Bank Negara surprises dropping interest rate to lowest in 9 years

While a cut in OPR lowers loan repayment costs for borrowers such as households and businesses, lenders or financial institutions generally take a hit on their profitability as they make less interest income on loans.

PETALING JAYA: The surprise move by Bank Negara to reduce the overnight policy rate (OPR) to 2.75% – the lowest level in nearly nine years – has rattled banking stocks as margin compression fears kick in.

Major banking counters such as Public Bank Bhd (-2.36%), Hong Leong Bank Bhd (-3.56%), CIMB Group Holdings Bhd (-1.95%) and Malayan Banking Bhd (-0.58%) yesterday saw selldowns, which as a result dragged down the FBM KLCI by 9.35 points or 0.59% to 1,577.98 points.