RAM Ratings: Banks saw higher earnings in 2024

Published on 07 Mar 2025.

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Malaysian banks registered stronger profit performances in 2024 on the back of more robust non-interest income, lighter provisions and sound loan growth, even as the average net interest margin (NIM) was marginally lower. The average pre-tax return on assets and return on equity of eight selected local banks improved to 1.40% and 14.0%, respectively (2023: 1.36% and 13.6%). Banks will likely see moderate profit growth this year, underpinned by steady loan expansion and still-benign loan provisioning expenses.

“The eight banks’ NIM on average recorded a mild contraction of 2 bps for the year, falling to 2.06%, although the NIM performance of individual banks varied. To safeguard margins, banks have actively managed funding costs by reducing expensive deposits. Margins are envisaged to stay largely stable this year, in line with our view that the overnight policy rate will remain unchanged,” said Wong Yin Ching, RAM Ratings’ Co-head of Financial Institution Ratings.

Domestic loans grew by a healthy 5.5% in 2024 (2023: 5.3%). Household loans led credit growth at 6.0%, outpacing business loans (4.8%). The bulk of household lending was driven by residential mortgages (6.9%) and passenger vehicle financing (8.5%), which together accounted for 80% of household loans. We project loan growth in 2025 to hold steady at around 5.5%. 

RAM forecasts GDP to expand 4.0%-5.0% this year (2024: 5.1%), which will continue to support credit growth. Albeit lower, economic growth remains underpinned by domestic demand, given favourable labour market conditions and accommodative interest rates. Both public and private investments are also expected to drive growth amid the ongoing rollout of multi-year infrastructure projects and increased realisation of approved investments. That said, risks to loan growth have tilted to the downside this year. Subsidy rationalisation and adjustments coupled with elevated global headwinds and geopolitical tensions may dampen consumer and business sentiments. 

The banking system’s gross impaired loan (GIL) ratio eased to a historical low of 1.44% as at end-December 2024 (end-December 2023: 1.65%). Ample reserves set aside over the last few years allowed the average credit cost ratio of the eight banks to continue to improve, coming in at 18 bps (2023: 23 bps). The average GIL coverage ratio (with regulatory reserves) of 143% is still noticeably higher than the pre-pandemic level of 107%. RAM expects the asset quality of banks to stay intact in 2025.

The eight selected banks in our roundup are AFFIN Bank Berhad, Alliance Bank Malaysia Berhad, AMMB Holdings Berhad, CIMB Group Holdings Berhad, Hong Leong Bank Berhad, Malayan Banking Berhad, Public Bank Berhad and RHB Bank Berhad.

RAM’s Banking Quarterly Roundup 4Q 2024 can be downloaded at www.ram.com.my.

 

Analytical contact
Wong Yin Ching, CFA
(603) 3385 2555
yinching@ram.com.my

Media contact
Sakinah Arifin 
(603) 3385 2500 
sakinah@ram.com.my

 

About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 

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