Friday, February 11, 2011

AmResearch sees minimal impact from possible SRR rate hike, Overweight on banks

KUALA LUMPUR: AmResearch remains positive on the banking sector and it sees minimal impact of any possible increase in the statutory reserve requirement (SRR) by Bank Negara.

It said on Friday, Feb 11 that the SRR is currently at a historically low level of 1%. Its sensitivity analysis indicates a '0.3% to '2.2% downgrade to net earnings, based on an SRR rate hike of 1%.

'The ones which may be affected the most would be EON Cap (-2.2%), Alliance Financial Group (-2.1%), Maybank (-2.1%) and Public Bank (-1.4%).

'We estimate every 1ppt increase in SRR rate to reduce the amount available for lending by RM7.65bil, just for eight local banks alone. Nonetheless, we remain positive about the banking sector. Our buys are CIMB, Maybank, Hong Leong Bank and RHB Cap,' it said.

The central bank, in the recent monetary policy statement, said the large and volatile shift in global liquidity are leading to a build-up of liquidity in the domestic financial system.

While the liquidity has been manageable, going forward, Bank Negara had said additional policy tools such as the SRR and macroprudential lending measures may be considered to avoid the risks of macroeconomic and financial imbalances.

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