"Accordingly, there is unlikely to be a strain on the borrowers' cashflow and repayment ability. Furthermore, our members will ensure that they continue to work closely with their customers to address all their financing needs."
Bank Negara Malaysia raised the benchmark interest rate by 25 basis points to 2.25 per cent on Thursday. Banks have yet to raise the BLR following that, but it is understood that they are finalising the matter.
Chuah said lenders are committed to do their part to ensure that viable borrowers will continue to have access to financial products and services to carry out and grow their businesses in everyone's interests. "Banks will also be offering more competitive rates to depositors," she said.
The OPR remains low if compared to the level prior to the reduction of the OPR to its historic low in early 2009 as a key stimulus in the face of a severe global economic downturn, ABM said.
It emphasised that the increase will not impede access to financing, or affect the industry's lending activities.
"As the Malaysian economy strengthens further, we are of the view that spending by households and businesses are likely to grow. This is supported by the stability of the labour market and increased confidence among consumers and businesses," said Chuah.
|Written by Kenanga Investment Bank research|
|Friday, 05 March 2010 10:48|
It said on Friday, March 5 the impact of the rate hike on the banks depends on the inter-bank rates; base lending Rates + variable-rate loans, fixed-rate loans and sector risk.
It said Malaysian banks have more assets sensitive balance sheet, going forward earning is skewing toward the upside. Net interest margins (NIMs) are likely to expand as asset yields re-price faster than cost of fund.
The immediate impact of OPR hike is inter-bank rate. The research house said it sees possibility of interbank rates increase by 25bps from March onward. We believe Hong Leong Bank with the lowest loan to deposit ratio of 53% is the biggest beneficiary on this front.
"Besides inter-bank rates, we believe BLRs should increase in tandem with OPR by 25 bps to re-price the current BLR-based loans. Rate hike would increase average lending rates. Banks with higher portions of variable-rate loans should fare comparatively better. Among the banks, Hong Leong Bank (81% of total), Public Bank (73%) and Maybank (73%) have the highest portion of variable-rate loans," it said.
Kenanga research said fixed-rate loans such as hire purchase may not re-price for five to seven years. AMMB (57% of total) and EON (43%) are biggest losers with the highest portion of fixed-rate loan. Government-linked banks, namely Maybank and CIMB, fare comparatively better than consumer banks, owing to larger low-cost deposit bases and variable-rate loan portfolios.
It noted that the duration of investment and dealing securities, namely bonds, is difficult to determine from the limited disclosures. Banks under its coverage suggests that their respective managements have been anticipating a rate hike and would position themselves accordingly. However, it expects investment banks, that is CIMB and AMMB would face substantial mark-to-market losss pressure.
On the overall, Kenanga Research believed the rate hike would have positive impacts to the banks’ earning.