MORE banks are expected to revise their lending and deposit rates this week in response to Bank Negara’s move last Thursday to raise overnight policy rates by 30 basis points to 3%, analysts said. Yesterday, HSBC Bank Malaysia Bhd became the latest bank after Bumiputra-Commerce Bank (BCB) to announce a revision in interest rates.
In a statement, HSBC said conventional fixed deposit interest (FD) rates and HSBC Amanah General Investment Accounts indicative profit rates had been revised with effect from yesterday. The quantum of increase ranged from 35 basis points to 75 basis points, depending on the tenure, the bank said.
For example, the rates for one-month FDs were raised to 2.5% from 2.15% previously, while those between three months and six months were increased to 2.8% from 2.25% before. For FDs of 12-month tenure, interest rates were raised to 3% from 2.25% previously. The bank said the revision was applicable to individuals and small-medium enterprises (SME) for total aggregate time deposits above RM1mil and to non-resident individuals and non-SMEs, deposits of any amount.
Interest rates for FDs by individuals and SMEs for total aggregate time deposits up to RM1mil remain unchanged at 3% per annum for tenures of one to 11 months and 3.7% for 12 months. BCB was the first lender to revise lending rates on Saturday to 6.25% from 6% previously. Yesterday, the country's second largest lender announced a hike in deposit rates from a minimum of 0.2% (previously 0.1%) and a maximum of 2% (1.25% previously) effective from Dec 4.
For Tier 1 FDs, BCB introduced a promotional rate of 3.5% for tenures of eight months compared with the bank’s standard board rate of 3%. Head of retail banking Sulaiman Tahir said in the statement that the rise in savings accounts and FD rates would help curb spending and inflationary pressures.
Bumiputra-Commerce Finance, a unit of BCB, had also increased its base lending rate by 25 basis points. According to a banking analyst at Mayban Securities, the higher quantum of increase for deposit rates compared with lending rates would erode banks’ margins slightly. “Bigger banks are able to absorb the cost of higher deposit rates, hence they can offer more competitive pricing,” she told StarBiz. Furthermore, banks with higher SME portfolios stood to benefit, as the margins for the segment were bigger than that for household loans, she said.
In this case, banks like BCB and Malayan Banking Bhd would be the main beneficiaries, she said, adding that more banks were shifting from consumer loans to SME loans. Meanwhile,
RAM Consultancy Services Sdn Bhd economist Dr Yeah Kim Leng said banks were not likely to raise lending rates too much due to the stiff competition. He said most banks had already shifted to risk-based pricing, which allowed “better” borrowers, according to the respective bank’s profiling, to enjoy lower lending rates. This would also help mitigate the slowdown in loans growth, he added.Yeah said the higher deposit rates were “good” from the consumers’ perspective, as they would enjoy a positive real rate of return. He said the upward revision would close the gap between the deposit rates and the inflation rate, which was estimated at between 3% and 3.5%.