Malaysian banks set to raise lending rates

Malaysian banks set to raise lending rates

KUALA LUMPUR (AFP): Malaysian banks are set to raise base lending rates (BLR) to match the rising cost of funds after lending rates hit bottom early this month, money-market dealers said yesterday.

The BLR is expected to rise by 0.5 percentage points by the end of the year, the dealers said.

"I think Malaysia's interest rates are still low if compared internationally and the half-percentage point rise will be not be unusually high," said one dealer.

Banking officials said lending rates were expected to gradually creep up as there were signs of a reversal in the interbank rates previous declining trend.

"The downward trend appears to have ended with the Kuala Lumpur Interbank Offered Rates (KLIBOR) firming up in recent weeks," Maybank's managing director Amirsham Aziz was quoted yesterday saying.

Amirsham said he did not expect the BLR to fall any further. "With the KLIBOR having gone up quite substantially, the BLR is expected to increase in a month or two," Amirsham said.

Maybank has led local banks and financial institutions in gradually reducing its BLR -- the lowest rate offered to favored customers -- from 6.75 percent in January to 6.55 percent in October.

"As a bank we have to manage our funding well ... too high or too low a ratio may not be good," he said.

Fund dealers said the KLIBOR's benchmark three-month money rates had firmed to 4.64 yesterday from a low of 4.53 on August 8. The rates had breached 6.5 percent between January and March.

Money-market dealers said the strengthening of the KLIBOR was mainly due to intervention by the central Bank Negara to mop up liquidity in the financial system and curb inflation.