Veteran banker sees Malaysia’s BNM keeping rates unchanged

[KUALA LUMPUR] A veteran banker who led a Malaysian lender to record profit says that the South-east Asian country can hold off on further cutting borrowing costs as current levels are sufficient to support growth.

“Inflation numbers are looking pretty healthy and the currency has been on the right side of strength for Malaysia,” Alliance Bank Malaysia chief executive officer Kellee Kam said in an interview on Tuesday (Sep 9).

Malaysia’s central bank lowered its overnight policy rate in July, the first cut in five years, in a preemptive move to bolster the economy. But it left the benchmark unchanged last week as economists said that low inflation and resilient consumption gave it room to keep the rate steady. Bank Negara Malaysia (BNM) also injected more funds in the banking system in May to encourage lending and economic activity.

The central bank will probably hold the benchmark rate at 2.75 per cent at its final policy meeting for the year in November, a level that would be “sufficient” to support the economy’s growth, said Kam, a banker of more than 25 years, with stints at Bank of America’s local unit and Malaysian lender RHB Bank.

Growth risks seem to have eased after Malaysia secured a 19 per cent levy on exports to the US, lower than the 25 per cent rate that US President Donald Trump had threatened to impose. The central bank estimates the economy will grow 4 to 4.8 per cent this year, and a survey conducted by Bloomberg News in August showed that the overnight policy rate may remain unchanged till 2026.

In the swaps market, traders are pricing in an almost 70 per cent probability of a rate cut by Malaysia’s central bank within the next 12 months, according to data compiled by Bloomberg.

Consumer spending will fuel Malaysia’s growth, Kam said, noting that the bank’s clients had resumed investments since the middle of the year after previously holding back due to uncertainty on US tariffs.

The country’s smallest listed lender estimates its net interest margin, a key gauge of profitability, to come in between 2.37 to 2.42 per cent in the current financial year ending March, down from its previous projection of 2.45 per cent, Kam said. Still, the range is above the industry average of 1.95 to 2 per cent, he said.

Separately, DBS Group Holdings’ plan to buy a stake in Alliance Bank has stalled as Singapore’s biggest bank is yet to get regulatory approval to start talks, Bloomberg News reported last week. Kam declined to comment on the matter.

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The CEO expects Alliance Bank to clock in loan growth of 8 to 10 per cent in the current financial year, boosted by demand from small-and medium-sized firms. That’s above the bank’s estimate of the industry average of 5 to 5.3 per cent. BLOOMBERG