3M-SORA stable while 3M-HIBOR declined in April
Singapore interest rates were up 1bp to 3.65% in April, having maintained these levels for the past three months. Nonetheless, April’s 3M-SORA rose by 5bps YoY but was 1bp lower than the 1Q24 3M-SORA average of 3.66% (4Q23: 3.74%). Notably, this is the smallest YoY increase since March 2022.
Hong Kong interest rates dipped in April. The 3M-HIBOR was down 16bps MoM to 4.54%, reversing the increase of 2bps in March. Nonetheless, April’s 3M-HIBOR improved by 95bps YoY but was 19bps lower than 1Q24 3M-HIBOR average of 4.73% (Figure 1).
Figure 1: SORA stable while HIBOR declined in April
1Q24 RESULTS HIGHLIGHTS
DBS’ 1Q24 adjusted earnings of S$2.96bn was slightly above our estimates due to higher NII, fee income, and other non-interest income offset by higher expenses. 1Q24 adjusted PATMI is 28% of our FY24e forecast. NII rose 7% YoY to S$3.5bn due to a 2bps NIM increase to 2.14% (4Q23: 2.13%) as interest rates continue to remain high and loan growth grew modestly by 2% YoY. DBS has increased the FY24e guidance it provided in the previous quarter, with net interest income to be “modestly better” than FY23, with NIMs to sustain an FY23 exit NIM level of 2.13%. Low-single-digit loan growth guidance for FY24e is maintained. As a result, DBS is guiding for PATMI to be above FY23 levels.
OCBC’s 1Q24 earnings of S$1.98bn were slightly above our estimates from higher non-interest income from growth in fee, insurance, and trading income and moderate growth in NII offset by higher allowances and expenses. 1Q24 PATMI was 28% of our FY24e forecast. NII growth of 4% YoY was led by a 5% increase in average assets and loans growth of 2%, which was offset slightly by NIM moderating by 3bps YoY to 2.27%. NIM moderation was mainly from higher funding costs, which offset the increase in asset yields. OCBC has provided FY24e guidance for NIM to be at the higher end of 2.20% to 2.25%, with 1Q24 exit NIM currently at 2.27% and loan growth of low-single-digit for FY24e.
UOB’s 1Q24 adjusted earnings of S$1.57bn met our estimates as higher fee income and other non-interest income were offset by lower-than-expected NII and higher expenses. 1Q24 adjusted PATMI was 25% of our FY24e forecast. NII dipped 2% YoY from NIM falling 12bps YoY to 2.02% mainly due to loan margin compression due to competition for high-quality credits and high cost of funding as the impact from the recent deposit repricing has yet to be felt. UOB has guided loan growth to a low single-digit and NIM to hold above 2% for FY24e. UOB expects to see demand for loans pick back up with rate cuts expected in 2H24, and we expect a slowdown in the first few quarters of FY24 as rates remain high, with the recovery expected in 2H24.
DBS’ 1Q24 fee income rose 23% YoY to a record level of S$1,043mn. The growth was led by wealth management (WM) fees surging 47% YoY from stronger market sentiment and an increase in assets under management (AUM). Card fees rose 33% YoY from higher spending, while loan-related fees grew 30% YoY. DBS has maintained its guidance of double-digit fee income growth for FY24e, which WM and credit card fees will sustain. The growth was mainly from a shift in investor sentiment due to the expectation of rate cuts, where demand and funds were moved from deposits into investment products.
OCBC’s 1Q24 fee income rose 6% YoY mainly due to growth in wealth management fees (+20% YoY) offset slightly by lower loan and trade-related fees (-6% YoY), lower brokerage and fund management fees (-5% YoY) and stable investment banking fees. Furthermore, the Group’s 1Q24 wealth management income grew 19% YoY and contributed 36% to the Group’s total income (1Q23: 32%). OCBC’s recent acquisitions of PT Bank Commonwealth in Indonesia will accelerate its growth in ASEAN. Therefore, we are expecting fee income growth of 12% for FY24e.
UOB’s 1Q24 fees grew 5% YoY, largely due to higher loan-related fees of S$244mn (+3% YoY) and a pickup in wealth management fees to S$164mn (+6% YoY) due to a return in investor confidence. Notably, wealth management assets under management (AUM) grew 11% YoY to S$179bn. Credit card fees continued to grow, reaching S$90bn in 1Q24 (+11% YoY) but normalized from last quarter’s seasonal high (-28% QoQ). As such, they have guided for double-digit fee income growth in FY24e, which could add ~S$220mn to revenue.
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Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.
