Banks Scramble For Fixed Deposit With Rates As High As 4.5%
The scramble for banks to balance out the loan-deposit ratio (LDR) has begun, with some now offering fixed deposit rates as high as 4.5% per annum for a 12-month tenure on a promotional basis.
In a survey by The Star on conventional and non-conventional banks, the promotional rates offered were on average 100 basis points higher than rates displayed on the boards. They were also up to 38% higher than the typical fixed deposit rates of 3.25% to 3.30% per annum.
Among the highest promotional rate being offered by a conventional bank is Malayan Banking Bhd that is offering 4.5% per annum for a 12-month tenure. The offer is valid until November 30.
Malaysia Building Society Bhd, a non-conventional bank that is majority owned by the Employees Provident Fund (EPF), is also offering 4.5% per annum on a promotional basis until December 31. The offer is for new deposits placed for an 18-month tenure.
Meanwhile, CIMB Bank is offering 4.3% for a 12-month tenure and Public Bank Bhd is offering a blended rate of 4.3% for a similar period.
Bank Rakyat, a non-conventional bank, is offering a rate of 4.1% per annum for 12 months, while the promotional fixed deposit rates of Bank Islam and Bank Muamalat are at 3.6% and 3.45%, respectively.
Alliance Bank and RHB Bank are offering promotions for different tenures, but are maintaining the board rates from 3.3% to 3.7% for the 12-month period.
Banks are currently under pressure to attract more deposits as under Basel III (a global regulatory framework on bank capital adequacy, stress testing and market liquidity risk), they need to hold a buffer of ostensibly high-quality liquid assets, such as Government bonds, to cover non-operating deposits and protect themselves from a funding run.
The industry’s LDR fell to 90.1% as at end-September from 90.4% in August, meaning that the pace of loans growth is faster than deposits.
Analysts expect that a compression in banks’ net interest margins would add to the already competitive environment in the deposit market.
Meanwhile, Fitch Ratings said a tougher operating environment amid sluggish economic growth, depreciating currencies and softer commodity prices would continue to challenge banks in many parts of the Asean region.
Currency, credit and liquidity risks are increasingly coming into focus, and asset quality is likely to deteriorate, particularly in Indonesia and Malaysia.
That said, most banking systems are coming from a position of strength and are reasonably well-positioned to manage the likely risks.
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