KUALA LUMPUR: Local banks could see their net interest margin (NIM) going up by about six per cent and profits by about five per cent, for every 25 basis points (bps) increase in the Overnight Policy Rate (OPR), analysts said.
Hence, it was not surprising that banking stocks were among the top gainers last Friday, a day after Bank Negara Malaysia decided to raise the OPR by another 25 bps to 2.75 per cent, marking the fourth consecutive 25bps hike this year since May.
Hong Leong Bank Bhd topped the list of Bursa Malaysia's top gainers, rising 12 sen or 0.59 per cent to RM20.56, with Malayan Banking Bhd (Maybank) being the next highest banking stock at fifth in the overall list.
Friday's gains, though, appear to wear off on Monday as Bursa's financial services index slipped in the afternoon.
At midday break, the financial services index dropped 16.61 points or 0.1 per cent to 16,076.08 points.
CIMB Group Holdings Bhd was the most active, losing two sen or 0.37 per cent to RM5.35. Public Bank Bhd was also down by two sen or 0.46 per cent to RM4.34, while Maybank gained one sen or 0.12 per cent to RM8.46.
AMMB Holdings Bhd lost one sen or 0.25 per cent to RM3.94, and RHB Bank Bhd gained two sen or 0.37 per cent to RM5.47.
Hong Leong Investment Bank Bhd (HLIB) analyst Chan Jit Hoong said banks were still short-term net beneficiaries as NIM was anticipated to widen.
"We estimated that every 25bps OPR hike would expand sector NIM by 5.0-6.0bps which in turn, bump up earnings forecast by 4.0-5.0 per cent on a full-year basis, without taking into account of potential market-to-market losses and higher defaults," Chan said.
He noted that the big gainers would be Allliance Bank Bhd and Bank Islam Malaysia Bhd, while the small gainers would include Affin Bank Bhd and Public Bank.
Chan said studying the trends of September 2022's OPR hike, the base rate (BR) and lending rate (BLR) had increased 25bps respectively, in line with the official 25bps uptick.
While for deposit, rates climbed by a similar quantum where one to 12 month fixed deposits jumped 21-24bps but savings only ticked up 7.0bps.
"Looking further back at May 22's OPR hike, we saw second quarter of 2022 sector NIM rose 5.0bps sequentially,: he added.
Analysts at Affin Hwang Capital, meanwhile, said the fourth consecutive OPR hike in November was not expected.
They expect a 25bps rate hike in January 2023.
"With rising rates, we are likely to see moderating loan growth and a rise in delinquency rates, which are negative for the banks' otherwise resilient operating income," they said.
Affin Hwang said Alliance Bank, Maybank, RHB, CIMB and Public Bank could have a 1.2-2.0bps NIM adjustments in the seocndh half of 2022, while net profit impact is around 2.0 per cent in FY22/23, with more a notable impact on Alliance.
Nonetheless, they said the positive NIM impact could be negated in the second quarter of 2023 onwards by deposit cost repricing up and a shift from current account savings account (CASA) to term deposits.