PETALING JAYA: CGS-CIMB Research believes Bank Negara’s decision to raise the overnight policy rate (OPR) by 25 basis points (bps) last week could be the last for the year.
It said the move will benefit banks and companies that are in a net cash position.
The research house noted that the OPR hike could negatively impact investor sentiment in the short term but will not have a too negative impact on corporates.
This is because the overall net gearing of FBM KLCI constituents remains low at 45%, with roughly 39% of the borrowings denominated in foreign currencies, it said in a report.
The current OPR rate of 2.5% is still below the pre-Covid level of 3%, leading CGS-CIMB to forecast the central bank to raise the OPR by another 50 bps (via two 25-bps hikes) next year.
OPR hikes are negative for cyclical sectors such as property, auto and consumers due to the decrease in consumers’ disposable income as a result of the hikes, it said.
The rate hike is also negative for companies with high floating-rate ringgit borrowings, due to higher interest expense.
For banks, it is positive as their total floating-rate loans are larger than their total fixed deposits (both likely to be repriced upwards following the OPR hike).
“Our analysis shows the OPR hike having the largest positive impact on Bank Islam Malaysia Bhd (7.6% increase in financial year 2023 or FY23 net profit for every 25-bps hike) as its forecast floating-rate loan ratio of 91% in FY23 is the sector’s highest.
“Conversely, the impact would be the smallest on Affin Bank Bhd’s forecast FY23 net profit (0.2% increase for every 25-bps hike) as its forecast FY23 floating-rate loan ratio of 74.1% is one of the lowest in the sector,” CGS-CIMB noted.
It added that if it were to factor in the OPR hike projected in 2023, every additional 25-bps hike would increase its net profit forecasts for banks by an estimated 2.1% (on a full-year basis; for FY24 for Hong Leong Bank Bhd, AMMB Holdings Bhd and Alliance Bank Malaysia Bhd, and FY23 for the rest).
“The positive impact from the OPR hike could be partly diluted by higher cost of funds from a pick-up in deposit competition,” it said.