KUALA LUMPUR (April 4): Malaysian banks could take a hit from the set of sweeping US tariffs if economic activity decelerates and drags on loan growth while disrupting firms’ cash flow, CIMB Securities warned on Friday.

There is also less loan growth potential ahead if approved investments are delayed due to the greater economic uncertainty, CIMB Securities said. For now, export-related loans only made up 2.8% of total loans in Malaysia, according to the research house’s estimates.

“Reduced trade volume may not affect loans directly given the insignificant exports-related loans to the overall system loans,” CIMB Securities said. “However, there may be indirect knock-on effects on loans to vendors and suppliers of exporters, if trade volume falls.”

US President Donald Trump announced in an executive order a 24% tariff on goods imported from Malaysia effective April 9 in a sweeping trade policy hitting all of its trading partners. The rate of tariffs ranges from 10% to 50%.

Malaysia mainly exports electronics, palm oil and machinery to the US, its third-largest trading partner since 2015. Further, Malaysia’s major trading partners such as China and the European Union have all been slapped with steep US tariffs.

Even as exporters are usually cash-rich, a snag in trade could strain cash flows for suppliers and vendors, eventually leading to higher credit costs across the banking sector, CIMB Securities flagged.

Credit costs, the increase in provisions set aside by banks for potential losses from loans turning sour or adverse economic conditions, may rise 22 basis points in 2025 and an additional five basis points following the US tariff measures, the research house said.

“We are likely to review our sector net earnings forecasts to reflect higher economic uncertainty following the reciprocal tariffs announcement,” CIMB Securities added.

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