Latest news with #StatutoryReserveRequirement
New Straits Times
5 days ago
- Business
- New Straits Times
PublicInvest: OPR cut likely in Q3, REITs outlook Neutral
KUALA LUMPUR: Public Investment Bank (PublicInvest) has revised its base case to include a 25 basis point cut in the Overnight Policy Rate (OPR) in the third quarter of 2025, subject to the continuation of reciprocal tariff suspensions and broadly stable domestic conditions. Although Bank Negara Malaysia (BNM) kept the OPR unchanged at 3.00 per cent in its recent monetary policy meeting, the central bank adopted a more accommodative stance by lowering the Statutory Reserve Requirement (SRR) from 2 per cent to 1 per cent, effective May 16. This move is expected to release about RM19 billion into the banking system to support economic growth amid rising external uncertainties, particularly ongoing trade tensions linked to US President Donald Trump's tariff policies. According to PublicInvest, the central bank's May policy statement cited several downside risks, including a sharper slowdown in key export markets, weaker consumer and business sentiment, and softening commodity output. The firm noted that the inclusion of "weaker sentiment" may indicate the early stages of a slowdown in private consumption and investment. While the OPR remains unchanged for now, PublicInvest said the SRR cut represents a proactive measure to ease liquidity pressures and pre-emptively safeguard domestic growth. Despite the policy shifts, the impact on earnings for real estate investment trusts (REITs) under PublicInvest's coverage, particularly those with floating-rate loans, is expected to be limited. The firm estimates a potential 1 per cent to 2 per cent reduction in interest costs should a 25 bps OPR cut materialise. "We keep our earnings estimates unchanged for now. Although we still believe the sector is fairly valued for now and maintain our Neutral stance, the attractive dividend yield of around 5 per cent looks sustainable," the firm said in a note. KL-listed REITs are currently offering an average gross yield of about 6 per cent, reinforcing the sector's appeal amid market volatility. Among its REIT coverage, PublicInvest has reiterated its preference for Sunway REIT (SREIT), citing its diversified asset portfolio and ambitious growth plan under the Transcend 27 roadmap. The strategy targets portfolio expansion from RM10 billion to RM14 billion to RM15 billion within the next two to three years. SREIT is expected to benefit from full-year earnings contributions in FY2025 from recently acquired assets, including 163 Retail Park in Mont Kiara, Kluang Mall in Johor, and an industrial facility in Prai, Penang. Additionally, the reconfiguration of Oasis retail space at Sunway Pyramid, down to 260,000 sq ft from 320,000 sq ft as of November 2024, is anticipated to enhance rental efficiency. In light of these developments, PublicInvest has raised SREIT's target price to RM2.10 (from RM1.80), reflecting an implied forward dividend yield of approximately 5.5 per cent based on FY2026 estimates. PublicInvest also noted that while Malaysia's retail sales are on a recovery path, rental reversions for malls in key urban locations are likely to remain flat in the near term. This is due to incoming retail supply and ongoing market uncertainty stemming from renewed trade tensions. "That said, we believe those established malls with a good tenant mix are expected to stay resilient and hence occupancy rates are likely to remain steady."
The Star
09-06-2025
- Business
- The Star
Fundamentals remain strong for banks this year
PETALING JAYA: Analysts closely monitor the financial performance of banks because they serve as a vital barometer of the broader economy's health. However, after the recently concluded reporting season for results from the first quarter of this year (1Q25), differing views have emerged. Hong Leong Investment Bank Research (HLIB Research) has an 'overweight' call on the sector, viewing the Kuala Lumpur Finance Index's 7% decline year-to-date as a strategic opportunity to build positions ahead of an anticipated market recovery in the second half of this year. 'Our conviction is underpinned by a confluence of compelling fundamentals. Chief among them is an attractive valuation at 1.04 times forward price-to-book. The other factors are robust 5.4% dividend yield offering downside support, and defensive earnings resilience backed by substantial pre-emptive provisions,' said HLIB Research in a report. It expects sector net interest margins (NIMs) in 2Q25 to hold up reasonably well sequentially. HLIB Research said it sees three key forces shaping the landscape: fresh liquidity from the recent cut in the Statutory Reserve Requirement for banks: reduced pressure from deposit competition and a sector-wide shift toward more disciplined loan growth and funding strategies. 'This proactive stance is already visible, with banks cutting promotional fixed deposit rates between five and 15 basis points in May, ahead of a potential overnight policy rate cut, though the full margin benefit may only materialise in the second half of this year,' it added. Asset quality is expected to remain stable, supported by resilient domestic economic conditions and minimal US trade exposure, which is below 1% to 4% of total loans. 'While acknowledging risks from the secondary impacts of trade uncertainty, we believe any potential weakness will be well-contained. 