Malaysian banks expect little to no direct fallout from Middle East tensions, though they remain watchful of how oil price movements could influence the central bank’s overnight policy rate (OPR), according to CGS International (CGSI).
CGSI analyst Winson Ng noted that every 25-basis-point cut in the OPR could reduce banks’ net profits by about 1.6%, largely because loan rates tend to adjust downward faster than fixed deposit (FD) rates.
The estimated impact varies across lenders, ranging from a 1.2% decline for Maybank to a 5.3% drop for Bank Islam, he added.
Higher oil prices could also push up raw material and operating costs for businesses, potentially weakening their ability to service debt and leading to an increase in banks’ gross impaired loans.
However, Ng highlighted that Malaysian banks are well buffered by substantial management overlays, estimated at MYR4.33 billion as of end-December 2025. This buffer could absorb up to a 37.8% rise in gross impaired loans.
Overall, he said bank earnings are expected to remain largely resilient despite potential pressures from elevated oil prices.
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