KUALA LUMPUR (July 31): Alliance Bank Malaysia Bhd (KL:ABMB) expects the pressure on lending margin to ease and stabilise in the current financial year ending March 31, 2025 (FY2025).
Net interest margin (NIM) — a measure of profitability from interests charged on loans after deducting returns paid to depositors — will probably come in between 2.40% and 2.45% in FY2025. However, any expansion in NIM would be hindered by competition for deposits, the bank said.
A combination of factors, including the repricing of the fixed deposit due to the lingering impact of higher overnight policy rates (OPR) and continued competition, would mean “less of an opportunity for NIM expansion”, said Alliance Bank chief executive officer Kellee Kam Chee Khiong.
At NIM of 2.40% to 2.45% for FY2025, Alliance Bank’s NIM would still be the highest in the industry, Kam said at a virtual press conference after the bank’s annual general meeting.
Alliance Bank’s NIM fell 16 basis points to 2.48% in FY2024 from 2.64% a year ago, due to higher funding costs.
Kam explained that NIM compression in FY2024 was due to a shift from current accounts and savings accounts (CASA) to fixed deposits, prompted by the increase in OPR as well as deposit competition in the banking industry.
The last OPR hike by Bank Negara Malaysia (BNM) was in May 2023, to 3%. Before that, the central bank raised the benchmark rate by 100 basis points in 2022, from a historical low of 1.75% in 2020.
BNM will likely maintain OPR at 3%, Kam said, in line with consensus expectations.
“We believe that OPR will stay at 3% as the current rate is conducive for the general business environment,” he said. “It is reflected in the growth of our GDP, as indicative of the fact that OPR at 3% level is comfortable for our economy.”
On the ringgit, Kam believes that the currency will "perform decently" against the US dollar over the course of this year. He did not provide a forecast.
He said the ringgit’s performance will be bolstered by favourable macroeconomic conditions, such as stronger-than-expected economic growth and low unemployment numbers, and supported by higher tourists numbers.
On Wednesday, the ringgit appreciated 0.34% and traded at 4.6060 against the US dollar, its highest since Jan 3 this year. The ringgit has recovered more than 4% from a 26-year low of 4.8035 in February this year.
Source: TheEdge - 1 Aug 2024
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