'The sector is significantly more resilient than in previous downturns, primarily due to the formidable provision buffers accumulated over the past five years. This provides a robust defence, capable of absorbing any stress and cushioning the gross impaired loan ratio, which currently stands near historical lows,' said HLIB Research. On the other hand, Maybank Investment Bank Research (Maybank IB Research) said the banking sector 'saw misses when they typically have an unblemished track record', after the results season. 'The first quarter was not a pleasant one, being tilted to a negative bias. There were more misses than wins. There were no sectors that clearly outperformed and banks were mostly below expectations,' said the research house. With expectations of a weaker outlook, Maybank IB Research has downgraded the banking sector to 'neutral' from 'positive' as it anticipates modest earnings growth of 1% and 5% for this year and next, respectively, from the 5.7% and 5.5% previously forecast. Touching on some key statistics, the research house said cumulative loan growth had moderated to 4.4% year-on-year (y-o-y) as of end-March 2025 from 5.5% as of end-December 2024. NIMs slipped by an average of two basis points quarter-on-quarter (q-o-q). With lower non-interest income and negative Jaws ratio that measures the difference between the growth rate of a bank's income and expenses, the research house noted that the sector's core operating profit rose merely 1% y-o-y. Amid lower credit cost, it said core pre-tax and net profit rose at a slightly faster pace of 4% from a year ago. 'However, in light of slower economic growth ahead, we have trimmed our bank earnings forecast by 5% and 4% for 2025 and 2026, respectively, and now forecast 2025 and 2026 net profit growth of 1.1% and 5%, respectively.'
The Star
21-05-2025
- Business
- The Star
Positive developments in 1Q25 for Affin Bank
CGSI Research sees potential net profit growth of around 10% in 2Q25 at around RM130mil. PETALING JAYA: Affin Bank Bhd's had a decent start with a RM124mil net profit in the first quarter of financial year ended March 31 (1Q25). The performance was below consensus estimates of analysts but they note a couple of positive developments in the quarter. One is overhead costs were flattish year-on-year (y-o-y) in 1Q25 potentially due to cost savings from its early retirement scheme implemented in 4Q24. The other positive as observed by CGS International (CGSI) Research is the bank's cost of fund declined by 11 basis points y-o-y and 16 basis points from 4Q24, which led to an expansion in net interest margin (NIM) in 1Q25. The research firm sees potential net profit growth of around 10% in 2Q25 at around RM130mil, underpinned by higher net interest income and benign credit cost. 'Upgrade to 'hold' as we see Affin as one of the key beneficiaries of the recent Statutory Reserve Requirement (SRR) cut and potential overnight policy rate (OPR) cuts by Bank Negara in 2025,' CGSI Research said in a report. It expects the central bank to cut OPR by 25 basis points to 2.75% in the second half of this financial year. For every 25 basis point cut in OPR, this would raise Affin's financial year 2026 (FY26) net profit by around 3%, it projects. As for FY25 to FY27, it projects the bank's net profit to grow between 1.7% and 2.5%, taking into account the SRR cut from 2% to 1% effective May 16, 2025. The profitability estimates also factored in Affin's bonus issues which led to an issuance of 133.3 million new shares. Another positive is the bank's robust inflow of CASA (current account savings account) from Sarawak government-linked companies. According to analysts, this signals early tangible benefits stemming from the Sarawak government's strategic involvement as the bank's largest shareholder. Coupled with the anticipated implementation of the Sarawak state civil servant payroll and a strong pipeline of new corporate payroll accounts, Hong Leong Investment Bank (HLIB) Research said these underpins expectations for further NIM expansion. At the same time it noted that Affin is actively reducing reliance on expensive fixed deposits to focus on its overall deposit pricing strategy to further strengthen its NIM. Loan growth moderated to 7.1% y-o-y, falling short of management's ambitious 12% loan growth target for 2025. However, HLIB Research said the bank's management indicated a substantial loan pipeline of RM9.5bil remains. Coming to asset quality, Affin's gross impaired loan (GIL) ratio improved 10 basis points from the previous quarter to 1.84% in 1Q25. 'Despite that, mortgage GILs continued to trend upwards given pockets of stresses in that portfolio. 'Meanwhile, management highlighted that stress testing indicated that while the impact from loan exposure related to US trade is minimal, a greater adverse impact is anticipated from a broader economic slowdown instead,' said HLIB Research, which kept its 'buy' call and RM3 target price on the stock. According to analysts, the bank's management has retained its key 2025 guidance of a return on equity of 6%, loans growth at 12% and NIM of 1.55%. Valuation wise, HLIB Research said the stock currently trades at one standard deviation to its 10-year mean. 'We believe the premium is fair given the emergence of the Sarawak government as Affin's largest shareholder, presenting it with better prospects to leverage the state's growth ambitions.' However, UOB Kay Hian Research is maintaining its 'sell' call with a target price of RM2.38 despite an improving CASA mix. It thinks the value unlocking potential from the Sarawak government has been more than priced in. The Sarawak government emerged as Affin's major shareholder in Nov 2024. At the time of writing the stock was trading at RM2.71, which is close to levels it was at the start of 2025.
