Malaysia’s banking system recorded a 5.7% year-on-year expansion in loans in May 2026, marking the fourth consecutive month of growth. This upward trajectory was largely propelled by corporate borrowing, with business loan growth reaching a record 7% year-on-year, primarily fueled by a 38.1% surge in utility sector financing. Concurrently, consumer borrowing remained steady, with household loan growth holding flat at 5.5% year-on-year, matching the performance recorded in April.
Despite the strong credit expansion, the industry also saw asset quality deteriorate, as gross impaired loans (GIL) increased by 2.5% month-on-month, translating to an rise of MYR843.3 million. CGS International (CGSI) attributed this uptick predominantly to pressures within residential mortgages and working capital loans, noting that sustained high oil prices have increased operating expenses for businesses. While CGSI anticipates that asset quality will continue to soften across the country throughout 2026, analysts noted that financial institutions remain well-protected against non-performing loan shocks. This resilience is supported by a substantial MYR4.29 billion management overlay buffer alongside a $1.3 billion Bank Negara Malaysia liquidity support package designed to mitigate fallout from geopolitical tensions in the Middle East.
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