CGS-CIMB sees banks' aggregate earnings down by 3.2 pct this year should SRR be tightened

08/02/2023 05:50 PM

KUALA LUMPUR, Feb 8 (Bernama) -- CGS-CIMB Securities has projected that any tightening of the statutory reserve requirement (SRR) by Bank Negara Malaysia (BNM) would lower banks' aggregate net profit by 3.2 per cent in 2023.

However, it said that banks’ core net profit growth would remain robust at 17.1 per cent this year, with banks' dividend yield remaining high at 5.2 per cent. 

“In our view, the SRR relaxation could be reversed soon as the risks from Covid-19 have subsided,” it said in a research note today. 

BNM relaxed the SRR to 2 per cent from 3 per cent at the onset of the Covid-19 pandemic on March 19, 2020, to ensure banks maintain sufficient liquidity to weather the crisis, according to the research house. 

It noted that banks benefited from the relaxation as it reduced the funds tied up in statutory reserves or deposits, “which are interest-free in nature.” 

It said that should the SRR be tightened, banks would have to top up their statutory reserves by RM39.4 billion. 

However, “banks would be able to achieve this given their strong liquidity positions,” it added.

“In 2021, banks’ liquidity coverage ratios, the key barometer for liquidity, ranged between 135.6 per cent and 180.1 per cent, significantly higher than the minimum requirement of 100 per cent.

“We do not expect banks’ liquidity coverage ratios in 2022 to be materially below the levels in FY2021,” it said.

The brokerage has reaffirmed its “overweight” call on the sector, premised on the expected expansion in net interest margin amid the overnight policy rate upcycle.



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