Banks to sustain NIM expansion despite MAS tightening: analyst

It will be backed by the sequential rise in SIBOR and the FFR hikes.

Banks will continue to see a net interest margin (NIM) despite the tightening policies of the Monetary Authority of Singapore (MAS), RHB said.

In its latest announcement, the central bank revealed that it will slightly increase the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band and maintain the width of the policy band and the level at which it is centred.

“This policy stance was assessed to be appropriate given that the Singapore economy was expected to remain on a steady expansion path, whilst MAS Core Inflation was projected to rise,” MAS said.

Also read: MAS stirs up SGD's appreciation at a faster pace

Despite said factors, banks in Singapore will see NIM expansion through further Federal Funds Rate (FFR) hikes.

“We note, however, that the US President had recently commented that the Federal Open Market Committee (FOMC) had raised US interest rates too aggressively, pointing to the risk that the number of hikes may be fewer than the dot plot suggests,” they commented.

They added that that Q3 sequential rise in 3-month SIBOR is also a positive for banks’ NIM in the said quarter.

Moreover, RHB thinks that UOB will lure more investors through its potential to dish out more dividends.