Key thrusts for banks next year

THE banking sector has transformed significantly this year amid rapid digitalisation, with bankers predicting even more changes in 2026.

Alliance Bank Malaysia Bhd group chief executive officer (CEO) Kellee Kam says three major trends will shape the industry next year.

These are an artificial intelligence or AI-augmented workforce; environmental, social, and governance (ESG) and sustainable finance; and finally, open and embedded banking.

“From trials to real adoption, AI aims to improve employee efficiency, accuracy and productivity,” he says.

Kam believes a “human + AI” partnership will boost productivity and improve customer service.

ESG will also play a prominent role, driven by regulations and customer demand, as lenders adopt sustainable practices in their lending and investing, he adds.

“Open finance is driving a major regulatory shift, with Bank Negara Malaysia’s 2025 exposure draft promoting secure, consent-based data sharing across financial institutions to enhance customer control and enable personalised services.

“This transformation paves the way for new business models for banks, driving innovation and advancing the integration of banking solutions for consumers as well as small and medium enterprises (SMEs) into key ecosystems, enabling seamless customer experiences,” Kam says.

RHB Banking Group group managing director and group CEO Datuk Mohd Rashid Mohamad also highlights several trends that will shape the banking landscape in 2026.

“We project loan growth at 5% to 6%, led primarily by the non-household segment as business confidence continues to improve amid a low-interest-rate environment.

“This will support account growth and wealth management activities, as customers seek better returns,” he says.

Mohd Rashid says lenders are likely to focus more on reducing funding costs through strategic deposit repricing and optimising their liability mix.

“At the same time, capital management has emerged as a key theme under the new Basel guidelines, influencing dividend payouts and growth plans,” he says.

“While there may be isolated upticks in gross impaired loans, overall asset quality is expected to remain healthy, supported by prudent risk management and strong provisioning buffers.”

CIMB Group Holdings Bhd group CEO Novan Amirudin says the lender will continue to support Malaysia and Asean’s long-term growth agenda.

“We continue to scale digital products and services such as CIMB Octo, CIMB Octo Biz and TNG eWallet to enhance economic inclusion and ensure our solutions reach all segments of society,” he says.

With resilient domestic consumption, CIMB expects Malaysia’s gross domestic product to grow at 4.1% in 2026.

Novan also expects the pace and interest rate cuts across the region to taper.

“Loan growth in Malaysia is projected to remain healthy at around 5%, while asset quality is expected to remain strong.”

Healthy trajectory

RHB’s Mohd Rashid says the bank’s outlook for 2026 remains positive, and it continues to maintain an “overweight” stance on the banking sector.

“The fundamentals are strong, supported by a resilient domestic economy and favourable macro conditions,” he adds.

RHB is expecting the banking sector’s profit after tax and minority interests growth to accelerate to +5% year-on-year (y-o-y) in 2026, compared to its 2025 forecast of +2%, driven by steady loan growth, easing pressure on net interest margins, and stable credit cost.

Alliance’s Kam says notwithstanding external headwinds, Malaysia’s economy remains on track for healthy growth, thanks to resilient private consumption which constitutes 60% of the economy.

He says Malaysia is set to benefit from firm domestic demand, underpinned by the robust labour market (increasing labour force, lower unemployment) and strong economic activities.

The upward revision of the minimum wage and civil servant salaries as well as higher financial assistance for the low-income group will also help support domestic demand, he further adds.

Kam notes that the industry’s outstanding loans base grew 5.5% y-o-y in September, which is “commendable”.

“The growth in industry SME loans at 8.1% y-o-y in September and household lending at 5.5% in September – two of our main segments – has been particularly encouraging,” he adds.

Kam reckons asset quality remains sound, with the industry gross impaired loan ratio at 1.41% remaining below pre-pandemic levels.

“While some SME segments show stress, overall fundamentals are steady.

“Banks will continue to benefit from Malaysia’s economic resilience while preparing for structural shifts in technology and sustainability.”

Novan adds that in 2025, CIMB benefited from its diversified portfolio with some businesses outperforming to offset challenges in others.

As with every year, the banking sector is certainly one to watch as it is a key reflection of the state of the economy.

One thing’s for sure, with increased digitalisation and growing compliance expected next year amid intense competition, lenders – both traditional and digital – will face significant challenges.