Singapore Banking Monthly – NII growth offset fee income decline March 7, 2023 260

  • February’s 3M-SORA was up 16bps MoM to 3.21%, 3M-SIBOR was down 4bps MoM to 4.21%.
  • 4Q22 results, banks’ NII rose 55% YoY as NIM improved by 69bps with loans growth of 2%. Fee income was a drag, declining 20%. Banks are guiding for NIMs of 2.10-2.25% (FY22: 1.75%-1.91%) and mid-single digit loans growth for FY23e.
  • Singapore domestic loans dipped 1.89% YoY in January, below our estimates, while Hong Kong’s domestic loans declined 2.56% YoY in January. The CASA balance dipped slightly to 20.0%.
  • Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with possible upside surprise due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates [SGX SP, BUY, TP S$11.71].



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).




  1. NII and NIM continue to surge

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.

  1. Fee income continued to decline in 4Q22

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.

Notify of
Inline Feedbacks
View all comments

About the author

Profile photo of Glenn Thum

Glenn Thum
Research Analyst

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.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!