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.

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.

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