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BUSINESS • 08/12/2025 03:46 PM

Lower Loan Provisions Lift Bank Profitability In 3Q 2025 - RAM Ratings

KUALA LUMPUR, Dec 8 (Bernama) -- RAM Rating Services Bhd (RAM Ratings) saw an uptick in profitability of eight selected local banking groups rated by the credit rating agency in the third quarter of 2025 (3Q 2025).

It said the improvement was largely driven by reduced loan loss provisions and to a smaller extent, stronger non-interest income, despite a contraction in net interest margins (NIMs).

Senior vice-president of financial institution ratings Wong Yin Ching said the banking sector’s loan growth gained some momentum in 3Q 2025, though the annualised nine-month 2025 growth of 4.5 per cent remained below the 5.5 per cent expansion for full-year 2024.

“The average NIM of the eight banks narrowed by five basis points (bps) to 1.99 per cent in 3Q 2025 (1Q 2025: 2.04 per cent, 2Q 2025: 2.03 per cent), reflecting the 25-bp overnight policy rate cut in July 2025 and ongoing deposit competition.

“With the seasonal year-end deposit competition heating up, margins will continue to be weighed down in 4Q 2025,” she said in a statement today.

She said loan credit cost ratio trends among the banks in the cohort were mixed in 3Q 2025.

“Although additional overlays were set aside in view of ongoing macroeconomic headwinds, write-backs and reclassification of loan provisions to the securities portfolio for a large corporate borrower more than offset the increase in provisions.

“Overall, the average loan credit cost ratio of the eight banks improved to an annualised 10 bps in 3Q 2025 (1Q 2025: 9 bps; 2Q 2025: 21 bps),” she said.

Meanwhile, she said gross impaired loan ratio inched down to 1.41 per cent as at end-September 2025 (end-December 2024: 1.44 per cent) -- a historical low.

“Direct loan exposures to US tariffs are minimal, and secondary effects from global trade disruptions appear limited at this stage.

“Nevertheless, we remain vigilant about downside risks, as RAM expects export growth to moderate and the effects of US reciprocal tariffs and payback from earlier front-loading activities to begin materialising,” she added.

-- BERNAMA

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