OREANDA-NEWS. The SIBOR is a benchmark for interbank loans, mortgages and corporate loans. Expectations of a Federal Reserve rate hike later this year and Singapore dollar weakness have propelled the 3-month SIBOR to near seven-year highs.


Source: Thomson Reuters Datastream

Increase in SIBOR “will likely be positive to loan yields… and should see the effects in 2Q15 for the Singapore banks,” Phillip Capital wrote in a March 6 sector report.

“We believe NIMs for the sector will move quite a bit in the coming quarters… 3-month SIBOR… has shot up and there is no reason to believe it will slow,” JPMorgan wrote in a March 16 sector report.

The increase in SIBOR may be a double-edged sword as rising rates could impact debt servicing ability and asset quality, leading to higher NPLs. Some banks may also face higher cost of funds, so those with larger current and savings account (CASA) deposits, amassed during the years of low interest rates, could have an advantage.

NPLs will show up, “but with a lag”, which can be from “a couple of quarters to a couple of years,” and “will be bank-specific in the beginning,” said JPMorgan in its report.

DBS’s NPLs eased to 0.9% in 4Q from 1.1% a year ago and was steady from the previous quarter, while those for OCBC slipped to 0.6% from 0.7% in both the year-ago quarter and 3Q 2014. UOB’s NPLs edged higher to 1.2% in 4Q versus 1.1% a year ago and were unchanged quarter-on-quarter.

Singapore’s economy may expand 2.8% this year, according to the Monetary Authority of Singapore’s survey of 21 private-sector economists and analysts in March, lower than the 3.1% forecast in its December survey. For 1Q, forecasters are now expecting lower growth of 2% year-over-year, versus the previous median forecast of 2.5%. Singapore's February exports sank 9.7% year-on-year, while February output fell a worse-than-expected 3.6%.

Key Financial Ratios for Singapore's Listed Banks             

DBS Group Holdings 4Q14 4Q13 3Q14
Net interest margin (%) 1.7 1.6 1.7
Non-performing loans (%) 0.9 1.1 0.9
Common Equity Tier 1 CAR  (%) 13.1 13.7 13.4
Return on Equity (%) 9.0* 9.7 11.2

*due to goodwill impact from acquisition of Societe Generale’s private banking business in Asia

Oversea Chinese Banking Corporation 4Q14 4Q13 3Q14
Net interest margin (%) 1.7 1.6 1.7
Non-performing loans (%) 0.6 0.7 0.7
Common Equity Tier 1 CAR  (%) 13.8 14.5 13.2
Return on Equity (%) 10.6* 11.9 13.1

*enlarged share base from rights issue

 

United Overseas Bank 4Q14 4Q13 3Q14
Net interest margin (%) 1.7 1.7 1.7
Non-performing loans (%) 1.2 1.1 1.2
Common Equity Tier 1 CAR  (%) 13.9 13.2 14.0
Return on Equity (%) 11.3 12.8 12.9

Source: Banks' 4Q/FY2014 earnings data

Company Name SGX Code Mkt Cap S\$M Last Close S\$ % Price Change YTD % Change (Div. Adj.) [1 year] % Dvd Yld P/E Ratio P/B Value ROE
DBS Group Holdings D05 50,560 20.450 -0.7 27.8 2.8 12.7 1.3 10.7
Oversea-Chinese Banking Corporation O39 42,412 10.600 1.0 16.5 3.4 10.4 3.4 13.1
United Overseas Bank U11 37,270 23.220 -5.3 10.7 3.0 11.8 3.0 11.6
Average       -1.7 18.3 3.1 11.6 2.6 11.8

Source: SGX StockFacts (Data as of 6 April 2015)