HLBANK: Robust Loan Growth Underpins Positive Outlook for Malaysian Banking Sector
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The Malaysian banking sector has maintained its positive momentum, with analysts reaffirming an “Overweight” rating for the sector, citing robust loan growth and stable asset quality. The sector saw an acceleration in annualised loan growth in September 2025, driven by both household and non-household segments.
Performance Review
System loan growth demonstrated a healthy rebound, annualising at 5.5% year-on-year in September 2025, an improvement from 5.1% in June 2025. This expansion was broad-based, with both household and non-household loans contributing equally with 5.5% YoY growth. Household loan expansion was notably spurred by increased demand for the purchase of securities, transport vehicles, and consumer durables, alongside robust personal use lending. Non-household growth was particularly strong in manufacturing, electricity, gas & water, and finance, insurance & business activities. Loan applications and approvals also showed healthy increases across both segments for the Jan-Sep 2025 period, indicating sustained demand.
Deposit growth mirrored this positive trend, with system deposits growing 4.0% year-on-year. The Current Account Savings Account (CASA) ratio saw an uptick to 32.1%, reflecting improved liquidity. Net Interest Margin (NIM) remained stable at 2.34%, indicating resilience in the sector’s core profitability.
Asset Quality and Capitalisation
The sector’s asset quality remained benign, with the Gross Impaired Loan (GIL) ratio easing slightly to 1.41% in September 2025. Both household (1.06%) and non-household (1.94%) GIL ratios remained well-managed. While system loan loss coverage (LLC) saw a marginal dip to 89.0%, it remains at a comfortable level. Capitalisation levels remain healthy, with the CET-1 ratio at 14.2% and total capital ratio at 17.9%, despite slight quarter-on-quarter adjustments.
Future Outlook
Analysts anticipate continued robust loan disbursements, supported by a healthy pipeline of approved loans. System loan growth is projected to remain steady at 5.5% for the full year 2025. While some modest NIM compression is expected, the overall outlook for the sector remains positive, underpinned by sustainable loan demand and stable asset quality. The GIL ratio is expected to remain largely stable.
