This article first appeared in The Edge Malaysia Weekly on June 22, 2026 - June 28, 2026

MALAYSIA’s two largest banking groups, Malayan Banking Bhd (KL:MAYBANK) and CIMB Group Holdings Bhd (KL:CIMB), have tightened their strategies in Indonesia as economic uncertainty, currency volatility and elevated interest rates weigh on returns.

Both lenders recently said they are sharpening their focus on higher-yielding businesses while pruning less profitable segments amid the republic’s increasingly challenging banking landscape.

CIMB’s Indonesian subsidiary PT Bank CIMB Niaga Tbk — the country’s second largest among private lenders — accounts for roughly a quarter of group profit before tax (PBT), while Maybank’s PT Bank Maybank Indonesia Tbk contributes about 4%.

At the recent Invest Malaysia conference, CIMB officials told investors that while Indonesia remains an important market, the group’s risk stance has turned more selective — it is actively de-risking unsecured lending and small and medium enterprise lending, while doubling down on secured segments such as mortgages and autos.

It is also pivoting towards wealth-related businesses — targeting the mass affluent and affluent segments — in a bid to deepen fee income.

Speaking to The Edge in an April interview, CIMB Niaga CEO Lani Darmawan acknowledged that the bank was preparing for a tougher operating environment as the Middle East conflict clouded the outlook. The plan was to bolster low-cost current account and savings account deposits while shifting greater focus to non-interest income (NOII), especially fee-based income, to offset pressure on margins.

At that point, the bank was of the view that the Indonesian central bank would keep the benchmark interest rate unchanged for the year. However, Bank Indonesia has since hiked interest rates three times, by a total of 100 basis points (bps).

It raised the rate by a surprise 50bps on May 20 — its first hike in two years — 25bps on June 9 and another 25bps last Thursday (June 18) to strengthen the rupiah amid capital outflows and imported inflation as a result of heightened uncertainties, including the Middle East conflict. The rupiah has weakened by about 7% against the US dollar so far this year.

“The impact of the recent Indonesian rate hikes [25bps on June 9 and 50bps on May 20] are expected to have a marginally neutral IDR20 billion to IDR30 billion positive impact on CIMB Niaga’s net interest income once non-retail loans are repriced over a 12-month horizon. Meanwhile, ongoing liability optimisation with interest rate swap will have a positive impact on NOII and feed through to pre-tax profit immediately,” CIMB Securities said in a report last week, highlighting key takeways from corporates at the Invest Malaysia conference.

It should be noted that this was before Indonesia’s latest policy rate hike last Thursday, which also came alongside a 25bps increase in the deposit and lending facility rates.

“Weakness in the Indonesian rupiah (currently trading at about IDR18,000/US dollar) has largely been priced in, while full-scale foreign exchange hedging is deemed uneconomical at the group level. Instead, CIMB will accept translation volatility that may arise, even if it has a marginally negative impact on group return on equity (ROE). Consequently, amid the weaker backdrop, CIMB Niaga’s FY2026 ROE guidance has been lowered to 13% vis-à-vis a higher envisioned level,” CIMB Securities added.

CIMB Niaga had previously guided for a ROE of 12.5% to 13.5% (FY2025: 13%). ROE came in at 12.7% in 1QFY2026.             

Several economists, including from DBS Group Research and Maybank Economics Research, expect Bank Indonesia to deliver another 25bps policy rate hike this year. Higher interest rates could raise banks’ funding costs and could put further pressure on asset quality.

Investors will be watching whether CIMB Niaga and Maybank Indonesia respond by building larger provisioning buffers over the coming quarters.

In 1QFY2026, CIMB Niaga’s net profit stood at IDR1.76 trillion, down 2.2% year on year but higher 9.8% quarter on quarter. Provisions grew 32.9% y-o-y, and 97.4% q-o-q to 

IDR420 billion. The bank’s gross non-performing loan (NPL) ratio deteriorated to 1.88%, from 1.81% three months earlier and 1.85% a year earlier. Its net interest margin (NIM) eased to 3.83%, from 3.88% a quarter earlier and 3.99% a year earlier.

Last year, CIMB Niaga accounted for 22% of CIMB Group’s PBT, the same proportion as in 1QFY2026. In FY2024 and FY2023, it accounted for 25% and 27% of PBT respectively.

When questioned by an investor at the Invest Malaysia conference how any shortfall in CIMB Niaga’s 60% dividend payout ratio would affect the CIMB group’s 55% dividend payout and RM2 billion capital return plan, the latter’s officials assured that the group’s capital return/dividend resilience remains intact, given the availability of other levers to rebalance capital across entities.

Separately, CIMB needs to reduce its  over-90% shareholding in CIMB Niaga to meet a free-float requirement of 12.5% by March 2027 and 15% by March 2028 — a move that could free up capital that could be redeployed into higher-ROE businesses, such as CIMB Singapore, or be returned to shareholders.

Meanwhile, Maybank too says it continues to see Indonesia as a core pillar of its Asean strategy, despite the fact that it is currently the lowest returning market, with 1QFY2026 annualised ROE at just 3.94%. Maybank Indonesia is among the top six banks there in terms of loan and deposits market share as at end-March.

“Current loan contraction reflects deliberate portfolio rebalancing rather than demand weakness. The group is exiting historically underperforming segments — such as commodities and low-margin sovereign-linked lending — in favour of ‘network names’, specifically Malaysian and Singaporean corporates expanding into Indonesia. This shift is aimed at improving returns through multi-product, relationship-based banking,” CIMB Securities said in its “takeaways” report.

“However, Maybank expects the recovery to be gradual, given both macro challenges and recent leadership transition. The group’s repositioning in Indonesia is supported by a clearer differentiation strategy across retail, digital and cross-border capabilities,” the research house added.

It notes that Maybank is expected to launch a new mobile banking platform there, targeted for 1Q2027, aimed at closing capability gaps and driving retail growth.

Maybank Indonesia’s net profit came in at IDR299 billion in 1QFY2026, down 20.5% y-o-y and 55.2% q-o-q. It accounted for just 2.7% of the Maybank group’s PBT. NIM improved marginally to 4.34% in that quarter from the preceding quarter’s 4.33%.

Gross NPL worsened to 2.25%, from 2.17% three months earlier, but was better than the 2.35% a year earlier.  Provisions were up 47.9% y-o-y to IDR123 billion.

As at June 19, there continue to be mostly “buy” calls on both Maybank and CIMB. Bloomberg data shows Maybank having 12 “buy”, seven “hold” and one “sell” call, with the average 12-month target price at RM11.95. CIMB has 16 “buy”, four “hold” and no “sell” calls, with the target price at RM9.04.

Maybank’s share price closed at RM11.18 last Friday, up 6.7% year to date, giving the company a market value of RM135.8 billion. CIMB’s closed at RM7.65, down 7.3% YTD, for a market value of RM83 billion.

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