Coverage: Q2 2026 · Information to 25 September 2026
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Published: 25 September 2026 | Region: Asia-Pacific | Country: Malaysia | Coverage: Q2 2026 (April–June 2026) | Classification: Premium Intelligence
Desk view — Malaysia, Q2 2026
- Bank Negara Malaysia (BNM) held the Overnight Policy Rate at 2.75% on 7 May and 9 July 2026, and again on 3 September. The only move in the cycle so far was the 25 basis-point cut of 9 July 2025.
- Real GDP growth strengthened to 6.0% year on year in Q2 2026, up from 5.4% in Q1. BNM now indicates full-year growth of around 5%.
- Business loan growth accelerated to 7.2% in June 2026 (Q1: 5.7%), offsetting slower household and SME lending.
- Asset quality is stable. The gross impaired loans ratio was 1.43% in June 2026 and loan-loss coverage, including regulatory reserves, was 124.6%.
- Capital headroom narrowed. The system CET1 ratio eased to 13.9% from 14.7% a year earlier, as risk-weighted assets grew 4.7% while CET1 capital was broadly flat. The revised standardised approach for credit risk took effect on 1 July 2026.
Executive summary
Malaysia’s banking system went through the second quarter of 2026 with resilient earnings at the large listed groups, clean asset quality and ample liquidity. The one clear change was on the capital line. Real GDP growth reached 6.0% year on year in Q2, helped by exports of electrical and electronics products linked to artificial-intelligence demand, the continued roll-out of data centres and steady household spending. With headline inflation at 1.9% in the quarter and core inflation also at 1.9%, BNM saw no case to change a policy rate it regards as appropriate for both price stability and growth.
The lending mix shifted towards corporates. Business loans grew 7.2% year on year in June, from 5.7% in March. Household loan growth eased to 5.3% and SME lending slowed to 4.2%. Overall outstanding loans grew 6.0%, and credit to the private non-financial sector, including corporate bonds, grew 6.4%. System deposits reached RM2.63 trillion at the end of June, up 5.6% on a year earlier.
Asset quality is not a concern for now: the gross impaired loans ratio was 1.43% and the net ratio 0.96%. The more important signal is capital. The industry CET1 ratio fell from 14.7% in June 2025 to 13.9% in June 2026, and the total capital ratio from 18.2% to 17.4%. Risk-weighted assets grew faster than retained capital, while the large banking groups kept dividend payouts high. The ratios remain comfortably above regulatory minima. Still, the trend matters now that the revised standardised approach for credit risk has taken effect and as lenders price the next leg of corporate and data-centre financing.