AmBank: Overnight policy rate likely to stay at 3%

PETALING JAYA: Banking group AMMB Holdings Bhd (AmBank) is forecasting the overnight policy rate to stay at 3%, with a normalised rate in the range of about 3.50%.

The sixth-largest bank based on asset size has indicated the possibility of two rate hikes next year.

AmBank Group chief executive officer Datuk Sulaiman Mohd Tahir reckoned the first rate hike to be in the first quarter of 2018, while the second to come in either in the second half of 2018 or the first half of 2019.

While a decent growth in retail loans in the banking system is expected, Sulaiman also forecast the gross impaired-loan ratio for banks to be at below 2%, similar to the levels seen in the second half of 2017.

“We anticipate the OPR will likely be maintained at 3% and we believe the normalisation rate for OPR is around 3.50%, suggesting there could be two rate hikes with the first possibly in the first quarter of 2018 and second either in second half of 2018 or first half of 2019,” Sulaiman said in a statement following AmBank’s second quarter ended Sept 30, 2017 financial results yesterday.

On the back of a healthy gross domestic product growth of 5.9% this year, driven by factors such as strong private consumption from higher wages and income support measures, strong exports and infrastructure spending, Sulaiman foresees mild pressure on banks’ net interest margin to linger.

“However, it will be of lesser extent since the implementation of net stable funding ratio requirement has been postponed to no earlier than January 1, 2019.

“Banks have sufficient liquid assets with an industry liquidity coverage ratio of 133% as at end August 2017, well above the regulatory’s 100% requirement,” he noted.