Singapore Banks - DBS Research 2023-07-20: What Lies Ahead As Earnings Peak?

• We do not see any immediate catalysts on the horizon for Singapore Banks, although valuations of OCBC (SGX:O39) and UOB remain undemanding.
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• We believe further rate hikes will limit loan yields upside as DBS Group Research expects a final 25bps rate hike to take place in July, with competition for high quality loans on the rise.

Further smaller rate hikes limit loan yields upside.

• As NIM started to decline during 1Q23, DBS/OCBC/UOB saw NIM movements of +7/-1/-8bps during 1Q23, compared to +15/+25/+27bps during 4Q22 to 2.12%/2.30%/2.14%. We believe further rate hikes will limit upside to loan yields as competition for high quality loans starts to rise, with Fed continuing to deliver smaller 25bps rate hikes during March and May 2023.
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Cost of deposits to continue weighing on NIM even as fixed deposit rates start to decline.

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Rui Wen LIM DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-07-20 SGinvestors.io

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