RPO hike unlikely to dampen loan growth, but some degree of near-term volatility expected, research firms say | Money


Bank Negara raised the key overnight rate to 2.0% yesterday. — Photo by Yusof Mat Isa

KUALA LUMPUR, May 12 – The 25 basis points (bps) earlier than expected increase in the key overnight rate (OPR) to 2.0% was seen by research firms as having no impact on the growth of bank loans, although short term volatility is expected.

MIDF Research maintained its positive call on the banking sector, as dividends and bank profits should benefit from the increase in the net interest margin (NIM).

“We do not expect a noticeable decline in loan growth in the immediate future given the still strong leading indicators (March 2022 loan application growth: 4.6% YoY increase, 47% increase .8% m/m) and the strong trend of recovery in consumer and business demand,” he said in a research note.

The MIDF said earnings and dividend offers from banking players should benefit from higher NIMs.

“Any potential negative impact on loan and Cash Savings Account (CASA) demand growth is expected to be minimal. credit costs in 2022, potential credit repossessions in 2023 and stronger loan demand,” he added.

The Kenanga Investment Bank is maintaining its overnight appeal to the banking sector as tighter monetary policy is likely to head off the inflationary consequences of recent commodity price volatility and supply chain disruptions.

“Having said that, this is definitely a boon for financial institutions as they will be able to set higher rates and increase their profits. We don’t believe the hike would disrupt the local economy at this time. , as industry asset quality still looks manageable after the moratorium,” he said in a research note today.

Meanwhile, AmInvestment Bhd maintains its overweight position on the banking sector and remains positive on the sector due to the uptrend cycle in interest rates which would benefit banks in terms of interest income, as well as the margin of potential resumption of management overlays in the future.

“We also expect a further 25 basis point rate hike, bringing the OPR to 2.25% at 2H2022, from 2.0% currently,” he said.

On the other hand, Public Investment Bank Bhd said that notwithstanding short-term volatilities, the start of the rate normalization cycle and the gradual economic recovery will lead to improved asset quality, loan growth and expansion of margins, all these medium-term benefits for the sector. .

“While we maintain our neutral view on the sector, it continues to have a positive bias, given its lagging valuations relative to the broader market,” he said. — Bernama


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