Pressure on bank earnings

CGS-CIMB told clients in a note that an OPR cut is negative for banks, as the downward re-pricing of lending rates has historically been wider than the decrease in deposit rates, leading to potential narrowing in banks’ net interest margins (NIMs).

PETALING JAYA: The overnight policy rate (OPR) which has been cut for the fourth straight time is an added negative for banks which are already competing for a pie that has gotten smaller in recent months.

The Covid-19 pandemic is mostly to be blamed for this, as it has put off many potential consumers from taking on loans - a main source of income for banks – and has also exacerbated the already competitive environment that banks operate in.