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Competition in the deposits sector affects malaysia banks

A weaker economic growth has been suspected in the banking industry in the second half of the year due to the  prevailing deposit competition. The profits for the sector will be delayed until 2019 as the Non-interest Income (NOII)  and Net Interest Margin (NIM) is expected to gain stability by 2019. NIM is defined as the difference between the  interest earned by the banks and the interest paid to the depositors. A banking analyst of AmBank Research said that there is a tough competition on deposits. The deposit repricing that occurred in January 2018 due to overnight policy rate increase has targeted banks’ funding cost. The result of the hike in overnight policy rate is the decline of NIM in the second half of the financial year 2018.  The deposits competition may lead way to higher funding costs and, in turn, the adoption of the Net Stable Funding  Ratio (NSFR). Another analyst said that the competition for retail and SME deposits may see another hike by the NSFR  im

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