Higher SIBOR to spur growth in Singapore banks' interest income

At the end of June, 3-month SIBOR has risen to 1.115%.

An improvement in Singapore banks' net interest income is expected to be buttressed by the 3-month Singapore Interbank Offered Rate (SIBOR), which has risen 12 bps to 1.115% as at the end of June.

According to RHB analyst Leng Seng Choon this improvement in SIBOR is also expected to support and widen the bank's net interest margin moving forward.

"We have already factored in wider NIMs for the three banks as we go into 2018," Leng noted.

The analyst noted that their sensitivity analysis points to DBS’ earnings rising the most from a SIBOR increase, whilst the other two banks would also gain although at a slightly smaller magnitude.

"The impact from rising Fed Funds rate is starting to show in the 3-month SIBOR’s ascent. Looking ahead over the next 12 months, we maintain our view that the 3-month SIBOR will continue to trend upwards, which would, in turn, contribute to the Singapore banks’ recording wider NIMs and higher net interest income," he noted.