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AMRO: Brunei banks' NPL ratio eased to 1.6% as offshore lending drove credit growth

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Key points

Implications for lenders

For lenders in Brunei, an NPL/NPF ratio of 1.6% and a loan-to-deposit ratio of 52.8% suggest that funding is not the binding constraint; demand and reach are. Because only 65.7% of people hold a bank account and policy rate cuts have barely reached retail pricing, products that combine onboarding, financial education and transparent pricing may find room, while fraud controls deserve attention given the cyber risks AMRO highlights.

Implications

ExecutivesDomestic retail and MSME lending in Brunei remains a small, slow-moving book; growth plans should not rely on headline credit growth that is mostly offshore.
InvestorsLow NPLs and strong capital point to a sound system, but returns depend more on offshore assets than on domestic consumer credit.
OperatorsWith a large unbanked share and a literacy-first policy stance, onboarding and financial-education features may matter as much as credit pricing.

Facts

The ASEAN+3 Macroeconomic Research Office (AMRO) published its 2026 Annual Consultation Report on Brunei Darussalam on 8 October 2026. It reports that the banking sector's gross non-performing loan and financing (NPL/NPF) ratio fell to 1.6% in Q1 2026, down from 1.7% in Q4 2025. 1 The aggregate capital adequacy ratio was 21.0%, against a 10% regulatory minimum. 2 The loan-to-deposit ratio rose to 52.8%, driven by more cross-border lending by domestic institutions. 3

Overall credit grew 11.3% year on year in Q1 2026, with offshore lending accounting for about four-fifths of that growth. 4 5 Household lending picked up slightly in Q1 2026 after a decline in 2025 driven by a modest fall in personal loans; corporate lending kept rising, mainly through cross-border lending to telecommunications and IT. About about 55% of total banking assets were domiciled offshore. 6

Brunei Darussalam Central Bank (BDCB) cut its standing facility rates twice in 2025; the lending facility rate has stood at 1.50% since November 2025 (cut from 3.00% in November 2025; unchanged since). 7 AMRO says pass-through to retail deposit and lending rates has been limited. On inclusion, it notes that 65.7% of the population holds a bank account, against internet penetration of 95%. 8 BDCB told AMRO that financial literacy is its current priority, and AMRO supports digital financial inclusion plans while calling for more work on interoperability and data security (source: AMRO).

Analysis

Over time, asset quality is edging better: the NPL/NPF ratio stood at 1.6% in Q1 2026, down from 1.7% in Q4 2025. Across markets, that is close to Hong Kong's gross classified loan ratio of 1.82% in Q2 2026, though the two measures are compiled differently. The more telling point is where Brunei's credit is going: headline growth of 11.3% mostly reflects lending abroad, while household credit only stabilised after personal loans shrank in 2025. With a loan-to-deposit ratio of 52.8% and limited rate pass-through, banks have ample funding but are not competing hard on price for domestic retail borrowers.

Counterpoints and uncertainties

The report's statistical appendix is not fully consistent with its main text: it gives a lower capital adequacy ratio without stating a period and says credit growth declined slightly in Q1 2026. The bank-account figure carries no survey year. AMRO also flags valuation risk on offshore assets and cyber threats, including AI-enabled fraud, as the largest risk reported by financial institutions, either of which could change the asset-quality picture.

Key figures

  1. Banking sector gross NPL/NPF ratio (AMRO, citing BDCB data): 1.6% (down from 1.7% in Q4 2025). Gross non-performing loans and financing / total loans and financing, banking sector (AMRO from BDCB data). Brunei banking sector (conventional and Islamic). Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  2. Banking sector capital adequacy ratio (AMRO): 21.0% (against a 10% regulatory minimum)
    The report's statistical appendix gives the aggregate ratio as 'about 19.5 percent' without stating a period; the main text gives 21.0% for Q1 2026.
    . Aggregate capital adequacy ratio of the banking sector (AMRO from BDCB data). Brunei banking sector. Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  3. Banking sector loan-to-deposit ratio (AMRO): 52.8% (up on the previous quarter, driven by cross-border lending). Loans / deposits, banking sector (AMRO from BDCB data). Brunei banking sector. Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  4. Share of Q1 2026 credit growth from offshore lending (AMRO): about four-fifths
    AMRO describes the share in words ('about four-fifths'); the value field holds 80 for sorting only.
    . Share of year-on-year banking credit growth attributable to offshore bank lending, as described by AMRO. Brunei banking sector. Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  5. Banking sector credit growth, year on year (AMRO): 11.3%
    AMRO attributes about four-fifths of the growth to offshore lending. The statistical appendix describes credit growth as having 'declined slightly' in Q1 2026, which the main text does not reconcile.
    . Year-on-year growth of total banking sector credit (AMRO from BDCB data). Brunei banking sector, domestic and offshore lending. Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  6. Share of banking assets domiciled offshore (AMRO): about 55%
    Of offshore assets, AMRO says about half are US dollar-denominated and 45% Singapore dollar-denominated.
    . Share of total banking assets domiciled offshore (AMRO). Brunei banking sector. Basis date: 31 Mar 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  7. BDCB standing facility lending rate: 1.50% (cut from 3.00% in November 2025; unchanged since)
    The deposit facility rate was cut to 0.50% at the same time. AMRO says pass-through to retail deposit and lending rates has been limited.
    . BDCB standing facility lending rate (AMRO, citing BDCB). Brunei money market. Basis date: 30 Nov 2025. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)
  8. Share of population holding a bank account (cited by AMRO): 65.7% (against internet penetration of 95%)
    The report does not state the survey year behind this figure; the basis date is the report date.
    . Share of the population holding a bank account, as cited in AMRO's 2026 consultation report. Brunei population. Basis date: 8 Oct 2026. Source: AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)

Sources

  1. AMRO: Annual Consultation Report on Brunei Darussalam 2026 (ACR/26-09, October 2026)primary
  2. AMRO: AMRO's 2026 Annual Consultation Report on Brunei Darussalam (2026-10-08)primary
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Reports are for information only and are not investment advice.

A Japanese version of this article is available: 日本語版

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