Odds for interest rate hike this year higher now: AmBank

KUALA LUMPUR: The phenomenon of interest rates currently being lower than the inflation rate has led to the possibility of a rate increase this year, said AMMB Holdings Bhd group CEO Datuk Sulaiman Mohd Tahir.
“With the Goods and Services Tax and the position of the ringgit, you can see that prices of stuff have gone up. So, inflation has kind of gone up. The last announcement on the inflation rate was in February at 4.3% while the Overnight Policy Rate (OPR) is circa 3%.
“If you have an inflation rate that is higher than the current interest rate, then you will have actually a negative real return from the investment point of view. Because of that, there is a view that there could be a rate hike,” he told reporters at a signing ceremony yesterday.
However, Sulaiman said any rate increase would need to be balanced and the impact on consumers at large needed to be managed.
“At the end of the day, I think it is a function of the reality that is, whether you really need to, based on the current environment, because there are alternative sources of investments, not just in terms of deposits, there are also equities and other instruments of investments for customers out there,” he added.
In its Economic Report yesterday, AmBank Research said there is a 30% chance for the central bank to raise the OPR by 25bps to 3.25% possibly around the fourth quarter of 2017, based on its probability assessment.
Although it maintained its base case scenario of no rate hike this year, it noted that room for the probability could increase when some of the dust around global uncertainties settles.
In terms of performance this year, Sulaiman said the first quarter looks to be better than that last year, despite some concerns in the real estate and oil and gas sectors.
“We have seen some activities, some growth at least in the first quarter this year and we see consumer confidence has kind of come back a bit. If you see FDIs, they have also come back, you see a pick-up in the equity markets as well. It looks positive but it is still too early for this current year.
“We have to see how it pans out over the remaining months … we don’t see any pick-up in delinquencies so in that sense we are comfortable and we are still in infrastructure growth as planned by the government,” he said.
Sulaiman said AmBank’s loan growth for the financial year ended March 31, 2017 (FY17) could be slightly better than that in FY16 by “a few percentage points”. The bank recorded 5-6% loan growth in FY16.
Yesterday, AmBank Islamic Bhd and Indah Water Konsortium Sdn Bhd signed an agreement with online bill payment platform JomPAY to enable Indah Water customers to pay their sewerage bills without any fee.
Sulaiman said it aims to quadruple its transactions via JomPAY in the next three to six months from the current 35,000 to 40,000 transactions per month valued at RM40 million per month.
In September last year, Sulaiman said, the bank had 8,000 to 9,000 transactions per month via JomPAY with transaction value of RM10 million. To date, it has 53 JomPAY billers.