Banks’ will focus on non-interest income amid growing competition

PETALING JAYA: Analysts expect banks’ non-interest income to jump significantly to between RM15bil and RM20bil next year amid compression in net interest margins (NIM) in the banking industry.

NIM is a measure of the difference between the interest income generated by banks and the amount of interest paid out to depositors.

Many analysts anticipate NIMs to remain compressed due to intense competition among banks for mortgage loans and deposits despite being in an interest rate up cycle environment.

An analyst with a foreign bank-backed brokerage said she expected non-interest income business for the country’s eight anchor banks, excluding Islamic banks, this year to be about RM17.5bil compared with RM3.1bil in the first quarter. For next year, she anticipated the figure to rise to RM20bil.

She attributed this to greater focus on foreign exchange, wealth management, bank assurance and capital market activities which would enlarge fee-based income and enhance the non-interest income of banks. Generally, banks derive income from interest and non-interest income.

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A banking analyst with MIDF Research said he expected non-interest income for the industry to reach RM13.7bil this year and hit RM14.6b next year, adding that this figure was applicable to the local anchor banks, excluding foreign banks.

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