Two key interest rate hikes possibly between 2018 and 2019: AmBank

KUALA LUMPUR: AMMB Holdings Bhd (AmBank Group) believes the normalisation rate for the country’s key Overnight Policy Rate (OPR) is around 3.50 per cent.

This suggests that there could be two interest rate hikes between next year and 2019, according to AmBank Group chief executive officer Datuk Sulaiman Mohd Tahir. Sulaiman said the first hike could possibly be introduced by Bank Negara Malaysia in the first quarter of 2018 and 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, he 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 as well as business loans especially from infrastructure and exports segment.

This will be a result of improving global growth and firmer commodity prices.

“Based on our 5.9 per cent GDP (gross domestic product) growth projection for 2017, we project the loans to grow circa five per cent in 2017,” he said.

AmBank Group expects the mild pressure on banks' net interest margin (NIM) to continue.

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

“Banks have sufficient liquid assets with an industry liquidity coverage ratio of 133.0 per cent as at end August 2017, 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 pushed its net profit to RM331.47 million in the second quarter ended September 30, 2017 from RM352.63 million a year ago.

Its revenue in the same quarter increased 1.2 per cent to RM2.13 billion from RM2.09 billion.

Sulaiman said the 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 topline growth momentum was sustained in transaction banking, business and SME banking and retail banking while markets based revenue was affected by the volatility in the market.”

He said the group recorded an encouraging 9.9 per cent growth y-o-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, while 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 will 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.

Related Articles