Fixed deposit rates on the rise

This follows Bank Negara’s move to raise OPR

PETALING JAYA: Depositors will be getting higher returns for their savings as banks raise interest rates for fixed deposits (FD) in tandem with the rise in lending rates.

In a telephone survey, StarBiz found that most banking groups, with the exception of EON Capital Bhd, and Alliance Financial Group Bhd (AFG), had already increased their FD rates by about 0.25% yesterday.

Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, RHB Capital Bhd and Affin Holdings Bhd have also upped their savings rates.

Kua Wei Jin says the FD will also go up when the Klibor or OPR increases
When contacted, EON Cap group CEO Michael Lor said the bank would be raising its base lending rate (BLR) and FD rate by 25 basis points soon.

“With the improving economy, we are confident that this latest rates rise would not affect our growth momentum. Also, Bank Ngeara’s disciplined approach on interest rates augurs well for the economy as a whole,” he added.

This is in response to Bank Negara’s move to lift the overnight policy rate (OPR) by 25 basis points last week.

An analyst with a local stockbroking firm said the rise in FD rates by about the same quantum as the BLR would result in generally, thinner margins for banks.

“This is a surprising move by the banks. Historically, the quantum of increase in FD rates is lower than the rise in BLR.

“The same quantum of increase could be due to the fact that deposit rates are still so low thus, making it affordable for banks to do so. This will also enable banks to attract more depositors and increase their deposit base in anticipation of higher loans growth as the economy improves,” she said.

In addition, the expectations of more OPR increases going forward would enable banks to boost margins further, the analyst said, adding that the recent 25-basis point increase in OPR was small.

TA Securities noted that although the rise in OPR would help boost banks’ net interest margin slightly – since the industry’s average lending rate had been hovering near its all time low of 4.83% – the impact would be minimal.

This is because competition in the industry is expected to intensify as banks aggressively look to grow their asset base.



In general, a rising interest rate environment will bode well for banks with a low exposure to fixed-rate loans and a low proportion of current accounts and saving accounts (CASA) and alternative deposits.

According to ECM Libra, among banking stocks, AFG would have the greatest potential for earnings accretion due to its high proportion of variable rate loans at 84% as well as high proportion of CASA at 37%.

“We believe key beneficiaries include AFG, CIMB, Maybank and RHB Capital due to a combination of high exposure to floating-rate loans (average around 70%) and large pool of CASA deposits (average around 30%),” TA said.

The Kuala Lumpur Interbank Offer Rates (Klibor), which serves as the benchmark rates for interbank lending and borrowing activities, has also increased by 20 to 25 basis points across the board since March 4.

Hong Leong Bank Bhd chief operating officer Kua Wei Jin said banks would have to borrow at higher rates from the interbank market if there was a hike in OPR.

“The FD, being one of the sources for banks to fund their loans, will also go up when the Klibor or OPR increases,” he said.

Nevertheless, Citibank Bhd consumer bank treasurer Lee Chet Leng noted that FD rates were not linked one-to-one to Klibor as they were often driven by different factors.

“FD rates are a reflection of market-based factors such as Klibor, the competitive and regulatory environment and the desire for banks to achieve a particular nature of funding mix,” Lee said.

The AmBank Group has revised the base lending rate (BLR) for AmBank (M) Bhd and the base financing rate (BFR) for AmIslamic Bank Bhd by 25 basis points respectively.

AmBank Group said in a press release that the BLR and BFR would be revised to 5.80% from 5.55% respectively effective yesterday.