Tuesday, 1 May 2012




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(近几年全球低利息环境下无可避免,但MBB有不断增加非利息收入来源如主理IPO,回教保险和Kim Eng)

30042012 banking hlib.pdf (893.66 KB)



2012-04-30 11:14





Pressure on bank’s net interest margin


This is due to competition and stiffer guidelines

PETALING JAYA: Net interest margin (NIM) for banks, which has been under pressure since mid-2010,
is expected to come under further compression, with an analyst projecting it to hover around
2.2% this year compared with about 2.3% last year.

Analysts attributed the continued margin pressure to competition in certain loan segments,
stringent responsible lending guidelines, efforts to shore up deposits in view of the Basel III requirement
to have stronger liquidity and capital base, and stagnation in the overnight policy rate.

RAM Ratings head of financial institution ratings Wong Yin Ching said NIMs this year would likely
remain under pressure due to stiff price competition, particularly in certain loan segments such as
residential mortgages by offering attractive packages.

The strong drive for deposits in anticipation of the more stringent Basel III liquidity requirements
as well as to keep a healthy loans-to-deposits (LDR) ratio would keep funding costs elevated, she said.

Wong said: “NIM's outlook for a particular bank largely hinges on the institution's loan and funding mix.
In view of the potential slower growth in household loans with the imposition of the Responsible Lending Guidelines in January,
certain banks have placed greater emphasis on lending to SMEs, which generally yield higher margins.

“Banks with a high proportion of low-cost current and savings account deposits will also benefit from lower funding costs.
On the whole, we expect the average NIM for the banking system this year to hover around 2.2% compared with the estimated 2.3% in 2011.”

Growing non-interest income, therefore, would be key for banks, she said, adding that wealth management,
bancassurance and treasury-related products and services were the main areas of focus.
NIM is a measure of the difference between the interest income generated by banks and the amount of interest paid out to depositors.
LDR, which assesses a bank's liquidity level, is the amount of a bank's loans divided by the amount of its deposits.
ECM Libra Capital head of research Leong Hon Sze said although there was an uptick from a low in January,
NIM margin fell back in February and with no directional movement of interest rates, NIM would continue
to be subjected to competitive downward pressure.

He said Maybank was expecting a contraction of 10 basis points in the group's NIM this year,
citing continued competitiveness in the financial services market resulting in thin margins for some
financing products offered due to price competition between banks.

“Banks with exposure to Indonesia face higher risk of interest margin compression,
as NIM margins in Indonesia are more than double Malaysia's, and Bank Indonesia favours lower intermediation costs,'' Leong noted.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said he expected NIMs would continue to shrink this year.
He attributed this partly to the replacement of low-cost deposits to higher-cost deposits and a stagnation of banks' hire-purchase portfolio.

“Low-cost deposits, typically of no more than three years duration, placed at low rates during the global financial crisis
are now maturing and will be replaced by slightly higher cost deposits,'' he added.

Furthermore, he said the cumbersome procedures under the recent amendments to the Hire Purchase Act
as well as the lending guidelines would impact the hire-purchase portfolio of banks.

A slowdown in hire-purchase portfolio growth was negative for NIMs as the gross yield automatically dropped off
as the portfolio aged, Pong said, adding that a continuously growing hire-purchase portfolio, essentially, is needed to keep the NIM level.

Meanwhile, Alliance Research banking analyst Cheah King Yoong takes a different view. He said NIMs were expected to stabilise
or even strengthen this year with the rolling out of higher interest margin loan products and stabilisation in the cost of funds.

He expected the Economic Transformation Programme-related loans and SMEs to be the key loan drivers this year as
they were expected to yield higher interest margins compared with mortgage loan products.

“Although we believe that competition among banks to attract deposits remains high, we do not foresee competition
to increase dramatically this year since most domestic banks have healthy LDR.

“Furthermore, the moderation in our loan growth projections (11.0% this year versus 13.6% in 2011)
means that banks do not need to aggressively acquire deposits to meet the loan growth.

“Nonetheless, we anticipate banks with high exposure to retail loan segments to suffer from ongoing NIM compression,” Cheah added.

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