3M-SORA picks up; 3M-SIBOR growth dips in February
Interest rates continued to flatten in February. The 3M-SORA was up 16bps MoM to 3.21%, while the 3M-SIBOR was down 4bps MoM to 4.21%. The SORA MoM increase was an improvement from the 3bps decline in January but still the smallest growth recorded since May 2022, while the SIBOR MoM decline was the first decline since September 2020. February’s 3M-SORA improved by 298bps YoY and was 53bps higher than the 4Q22 3M-SORA average of 2.68%. February’s 3M-SIBOR improved by 374bps YoY and was 25bps higher than 4Q22 3M-SIBOR average of 3.96% (Figure 1).
4Q22 RESULTS HIGHLIGHTS
DBS’ 4Q22 earnings of S$2.34bn were above our estimates, and FY22 PATMI was 104% of our FY22e forecast. 4Q22 DPS was up 17% YoY to 42 cents with an additional special dividend of 50 cents; full-year FY22 dividend rose 67% YoY to 200 cents. NII spiked 53% YoY to S$3.28bn on NIM expansion of 62bps to 2.05% and loan growth of 1% YoY. Management has guided for a peak NIM of 2.25% for FY23e with a downside risk of 5-7bps due to outflows to T-bills, strengthening SGD and higher funding costs.
OCBC’s 4Q22 earnings of S$1.31bn were below our estimates from lower fee and insurance income offset by higher net interest income. FY22 PATMI was 89% of our FY22e forecast. 4Q22 DPS was up 43% YoY to 40 cents; full-year FY22 dividend rose 28% YoY to 68 cents. NII grew 60% YoY underpinned by loan growth of 2% YoY and NIM surging 79bps YoY to 2.31%. NIM expansion was mainly due to loan yields rising faster than the increase in funding costs on the back of the rapid rise in interest rates during the year. OCBC has guided for a NIM in the region of 2.10% for FY23e.
UOB’s 4Q22 adjusted earnings of S$1,398mn were slightly below our estimates due to lower fee income and higher allowances offset by NII growth. FY22 adjusted PATMI was 96% of our FY22e forecast. 4Q22 DPS was up 25% YoY to 75 cents; full-year FY22 dividend rose 13% YoY to 135 cents. NII was up 53% YoY despite a slowdown of loans growth to 3% YoY, while NIM surged 66bps YoY to 2.22%. Loan growth YoY was broad-based across most territories, while the consolidation of Citi assets added 11% to the ASEAN loan book in 4Q22. UOB has guided for NIM of 2.20% and maintained its guidance of mid-single digit loan growth for FY23e.
DBS fee income fell 19% YoY mainly due to weaker market sentiment affecting wealth management and investment banking, which more than offset increases in card and loan-related fees. WM fees fell 31% YoY to S$262mn and investment banking fees fell by 64% YoY to S$23mn. Nonetheless, card fees improved 22% YoY to S$245mn as travel spending continued to recover towards pre-pandemic levels. Loan-related fees were stable at S$79mn.
OCBC’s fee income declined 25% YoY mainly due to a drop in wealth management fees as customer activities were subdued amid risk-off investment sentiments globally. Nonetheless, OCBC’s wealth management AUM was higher at S$258bn (4Q21: S$257bn) mainly driven by continued growth in net new money inflows which offset negative market valuation. A key concern was an increase in Greater China NPLs by 21% QoQ mainly due to the downgrade of a corporate relationship in Hong Kong.
UOB’s fee and commission income fell 16% YoY, largely due to lower wealth and fund management fees as investor sentiment remained subdued alongside a seasonally softer quarter. Loan-related fees also fell 17% YoY this quarter. Nonetheless, credit card fees were higher 40% YoY mainly from higher customer spends which were boosted by the Citi consolidation.
Singapore loans growth declined in January
Overall loans to Singapore residents – which captured lending in all currencies to residents in Singapore – fell by 1.89% YoY in January to S$807bn. This was below our estimate of mid-single digit growth for 2023 as the rise in interest rates started to be more fully felt by consumers.
Business loans fell by 2.91% YoY in January, as business loans dipped by 0.99% for the month. Loans to the building and construction segment, the single largest business segment, grew 0.62% YoY to S$170bn, while loans to the manufacturing segment fell 8.04% YoY in January to S$23.9bn.
Consumer loans were down 0.22% YoY in January to S$311.5bn, as dips in other segments were offset slightly by strong loan demand in the housing segment. Housing loans, which make up ~70% of consumer lending, grew 3.28% YoY in January to S$222.8bn for the month.
Total deposits and balances – which captured deposits in all currencies to non-bank customers – grew by 5.90% YoY in January to S$1,719bn. The Current Account and Savings Account (CASA) proportion dipped slightly to 20.0% (Dec22: 20.4%) of total deposits, or S$344bn, as there was a continued move towards Fixed Deposits due to the high interest rate environment.
Hong Kong loans growth continues to fall
Hong Kong’s domestic loans growth declined 2.56% YoY but rose 1.26% MoM in January. The YoY decline in loans growth for January was lower than the decline of 2.99% in December, while the MoM loans growth of 1.26% was the first MoM growth since May 2022.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
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.
