Property Hunter Magazine August Issue 2014 | Page 56
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Contributor
/// Banking and Investment News
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BANKING &
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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)
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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