KUALA LUMPUR : The move by Public Bank Bhd and Hong Leong Bank Bhd to raise their base rates (BR) is a positive move in alleviating some of the pressure on their net interest margins (NIM) amid an environment of declining interbank rates, said Maybank IB Research.

In a note today, the research house said that Public Bank and Hong Leong Bank have raised their BR by about 10 basis points (bps) to 3.75% and 3.94% respectively.

Standard Chartered had also followed suit by raising their BR to 3.77%.

“This was despite the three month KL interbank offered rate (3M KLIBOR) trending down by 17bps to 3.67% from its recent peak of 3.84% in January. This very much reflects the funding cost pressures that continue to impact the banks amid stiff competition for deposits and tighter liquidity,” it said.

The scope for other banks to follow suit with a BR adjustment appears limited at this stage due to the declining rates.

This is because some banks had pegged their BR to the KLIBOR, which gives them little leeway to maneouver their BR higher, it said.

“On the other hand, the BR raise sould allow Public Bank and Hong Leong to reprice upward the rates on their existing loans, thus alleviating some of the the pressure on their NIMs. However, banks whose BR closely track the interbank rates may eventually have to lower rates if the downtrend in the KLIBOR persists,” Maybank IB noted.