KUALA LUMPUR, Nov 4 — CGS-CIMB views the unchanged Overnight Policy Rate (OPR) of 1.75 per cent as a positive surprise for banks.
In this regard, it has reaffirmed its “overweight” call on banks in light of the improved outlook for net interest income.
In a note today, the research house said Bank Negara Malaysia’s (BNM) decision to maintain the OPR at 1.75 per cent during its monetary policy committee (MPC) meeting yesterday was a surprise to its economist.
The economist had factored in total OPR cuts of 150-basis point (bp), including a 25 — basis point cut in November 2020 in the earnings forecasts for most banks.
While expecting the OPR to be maintained at 1.75 per cent until end-2021, CGS-CIMB anticipated banks’ net interest margins to be stable (or slightly lower) in the financial year ending 2021-forecast (2021F), compared with the expected 10-12bp contraction in 2020F.
It also projected the net interest income of Malaysian banks under its coverage to expand by 3.8 per cent in 2021F, compared with an expected 6.7 per cent drop in 2020F, following the likely pause in OPR cuts.
“The expected revival of banks’ net interest income growth and projected 23.4 per cent drop in loan loss provisioning in 2021F underpin our expected recovery in banks’ net profit growth to 14.8 per cent in 2021F, which is a potential re-rating catalyst behind our ‘overweight’ call for banks,” it said. — Bernama
