KUALA LUMPUR: Bank Negara is likely to cut its key interest rate again this year if the United States Federal Reserve (Fed) further eases its monetary policy amid uncertain global economic growth, according to Malayan Banking Bhd (Maybank).
Group president and CEO, Datuk Abdul Farid Alias, said the central bank is likely to cut another 25 basis points off its overnight policy rate (OPR) this year to 2.75% that would help to boost private consumption.
“The government has mentioned that we still have plenty of tools to respond to any slowdown in the global economy and one of it is the key interest rates.
“What we anticipate is for rates to be cut further, not only in Malaysia but countries around the region, ” he said at a press conference to announce Maybank’s first-half financial performance.
Bank Negara cut its key interest rate to 3% in May from 3.25% previously. It was the first time the central bank had revised its rate in over a year since Jan 25,2018.
Notably, earlier this month, the Fed lowered its interest rate to a range of 2%-2.25% for the first time since the global financial crisis in 2008. Its chairman Jerome Powell said the weak global growth and the trade war between the US and China has been disruptive to the world economy and the growth in the US, despite the US labour market improving.
Meanwhile, Abdul Farid pointed out that while a cut in the OPR would impact Maybank’s net interest margins, he reckoned it would encourage businesses and consumers to spend more, which would boost the economy.
The country’s biggest banking group by assets is also adopting a cautious approach in the second half of the year, especially on the external factors.
“Domestically, there is more clarity in some infrastructure projects which would boost demand from the corporate side, ” Abdul Farid said.
For the first half of the year, Maybank’s overall loan growth was at 4.6% year-on-year (y-o-y), which was at the same rate as a year earlier. The bank’s stronger loans were contributed by its three home markets – Malaysia (4.2%), Singapore (2.3%) and Indonesia (6.1%).
Abdul Farid pointed out that the loan growth for 2019 in Malaysia is forecast at 4.7% y-o-y, driven by the revival of major infrastructure projects and government development spending.
Meanwhile, the bank’s deposit growth for the first half grew 3.9% compared with 5.5% a year earlier.
As for its performance in the second quarter to end-June, Maybank posted a marginal decline in net profit to RM1.94bil compared to RM1.96bil in the same quarter last year. This came on a 13.4% jump in revenue to RM13.05bil from RM11.51bil previously.
Its gross impaired loans ratio for the period stood at 2.01%, which was higher than the 1.81% posted in the second quarter of last year.
Maybank’s pre-tax profit for the quarter rose 1.6% to RM2.65bil on the back of a 1.2% rise in net operating income and a 19.6% decline in net impairment losses.
For the first half of the year, Maybank’s earnings fell 2% to RM3.75bil from RM3.83bil. Revenue, on the other hand, grew 12.5% or RM3bil to RM26.03bil compared with RM23.02bil previously.
Maybank has declared a dividend of 25 sen per share, payable within three months.
On a quarter-on-quarter basis, Maybank said the second quarter also recorded a stronger earnings growth momentum compared with the first quarter. This resulted in pre-tax profit advancing by 8.2% quarter-on-quarter.
“Net profit also came in 7.3% higher, boosted by a 10.9% rise in net fee-based income arising mainly from better investment and trading income, ” it said.
Maybank chairman Datuk Mohaiyani Shamsudin said the better momentum in the second quarter was achieved despite the challenging operating environment globally.
“We have continued to create value for our stakeholders and remain committed to pursuing a responsible growth strategy.
“We are also optimistic that there would be better business opportunities in the second-half of the year, driven by the measures being put in place by governments regionally to stimulate growth and boost consumer spending.”
On the bank’s digital initiatives, Abdul Farid revealed that Maybank is exploring the digital banking space in the region.
“This is in line with the trend that is going on around the world, where because of the advancement in technology, digital banking is no longer just an idea, it’s a reality, ” he said.
He said in terms of licensing, Maybank could launch its own digital banking, but the bank would need to explore other opportunities to stay ahead of the curve.
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