Property Hunter Magazine August Issue 2014 | Page 56

52  53 | Contributor /// Banking and Investment News $₤ € BANKING & $ INVESTMENT NEWS The banking and investment industry has a crucial role to play when it comes to property. Read about the most recent news and trends in this trade Hike to Benefit Banks but Competition Will Affect NIM to 3.25 per cent at its upcoming Monetary Policy Committee meeting on Thursday. “With the exception of AMMB and Affin (with a larger share of fixed rate loans), most banks should benefit in a rising rate environment. “An interest hike will be positive for most banks as the variable rate and BLR-based loans tend to be re-priced within a week of a hike, while deposit rates take longer to adjust, due to various maturity profiles,” it added in a note Tuesday. The research firm anticipates Bank Negara Malaysia raising the OPR by 25 basis points (bps) 56 www.PropertyHunter.com.my Nevertheless, it said, the banking system’s loan loss coverage ratio remains robust at above 100 per cent and able to buffer an NPL uptick. “Meanwhile, banks with a larger current and savings account ratio base (low-cost funds) would be in a stronger position to manage the rising cost of funds,” it said. A hike in the Overnight Policy Rate (OPR) will provide a short-term benefit for banks as lending rates can re-price immediately, but competition will continue to pressure the net interest margin (NIM), said Alliance DBS Research House. larger hike could create risks of a higher NPL and provisions. The research firm said its top picks are Public Bank, Hong Leong Bank and RHB Capital. AllianceDBS said based on its sensitivity analysis, every 10 bps hike in the NIM would raise the sector’s earnings by six per cent. The research house said banks have to balance between expanding the NIM and keeping nonperforming loans (NPL) intact as interest rate hikes can lead to higher NPL and provisions. In 2010, it added, the 75 bps hike triggered an uptick in the NPL, and provisions or credit costs crept up. However, AllianceDBS opined that a 25 bps hike should be manageable and not affect borrowers’ ability to service higher interest costs, but a Meanwhile, banks with a larger current and savings account ratio base (low-cost funds) would be in a stronger position to manage the rising cost of funds