PETALING JAYA - Bank Negara is expected to maintain the overnight policy rate (OPR) for the rest of this year but a possible 25 to 50 basis points hike is anticipated for next year which could result in a "one-time lift" to the earnings of banks.
CIMB Research told this to its clients last Friday via a report, adding that every 25 basis point hike would lift banks' net profit by 1.2 per cent due to a re-pricing gap between lending and deposit rates.
"While rate hikes could provide a one-time lift to earnings, continuous pressure on margins from rate competition remains a concern," it said.
It is keeping a "neutral" call on the banking sector for now.
It added that rate hikes, which mean a rise in cost of funds, would drag down the industry's loan growth though the impact should not be significant due to the small magnitude of increase.
A rate hike could reduce 2014's loan growth by 40 to 80 basis points from 10 per cent to 11 per cent to about 9 per cent to 10.5 per cent.
Bank Negara has maintained the OPR at 3 per cent in its recent meeting. The central bank has kept the OPR at 3 per cent since May 2011. Its next monetary policy meeting is scheduled for Sept 5.
Maybank Investment Bank also expects the OPR to stay at 3 per cent for the year.
It maintains its 2013 inflation rate forecast at 1.8 per cent .
"Assuming the resumption of the Subsidy Rationalisation Programme in 2014, we are pricing in a 2-2.5 per cent inflation rate with 3 per cent-3.25 per cent OPR for 2014," said Maybank Investment.
In its statement last month, the central bank said private consumption remained steady, underpinned by income growth and stable labour market conditions.
"Capital spending in domestic-oriented industries and the ongoing implementation of infrastructure projects would also support investment activity," it said.
Inflation, meanwhile, remained low at 1.6 per cent in the first five months of the year, it added.