SINGAPORE • Singapore’s big banks probably boosted interest margins in the third quarter (3Q), thanks in part to the US Federal Reserve (Fed).
Two rate hikes by the Fed earlier this year lifted borrowing rates in Singapore and in Hong Kong, likely increasing net interest income for DBS Group Holdings Ltd and its two largest rivals in the July September period.
That, coupled with growth in their wealth businesses, is expected to help South-East Asia’s largest lenders post an average net income gain of almost 7% from a year earlier, according to analysts surveyed by Bloomberg News.
United Overseas Bank Ltd (UOB) will benefit the most from better margins, with net interest income forecast to rise 13% in the quarter, Goldman Sachs Group Inc analysts forecast in a report this month. Larger rivals DBS and Oversea-Chinese Banking Corp (OCBC) may see gains of 5% and 11% respectively, the analysts said.
The three-month Singapore interbank offered rate (Sibor), which reached its highest level since March 2016 in July, rose by 0.13 percentage point in the 3Q. Local banks rely partly on Sibor to price domestic loans.
Meanwhile, in Hong Kong, the one-month interbank rate rose this month to the highest level since January, on increased debt sales by the Hong Kong Monetary Authority and expectations of higher US rates. That’s bolstered margins at the local units of DBS and OCBC.
OCBC will kick off the earning season on Oct 26. UOB reports on Nov 3, while DBS’ figures are due three days later.