KUALA LUMPUR: BIMB Holdings Bhd expects to be temporarily impacted by the lowering of the Overnight Policy Rate (OPR) but is confident that its ever growing fee-based income will negate this.
Chief executive officer Mohd Muazzam Mohamed said that it was natural for banks, including BIMB, to experience short-term negative impact whenever there was a cut to the OPR.
“All banks have a positive correlation to the OPR. So when OPR is up, typically their income is higher but when the OPR comes down, net income is lower. All banks will be in the same situation,” Muazzam told reporters after BIMB’s annual general meeting today.
“When OPR is lower, we will have to lower the base rate and base lending rate (BLR) and this will definitely impact us temporarily. However this will eventually stabilise and will be negated by our growing fee-based income such as wealth management and bancatakaful.”
He added that in terms of whole year financial results, the group would still be in the “neutral”.
“(In the interim), our overall results will be neutral because we expect other sources of income will be better this year. For example, our fee-based income and for Bank Islam Malaysia Bhd. In terms of financial numbers, we will still be in neutral.”
Research houses have named BIMB as one of the two most affected banks following Bank Negara Malaysia’s decision to cut the OPR from 3.25 per cent to three per cent this month.
In terms of loans growth, Muazzam said the bank would be able to follow the industry average of between six per cent and seven per cent.
“In view of the economic challenges and our current loan size of some RM46 billion to, we are targeting our loans growth to moderate slightly to six to seven per cent, from last year’s 8.5 per cent,” he said.
Muazzam believes that the group will be able to maintain a return of equity to above 15 per cent, before tax for this year.
Bank Negara’s recent banking data showed that industry’s loan growth had slowed to 4.9 per cent year-on-year (YoY) in March this year, in comparison to the five per cent posted YoY in February 2019.