3M-SOR and 3M-SIBOR reach new highs in July
Interest rates continued to increase in July. The 3M-SOR was up 64bps MoM to 2.47%, while the 3M-SIBOR was up 51bps MoM to 2.02%. It is the highest interest rates have been for the past 7 years. The 3M-SOR is 103bps higher than its 2Q22 average of 1.44% and has improved by 228bps YoY. The 3M-SIBOR is 80bps higher than its 2Q22 average of 1.22% and has improved by 159bps YoY (Figure 1).
Figure 1: Interest rates reach new highs in July
Source: Bloomberg, PSR
2Q22 RESULTS HIGHLIGHTS
1.NII and NIM rise across the board
DBS’ 2Q22 earnings of S$1.82bn are in line with our estimates, and 1H22 PATMI is at 47% of our FY22e forecast. 2Q22 DPS is up 9% YoY at 36 cents, above pre-pandemic 33 cents. NII grew 17% YoY to S$2.5bn due to NIM increase of 13bps YoY to 1.53% and continued loan growth of 7% YoY. NIM improvement was mainly due to the rising interest rates as the impact of interest rate hikes was more fully felt. Management has lifted NIM guidance to 1.70-1.75% for FY22e (from 1.58-1.60%).
OCBC’s 2Q22 earnings of S$1.48bn were in line from higher net interest income, non-interest income and lower allowances. 1H22 PATMI is at 47% of our FY22e forecast. 2Q22 DPS rose 12% YoY to 28 cents. NII grew 16% YoY led by loan growth of 8% YoY and NIM improvement of 13bps YoY to 1.71%. NIM expansion was mainly due to asset yields outpacing higher funding costs amid a rapidly rising interest rate environment. OCBC has guided for NIM of 1.70% (from 1.5-1.55%) for FY22e.
UOB’s 2Q22 earnings of S$1,113mn were in line with our estimates due to higher net interest margin and healthy net interest income growth. 1H22 PATMI is 43% of our FY22e forecast. NII grew 18% YoY, led by continued loans growth of 8% YoY, while NIM improved 11bps YoY to 1.67%. Loan growth QoQ was mainly from term and housing loans, while YoY loan growth was broad-based across geographies as business regained momentum. UOB has lowered its guidance to mid-single digit loan growth for FY22e (previously mid to high single-digit).