KUALA LUMPUR: The glaring outcome of Bank Negara Malaysia's latest move to raise the country's policy rate is that banks will earn more at the expense of the borrowing public.
The central bank's decision to raise its Overnight Policy Rate (OPR) on Thursday means that borrowers will pay more to service their variable-rate loans, which are mainly personal financing, and housing and business loans.
The local banks' earnings could bump up by 2.0-4.0 per cent, some analysts estimated, after Bank Negara raised the OPR by 25 basis points (bps) to 3.00 per cent in a move that surprised market participants.
Analysts at Hong Leong Investment Bank Bhd (HLIB) estimated that over a one-year forward earnings, the 25bps rate hike would nudge up the banks' net profit by 3.7 per cent or slightly more than RM1 billion to RM30.07 billion from RM28.99 billion forecasted earlier.
Malayan Banking Bhd (Maybank), for example, may see its estimated net profit during the period rise by about RM310 million or 3.4 per cent to RM9.56 billion from RM9.25 billion as a result of the hike.
CIMB Group Holdings Bhd's earnings will likely grow at a faster rate of 5.2 per cent to RM6.63 billion from RM6.3 billion, while Public Bank Bhd's may edge up 1.9 per cent to RM6.82 billion from RM6.69 billion.
HLIB, however, named smaller players Alliance Bank Malaysia Bhd and BIMB Holdings Bhd as the biggest gainers in terms of growth pace.
Alliance Bank's net profit should grow 5.8 per cent to RM751 million from RM710 million and Bank Islam parent BIMB's earnings to jump 8.4 per cent to RM690 million from RM637 million.
"We estimated that every 25bps OPR hike would widen sector net interest margin by 5.0-6.0bps which in turn, lift up earnings forecast by 3.0-4.0 per cent (on a full year basis, without taking into account of potential market -to-market losses and higher defaults).
"Alliance Bank and BIMB would benefit the most while Affin Bank Bhd and Public Bank are poised to gain the least," HLIB said.
Kenanga Research said similar to the preceding 25 bps OPR hikes, the annualised impact from the recent move also appeared to be a 1.0-3.0 bps increment to banks' net interest margins.
"This, in turn, translates to earnings upgrades of up to two per cent," the firm said.
Bank Negara, in restoring the OPR to the pre-pandemic level (its fifth increase since Covid-19 and first this year), said it was timely to further normalise the degree of monetary accommodation as the domestic growth prospects remained resilient.
Following the OPR hike, most local banks such as Maybank and RHB Banking Group announced that they would revise upwards their standardised base rate (SBR), base rate and base lending rate by 25 basis points effective from May 8 (Monday).
Hong Leong Bank Bhd announced its SBR as well as that for Hong Leong Islamic Bank Bhd will be at 3.00 per cent effective May 9.
An industry observer reportedly criticised Bank Negara's decision, saying it had failed to look at matters holistically, and instead focused on things in the aggregate.
"The problem with aggregated policy and decision-making, especially within the economic sphere, is that it tends to ignore the needs of some sectors of society," Callistus Antony D'Angelus, who is an international labour adviser for the Social Protection Contributors' Advisory Association Malaysia, wrote in a letter published by a portal.
He said Bank Negara, as the country's central bank, should implement policies based on the needs and good of all segments of society.
Consumers Association of Kedah president Yusrizal Yusof said the move was untimely as it would just pile more pressure on individuals and businesses to service their loans.
"This OPR hike will obviously burden individuals and businesses in servicing their loans. This will pressure the people with the cost of living continues to skyrocket," he told the New Straits Times last Friday