DBS vs OCBC: Who will win big from Fed hikes?

UOB Kay Hian said there will be a total of seven hikes in 2022.

The Federal Open market Committee will hike its Fed Funds Rate seven times in 2022 which UOB Kay Hian said will benefit Singapore’s major banks, DBS and OCBC.

The Fed Funds Rate has already been increased by 25bp, and there will be six more totalling 175bp, including one hike of 50bp, for the remaining of this year, UOB Kay Hian said.

Comparing estimates for the two banks, the analyst said DBS will benefit more from the looming interest rate hikes as they expect the bank’s net interest margin to expand by 4bp to 1.49% in 2022.

UOB Kay Hian also increases its earnings forecast for the bank by 2% to $6.996m for 2022.

The analyst added that the bank’s DPS will likely be at $1.44 in 2022, representing a dividend payout ratio of 53.7%

On the other hand, OCBC’s expected NIM was unchanged at 1.55% in 2022. The 1% increase in its earnings forecast to $5.011m and its expected DPS of $0.56 were also lower compared to DBS.