- August’s 3-month SORA was down 21bps m-o-m to 1.71%, the lowest since August 2022 and fell by 189bps y-o-y. Singapore loan growth has continued to climb (Jul25: +6.4%), but we expect a slight slowdown due to the trade war. Banks are guiding low to mid-single digit.
- CASA ratio to total deposits dipped slightly (Jul 25: 19.1%), but a rising CASA of 13% y-o-y would provide a tailwind for the banks from lowered funding costs.
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- The banks’ dividend yield of ~6% remains attractive, as capital return initiatives are expected to continue in FY25, and share buybacks will improve ROE and EPS. DBS (SGX:D05) is our pick for its fixed dividend policy.
3-month SORA continues to decline
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- Hong Kong interest rates continued to recover in August. The 3-month HIBOR rose by 50bps m-o-m to 2.30%, a continuation from the recovery of 13bps in July. August’s 3M- HIBOR declined by 201bps y-o-y and is 28bps lower than the 2Q25 3-month HIBOR average of 2.58%. We believe the decline in HIBOR was due to a surge in capital inflows.
- As investors returned to the IPO market, they converted large amounts of US$ into HKD. This boosted the supply of HKD in the banking system, reducing the need for banks to offer high deposit rates to attract funds.
Singapore loan growth recovery continues
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