Banks raise rates

Bankers say rate hikes based on recent adjustment
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KUALA LUMPUR: Banks have begun raising their base lending rates (BLRs) following Bank Negara’s move to lift the overnight policy rate (OPR) by 25 basis points last week.

Five of the largest banks in the country raised their BLR to 5.8%.

Malayan Banking Bhd (Maybank) and CIMB Bank Bhd were the first two banks to announce their interest rate hike from 5.55%.

The two banks raised their BLR and base financing rates to 5.8% effective today following Bank Negara’s OPR revision last Thursday.

In a statement, Maybank president and CEO Datuk Seri Abdul Wahid Omar said the interest rate revision was based on the recent adjustment in the OPR.

“We expect to see better growth from our core business segments, leveraging on the improving economic environment and as more customers take advantage of the diversity of our product and service offerings,” he added.

Public Bank will also raise its BLR to 5.8% today, according to Bank Negara’s banking info website.

“We are supportive of Bank Negara’s move to normalise interest rates as the economy regains stability and are immediately transmitting it to both savers and borrowers,’’ said CIMB group chief executive Datuk Seri Nazir Razak in a statement.

Nazir said it was the right time to raise interest rates as the economic environment had normalised and growth momentum was strong.

“We saw the fourth quarter gross domestic product (GDP) numbers and we are looking at a GDP growth north of 4% this year potentially,’’ he told reporters at the launch of CIMB Twin Yield Income Investment structured product yesterday.

“Those conditions suggest that it is time to normalise interest rates. As best as I can tell, it is a good decision.’’
CIMB also raised its savings and fixed deposit rates by up to 25 basis points.

The RHB banking group also raised its BLR for RHB Bank Bhd to 5.8% today.

In a statement, group managing director Datuk Tajuddin Atan said RHB would be balancing the increased borrowing rates by offering more competitive rates for depositors.

Hong Leong Bank Bhd will increase its BLR to 5.8% effective March 10.

Bank Negara raised the OPR as the economy has improved significantly and returned to its path to recovery.
“Given this improved economic outlook, the Monetary Policy Committee (MPC) decided to adjust the OPR towards normalising monetary conditions and preventing the risk of financial imbalances that could undermine the economic recovery process,’’ said Bank Negara in its monetary policy statement last week.

“At the new level of the OPR, the stance of monetary policy continues to remain accommodative and supportive of economic growth.”

A rise in interest rates is usually greeted with trepidation as economists typically worry about its impact on growth and demand.

This time around, that apprehension is not yet visible.

“At the moment the impact will not be great as it is coming off historic lows,’’ said AmResearch economist Manokaran Mottain.

The Association of Banks Malaysia said the increase in OPR would not impede access to financing nor affect the industry’s lending activities.

The banking industry recorded a loans growth of 8.6% in January and 7.8% in December.

Analysts said the impact the BLR increase would have on bank’s profits would depend on whether deposit rates would be raised by the same quantum.

They said bank margins were squeezed when interest rates were cut but they expected net interest margins to widen as interest rates rose.

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