KUALA LUMPUR: Banks here have not raised fixed deposit (FD) rates as much as expected, although increases in base lending rates (BLR) have been largely in line following Bank Negara Malaysia’s overnight policy rate (OPR) hike by 25 basis points to 2.25% last week.

“Most major banks in Malaysia have announced a revision in their BLR to 5.80%, effective March 9. The 25bps upward revision from a 5.55% level set since end-February 2009 was widely expected.

“Short-term fixed deposit rates were raised by a similar quantum of 20bps to 25bps, but longer-term one-year fixed deposits were raised by smaller than 10bps for some banks — which is a surprise,” AmResearch said in a note yesterday.

According to bankinginfo’s website, as of yesterday, all of the country’s anchor banks have raised their BLR, while FD rates have risen by varying degrees.

Bankinginfo is a one-stop platform for information, tools and tips to help consumers with their banking needs. Its website showed foreign banks here had also revised their BLR, with the exception of Bank of America Malaysia Bhd, Bank of China (M) Bhd, Deutsche Bank (M) Bhd, the Bank of Nova Scotia Bhd and the Royal Bank of Scotland Bhd.

AmResearch said banks which had raised FD rates by 10bps included CIMB Group Holdings Bhd, Public Bank Bhd (PBB) and RHB Capital Bhd.

It added that while it had earlier assumed that 50% of FD would be repriced upwards in a first year of increase, it now sees a higher portion of FD being repriced.

“This will be offset by a lower increase in longer-term one-year FD — in the case of CIMB, PBB and RHBCap,” it said, adding the impact on banks’ bottom lines would be mixed.

It said its earlier assumption had taken into account a lag impact from deposit repricing, given that 60% of industry FDs were short-term with a tenure of up to nine months.

Based on industry statistics, 35.2% of the remaining FD were for tenures between nine and 12 months, while 4.9% exceeded 12 months, it said.

The research house said its other basis for its previous assumption was that FD rates for tenures of between two and 11 months were less “regulated” and unlikely to be repriced upwards as much as one-month and one-year FD.

“Based on our sensitivity analysis, assuming all FD are repriced immediately, we estimate downgrades to net earnings of 2% for Hong Leong Bank Bhd (HLBB) and RHBCap, 1% for Malayan Banking Bhd and 6% for EON Capital Bhd.

“Banks which will see positive impact are Alliance Financial Group Bhd (2%), CIMB (2%) and PBB (0.1%). This is, of course, based on a conservative scenario, assuming no lag impact at all,” AmResearch said.

Meanwhile, it also said it had not detected any changes in savings or current account rates, although it has assumed an increase of between 10bps and 20bps in current rates, in line with its overall assumption of a 50bps rise in interest rates this year.

It added the bottom-line impact of this would be positive, if the adjustment eventually came in lower than expected.

The research house has maintained its overweight stance on the banking sector, expecting marginally higher costs of FD to be neutralised by a lower rise in current and savings account rates, or a lower rise in FD rates in subsequent rate hikes.

Its top pick is RHBCap while it also favours AFG, CIMB and HLBB.

Meanwhile, OCBC Bank (M) Bhd announced yesterday it was increasing its BLR and base financing rate to 5.80% effective today, while its mortgage lending rate, the alternative to using BLR for home loans, would rise to 4.65% per annum.

“On the same day, customers will also be able to enjoy increases in deposit rates as high as 30bps for deposit placements of three to 11 months and over 12 months,” the bank said.

OCBC director and CEO Jeffrey Chew said the upward revision of the OPR clearly signalled that the economy’s growth momentum was firmly established, a good sign for the banking industry and commerce.


This article appeared in The Edge Financial Daily, March 11, 2010.