LCR Expects To Improve, Supporting NIM Recovery - Maybank IB

KUALA LUMPUR, Sept 18 (Bernama) -- The average liquidity coverage ratio (LCR) for Islamic banks in Malaysia has improved, which should help reduce funding pressure in the near future, said Maybank Investment Bank Bhd (Maybank IB).

In a note, the investment bank said that from a pre-pandemic average of about 152 per cent, the average LCR for Islamic banks dipped to a low of about 127 per cent in October 2022.

“Since then, Islamic banks have built back their LCR to a more normalised level of 153 per cent, back to being on par with those of conventional commercial banks,” it said.

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Maybank IB added that with improving liquidity conditions and easing price competition ahead, net interest margins (NIMs) are expected to recover in 2025.

This improvement is supported by rising current account and savings account (CASA) deposits, a stabilising three-month KLIBOR, and enhanced LCRs at Islamic banks.

“What is encouraging is that these indicators point to improving liquidity positions, which should help ease NIM pressure in the coming quarters.

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“Moreover, some banks have pledged to scale back on mortgage price competition, which should also ease pressure on lending yields,” it said.

Maybank IB noted that an ideal situation would be for NIMs to return to pre-pandemic levels which could hypothetically pave the way for earnings upgrades by 1.0-16 per cent.

Overall, the investment bank projected a positive outlook for the banking sector, with ‘buy’ recommendations for AMMB Holdings, CIMB, Public Bank, RHB, Hong Leong Bank, and Hong Leong Financial Group.

-- BERNAMA