OPR SET TO STAY AT 3.50pc, SAYS AmBANK
Two interest rate hikes likely between next year and 2019, says group CEO
AMMB Holdings Bhd (AmBank Group) believes the normalisation rate for the country’s key Overnight Policy Rate (OPR) will be around 3.50 per cent.
This suggests that there could be two interest rate hikes between next year and 2019, according to AmBank Group group chief executive officer Datuk Sulaiman Mohd Tahir.
He said the first hike could possibly be made by Bank Negara Malaysia in the first quarter of next year and the second either in the second half of next year or first half of 2019.
For the rest of this year, the OPR will likely be maintained at 3.00 per cent, Sulaiman said in a statement on AmBank Group’s second-quarter results yesterday.
For the overall banking sector’s outlook this year, Sulaiman expects decent growth in retail loans, namely in mortgage loans for affordable homes and business loans, especially from infrastructure and export segments.
This will be a result of improving global growth and firmer commodity prices.
“Based on our 5.9 per cent gross domestic product (GDP) growth projection for this year, we project the loans to grow circa five per cent this year,” he said.
AmBank Group expects the mild pressure on banks’ net interest margin (NIM) to continue.
However, it will be of a lesser extent since the implementation of net stable funding ratio requirement had been postponed to no earlier than January 1 2019, said Sulaiman.
“Banks have sufficient liquid assets with an industry liquidity coverage ratio of 133 per cent as at end-August this year, well above the regulatory requirement of 100 per cent.
For its second-quarter results, AmBank Group was affected by shared losses from joint ventures, higher operating expenses and lower non-interest income.
This dragged down its net profit to RM331.47 million in the second quarter ended September 30 this year from RM352.63 million in the same period a year ago.
Revenue for the quarter increased 1.2 per cent to RM2.13 billion from RM2.09 billion.
Sulaiman said the banking group had recorded a modest 2.3 per cent year-on-year (y-o-y) improvement in total income of RM1.95 billion for the half-year.
“Our top-line growth momentum was sustained in transaction, business and SME, and retail banking while markets based revenue was affected by the volatility in the market.”
He said the group recorded encouraging 9.9 per cent growth yo-y in NII (net interest income) supported by interest income from customer lending and fixed income securities.
For the six-month period, AmBank Group’s net profit eased to RM659.74 million from RM675.63 million, but revenue was up 1.04 per cent to RM4.21 billion from RM4.16 billion.
On its outlook in the second half, Sulaiman said NII would continue to deliver steady growth while non-interest income from investment banking and money market activities is expected to be lumpy.
“We remain steadfast in achieving our Top 4 aspirations while delivering optimal returns to our shareholders,” he added.