The Star
19-05-2025
- Business
- The Star
Investment banks anticipate Bank Negara's 25bps OPR cut in 2H25
KUALA LUMPUR: Investment banks expect Bank Negara Malaysia (BNM) to lower the Overnight Policy Rate (OPR) by 25 basis points (bps) in the second half of 2025 (2H 2025) amid softer first quarter (1Q) growth and tariff disruptions. Public Investment Bank Bhd said the earlier 100 bps reduction in the Statutory Reserve Requirement (SRR) is expected to serve as a timely liquidity buffer, allowing BNM to maintain a data-dependent stance amid elevated external volatility. Should the 90-day tariff suspension lapse without renewal, raising Malaysia's effective tariff exposure to 24 per cent, the investment bank anticipated a more front-loaded policy response, comprising two 25 bps OPR cuts in 2H 2025. "This would be intended to mitigate negative spillovers on trade performance, investment activity and broader economic sentiment. "With three scheduled policy meetings remaining this year -- July 9, Sept 4 and Nov 6 -- the window for calibration remains open, though timing will depend on incoming data and developments surrounding global trade negotiations,' it said in a note today. Meanwhile, Hong Leong Investment Bank said the projection was made in view of external uncertainties and modest inflationary environment. As for Standard Chartered (StanChart), it continued to expect BNM to cut the policy rate by 25 bps in July, with more cuts (beyond 25 bps) in 2025 likely if data deteriorates by more than expected. The bank has lowered its 2025 gross domestic growth (GDP) growth forecast to 4.2 per cent from 5.0 per cent previously on weaker-than-expected 1Q GDP growth and tariff disruptions. "We estimate that a 24 per cent and 10 per cent reciprocal tariff rate will subtract 0.7 percentage point (ppt) and 0.4 ppt respectively, from GDP, assuming that 30 per cent of Malaysia's exports are exempt from tariffs and a United States (US) import elasticity rate of 0.5 times. "The hit to GDP from a fall in demand of trading partners will also likely weigh on growth in 2025,' it said. Nevertheless, StanChart expects consumer spending and investment are likely to remain the key pillars of growth in 2025. - Bernama
The Star
15-05-2025
- Business
- The Star
FBM KLCI struggles for momentum amid cautious buying interest
KUALA LUMPUR: The FBM KLCI struggled to maintain its upward momentum due to weak buying interest, closing the morning session lower. At midday, the FBM KLCI slipped 8.57 points or 0.54% to 1,574.94, just marginally higher than its intramorning low of 1,574.13. Gainers numbered 396, trailing losers at 513, while 471 counters remained unchanged. Trading volume stood at 2.4 billion shares, valued at RM1.3bil. Nestle, the top decliner, fell 82 sen to RM83.98, followed by Kluang, which lost 40 sen to RM5.56. PETRONAS Dagangan eased 32 sen to RM20.22, while Tenaga declined 18 sen to RM14.12. Among the gainers, Malaysian Pacific Industries rose 42 sen to RM21.74, Heineken added 24 sen to RM27.74, Carlsberg gained 22 sen to RM19.38 and Chin Tek climbed 11 sen to RM8.30. TA Securities said the local market should stay in consolidation mode as investors will likely remain cautious ahead of the release of Malaysia's first-quarter GDP data later this week. 'Immediate resistance remains at 1,610, with the next major resistance seen at 1,644, followed by the August 2024 high of 1,684. Immediate support is maintained at 1,526, with 1,490 and 1,444 acting as stronger supports,' it added. Meanwhile, Malacca Securities remains optimistic about the outlook for blue-chip stocks, citing strong fundamentals and stable dividends as key drivers amid renewed foreign fund inflows into the Malaysian market. The research house said that despite global headwinds from US tariffs and geopolitical tensions, Bank Negara Malaysia's move to lower the Statutory Reserve Requirement (SRR) from 2% to a 14-year low of 1% may boost loan uptake among businesses and help stimulate economic growth. 'We maintain a positive outlook on the construction sector, driven by ongoing data centre investments and major developments across the country, such as the JSSEZ. The Construction Index has also broken above its MA200 resistance,' Malacca Securities said.
