Singapore Banks - OCBC Investment 2024-09-25: Isn’t Higher Rates Bad For Banks? What Is Supporting This Rally?

• The US Federal Reserve (Fed) recently cut rates by 50bps, and the conventional view is that this should impact net interest margins (NIM) and the banks’ overall profitability in the coming years. However, Singapore banks outperformed in the past few weeks with both DBS share price and UOB share price hitting new all-time record highs.

Why are Singapore banks’ shares up?

• - Read this at SGinvestors.io -
• As a recap, Singapore banks posted record profits in FY23, supported by the increase in net interest income.
  • Net interest income rose 25% for DBS in FY23 to S$13.6b.
  • - Read this at SGinvestors.io -
• Both sets of improved results were largely driven by the increase in NIM.
  • For DBS, NIM went up from 1.75% in FY22 to 2.16% in FY23 – the first time it crossed 2% since FY09.
  • UOB saw its NIM improved from 1.91% in FY22 to 2.28% in FY23 – the highest in 14 years!
• Against this strong surge in net interest income, this component accounted for 68% of DBS's and 69% of UOB’s total income in FY23.

Isn’t higher rates bad for banks?

• Read more at SGinvestors.io.

Carmen Lee OCBC Investment Research | https://www.iocbc.com/ 2024-09-25 SGinvestors.io

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