Banks increase BLR to 6.6%

Malayan Banking Bhd (Maybank) and RHB Bank Bhd, together with their Islamic banking arms, became the first banks to raise base lending and financing rates as well as deposit rates following the overnight policy rate (OPR) hike by Bank Negara last Thursday.

The central bank revised upwards the OPR by 25 basis points to 3% while the statutory reserve requirement (SRR) was increased 100 basis points to 3%.

In separate press releases yesterday evening, Maybank and RHB said they were revising their lending and deposit rates from today.

Both banking groups are raising their base lending rates (BLR) and base financing rates (BFR) by 30 basis points to 6.60% respectively.

These rates would affect lending rates of property, automobile and hire-purchase loans among others.

Maybank said deposit rates would be revised upwards by up to 30 basis points while RHB said new fixed deposit rates for one to two months tenure was now raised to 3.05% from 2.75% previously.

Maybank said the last revision to the bank's BLR and BFR was on July 13 last year when they were revised to 6.30% from 6.05%.

According to analysts, adjustments to these rates would be announced over the next few days as this was usually the case after the central bank increased the OPR.

The BLR and BFR hikes are in line with their expectations.

“I think the banks will increase the BLR (and BFR) by 30 to 31 basis points to take into account the higher SRR since they'll have to compensate for the amount they have to deposit interest-free with Bank Negara,” an analyst with a local brokerage said.

Early last month, CIMB Bank Bhd and CIMB Islamic Bank Bhd reversed a decision to raise BLR and BFR by 5 basis points after Bank Negara increased the SRR by 100 basis points to 2% effective April 1 following a March meeting of policymakers.

Meanwhile, analysts felt that there would be minimal impact from the move to mop up excess liquidity in the local banking system by increasing the SRR as the hike has been factored into their forecasts for bank earnings this year.

CIMB Investment Bank Bhd analyst Winson Ng said in a report dated May 6 that the OPR and SRR increases would be neutral for banks.

He said every 100-point hike in the SRR, although lowering banks' net earnings by 0.8%, would be offset by the 0.8% to 0.9% lift from the OPR (as BLR increases always precede deposit rate increases).

“For the full year, we are anticipating a 50 basis point rise in OPR and 300 basis point increase in SRR,” Ng said.

He added that the big banks including Public Bank Bhd were more conservative in upping their fixed deposit (FD) rates after the total 75 basis points worth of OPR hikes last year.

These banks raised their FD rates by an average 66 basis points to 67 basis points last year while AmBank (M) Bhd raised its FD rates by only an average of 70 basis points due to a high proportion of fixed rate loans at 565.

“At the other end of the spectrum, RHB Bank and Alliance Bank were the most aggressive, raising their FD rates by an average of 84 basis points as they're backed by their high floating-rate loans,” Ng said.

He said this showed last year's rate hikes were basically neutral for most banks except for Public Bank and two other banks which were more conservative in pricing their deposits.

“We expect a repeat of this trend this year, that is, the rate hikes will be neutral for most banks and Public Bank will be the biggest beneficiary again given its disciplined pricing strategies,” Ng said. - By Fintan Ng (The Star)