Islamic banks to gain from better LCR

KUALA LUMPUR: The average liquidity coverage ratio (LCR) for Islamic banks in Malaysia has improved, which should help reduce funding pressure in the near future, says Maybank Investment Bank (Maybank IB) Research. In a note, the research house said that from a pre-pandemic average of about 152%, the average LCR for Islamic banks dipped to a low of about 127% in October 2022. “Since then, Islamic banks have built back their LCR to a more normalised level of 153%, back to being on par with those of conventional commercial banks,” it said.

Maybank IB Research added that with improving liquidity conditions and easing price competition ahead, net interest margins (NIMs) are expected to recover in 2025. This improvement is supported by rising current account and savings account deposits and enhanced LCRs at Islamic banks. “What is encouraging is that these indicators point to improving liquidity positions, which should help ease NIM pressure in the coming quarters.



“Moreover, some banks have pledged to scale back on mortgage price competition, which should also ease pressure on lending yields,” it said. — Bernama.