The decision to raise the Statutory Reserve Requirement (SRR) by 100 basis points to 4.00 per cent effective July 16, is unlikely to have any visible impact on the credit growth of banks, say research firms.
OSK Research in a statement today, said the move is similar to the increase in interest rates from record lows in early 2010, which did not stifle loans growth.
"Given that we expect the gross domestic product growth to remain intact at 5.6 per cent for 2011, and the current system Loan-to-Deposit Ratio (LDR) of 84 per cent is still off the optimum 90 per cent to 92 per cent level that most banks are comfortable with, we believe any increase in SRR, even to six per cent is unlikely to hamper loans growth," the research house said.
However, OSK Research said, the 100 basis points increase in SRR to four per cent is only expected to negatively impact the earnings of banks under its coverage by an average of 1.1 per cent.
OSK Research maintains the "overweight" call on the banking sector and its top picks are CIMB and Maybank.
In a separate note, MIDF Research said the banking system loans growth will remain robust as the average lending rate had stayed at a historical low level of 5.12 per cent in May 2011, despite the overnight policy rate (OPR) being raised by 25 basis points in the same month.
"Competitive pressure will keep average lending rates low moving forward. The low lending rate will maintain the momentum of the banking system loans growth.
"We believe banks' earnings growth will not be severely affected by the SRR hike with the earnings growth sustained by the positive impacts of OPR hike as well as robust loans growth," the research firm said.
MIDF Research maintained its "positive" call on the banking sector and the banking loans growth forecast of between 10-11 per cent.
"The escalating SRR will not affect the long term growth of the banking system. Thus, we maintain our forecast earnings for banks under our coverage," MIDF Research said.