’s growth remains influence by global economic uncertainties and volatility in energy and commodity prices, but with strong economic fundamentals and domestic demand-driven growth, the Malaysian economy remains resilient.

The Government expects the country’s underlying real GDP growth to expand at a steady growth of between 4.5-5.5% in 2025, as compared to an estimated 4.8% to 5.3% for 2024.

The National Budget 2025 measures, marking the final year of the Twelfth Malaysia Plan (12MP), also set the groundwork for the development plan of the Thirteenth Malaysia Plan (13MP), which will span from 2026 to 2030.

These measures aim to propel the country into a new era of growth by adopting transformative economic strategies. Notably, the introduction of a strategic investment fund worth RM1 billion seeks to enhance local talent capacity and promote high-value activities within the nation.

SMEs are the backbone of the Malaysian economy, yet they remain the most vulnerable to economic challenges. We fully support the Government’s efforts to drive the growth of micro-SMEs and SMEs through targeted loan and financing facilities.

In the National Budget 2025, the Government provided more than RM40bil on loan facilities, funds and guarantees to provide business assistance and financing to MSMEs.

We are encouraged to see that the strategies and programmes outlined in the National Budget 2025 to support economic growth, facilitating industry transformation and productivity growth to create a conducive business environment.

Ng Wei Wei, CEO, UOB Malaysia

THE National Budget 2025 reflects the Government’s strong commitment to strengthen fiscal reforms, advance growth and improve the well-being of the people. The government’s gradual approach to fiscal consolidation seeks to balance responsibilities while maintaining stable growth drivers. It signifies the Government’s commendable commitment to rebalancing, restructuring, and reforming the economy in a sustainable and inclusive manner.

We welcome the introduction of the New Investment Incentive Framework that marks a strategic shift towards promoting high-value economic activities, particularly in sectors like Electrical and Electronics (E&E) and Artificial Intelligence (AI).

By incentivising education in emerging technologies and strengthening local supply chains through tax benefits for joint ventures between multinational enterprises and local suppliers, the framework aims to create high-paying jobs and foster regional economic development.

Additionally, the emphasis on Environmental, Social, and Governance (ESG) principles through incentives for sustainable practices demonstrates a commitment to balancing economic growth with environmental responsibility.

The introduction of a Carbon Tax on the iron, steel, and energy sectors in Malaysia by 2026 is a strong significant step towards incentivising low-carbon technologies. Aligned with other international ESG regulations such as EU’s Carbon Border Adjustment Mechanism (CBAM), this measure demonstrates the government's firm commitment to decarbonisation.

Overall, this comprehensive budget lays a solid foundation for resilience and growth, and UOB Malaysia is committed to supporting Malaysia in its next phase of development.

Tan Chor Sen, CEO, OCBC Bank (Malaysia) Bhd

THE focus on ensuring the country’s infrastructure development is given top priority, which is a step in the right direction as it paves the way for economic excellence. With the emphasis on ensuring transportation and other infrastructure programmes are implemented smoothly, we believe the country will be moving further along in its quest to becoming a high-income nation.

We are particularly interested to learn that efforts are well underway to make the Johor-Singapore Special Economic Zone (JS-SEZ) a reality and look forward with anticipation to participating in the initiatives that will be rolled out.

We are excited over the to-be-announced special incentives for attracting high quality investments and creating employment that is commensurate with the required expertise for the tasks. We also look forward to the rollout of details pertaining to the Invest Malaysia Facilitation Centre – Johor (IMFC-J) and to undertaking our role as part of the second largest financial services group in the region to help make the ideals become reality. This is because we see the critical role the Johor region plays in economic development for attracting investments from the ASEAN-Greater China region.

The efforts to encourage the use of low carbon technology is yet another of the government's moves in the right direction as we aim to collectively encourage sustainable practices among all Malaysians. In line with OCBC’s aspiration to be Asia’s leading financial services partner for a sustainable future, we welcome the move to introduce carbon tax by the year 2026 which will be channelled to funding research and green technology.

Mak Joon Nien, CEO, Standard Chartered Malaysia

BUILDING on the previous Budget that has laid a strong foundation through fiscal responsibility, this third MADANI Budget strikes a commendable balance between safeguarding the rakyat’s well-being amid the high cost of living environment, uplifting wages and driving economic resiliency.

We are pleased to see Malaysia’s robust economic growth and improved ringgit performance in 2024 have provided flexibility for the country’s highest-ever Budget allocation of RM421bil.

The country’s continued commitment towards reducing fiscal deficit to 3.8% next year is a crucial step towards enhancing economic stability and instilling greater investor confidence. In summary, the five key takeaways are:

• The strength in investment growth in 2024 is likely to persist in 2025. Total public investment is expected to total RM120bil in 2025. This includes the budget allocation of RM86bil towards development expenditure, RM9bil from public-private partnerships and investments from GLICs totalling RM25bil. The strong private sector support is in addition to strong private investment sentiment that saw total investment account for 43% of GDP growth in 1H 2024. Foreign investor interest in Malaysia is also high, with the economy attracting a total of RM30bil in foreign direct investment inflows in H1, particularly as Malaysia gains prominence as a data centre hub in Southeast Asia.
• The continued targeted subsidy rationalisation showcases consistent efforts by the government to enhance spending efficiency, optimise resource allocation to ultimately promote sustainable economic growth. Importantly, it bolsters foreign investor confidence by signalling that the government is committed towards its fiscal consolidation efforts.
• We look forward to the roll-out of a new investment incentive framework in Q3 2025 that will introduce tax incentives and reliefs to multinational enterprises (MNEs) and local suppliers to ensure supply chain resilience. This will undoubtedly attract more investments into Malaysia and encourage more collaborations between local and international companies. One benefit we see is the increased visibility of the electrical and electronics (E&E) sector, further reinforcing Malaysia’s position as a major player on the world stage.
• The provision of special incentives to attract quality investments and create high-value job opportunities in the Johor-Singapore Special Economic Zone (JSSEZ) by the end of this year will give it the extra boost to grow as an advanced SEZ.
• Despite being the backbone of a nation’s economy, equitable access to financial support continues to be a main challenge for SMEs. We are pleased to see continued focus on SMEs with the provision of up to RM40bil in financing facilities and credit guarantees.

Source: Budget 2025: Reactions from the banking industry | The Star

ACQ_REF: CS/18235/20250826/185148/MYS/23/3

ACQ_AUTHOR: Associate/Anne Ching