Photographer: Munshi Ahmed/Bloomberg

Fed, Hong Kong Rates Seen Boosting Singaporean Banks' Margins

  • Profit at DBS, rivals rose 7% in third quarter: analyst survey
  • OCBC to kick off earnings season for big banks on Oct. 26

Singapore’s big banks probably boosted interest margins in the third quarter, thanks in part to the Federal Reserve.

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 Southeast Asia’s largest lenders post an average net income gain of almost 7 percent from a year earlier, according to analysts surveyed by Bloomberg News.

United Overseas Bank Ltd. will benefit the most from better margins, with net interest income forecast to rise 13 percent in the quarter, Goldman Sachs Group Inc. analysts forecast in a report this month. Larger rivals DBS and Oversea-Chinese Banking Corp. may see gains of 5 percent and 11 percent, respectively, the analysts said.

The three-month Singapore interbank offered rate, which reached its highest level since March 2016 in July, rose by 0.13 percentage point in the third quarter. 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 HKMA and expectations of higher U.S. 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’s figures are due three days later.

    Before it's here, it's on the Bloomberg Terminal.