Singapore Banks - DBS Research 2022-10-21: Are Stellar Net-Interest-Margins (NIM) Priced In?

• Net-interest-margin (NIMs) are main driver for Singapore banks' 3Q22 earnings. DBS/OCBC/UOB saw NIM expansion of 12bps/16bps/9bps q-o-q during 2Q22, respectively. During 2Q22 results, Singapore banks have guided positively for FY22F NIMs.
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  • UOB guided for > 20bps expansion over the next two quarters combined.
• Recall that 25bps/50bps hikes in March/May 2022 have already culminated in a 12/16/9bps q-o-q improvement across DBS/OCBC/UOB, respectively, and DBS’s exit NIM for July 2022 already exceeded 1.8%. Given the 75bps Fed hike each in June, July, and September 2022, respectively, we believe 3Q22 NIMs are likely to surprise on the upside as asset yields continue to reprice, strongly driving 3Q22 earnings, with average 3MSIBOR and 3M SORA OIS having seen 125bps and 146bps increases q-o-q, respectively.
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Cost of deposits set to rise with CASA expected to decline, though effect of higher loan yields still dominates.

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Rui Wen LIM DBS Group Research | https://www.dbs.com/insightsdirect/ 2022-10-20 SGinvestors.io

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