DBS vs OCBC: Which bank will be the bigger winner from an upcycle in interest rates? 

An analyst said one of the banks will have an earnings growth of 15.9% in 2023.

Another 75bp rate hike is expected on 27 July from the Fed, and with Singapore’s interest rates moving in tandem with the United States, banks in the country are expected to benefit from the increase.

Between DBS and OCBC, UOB Kay Hian said the bigger winner from another rate hike from the Fed would be the former.

Based on the analyst’s estimate, DBS’s net interest margin (NIM) would expand by 9bp to 1.54% in 2022 and 43bp to 1.97% in 2023, should there be four rate hikes in 2H22 totalling 200bp. 

UOB Kay Hian said the intensity of hikes could ease after the FOMC meeting on 21 Sep 22, following the expected 75bp rate increase on 27 July.

Apart from the NIM, the analyst said DBS’ earnings will likely grow by 15.9% in 2023 and 9.7% in 2024. Meanwhile, the bank’s dividends per share (DPS) will likely clock in at $1.44 in 2022 and $1.48 in 2023, representing dividend payout ratios of 56.4% and 50.0% respectively. 

OCBC likewise will see expansion in its NIM and earn rights growth, though lower than that of DBS.

According to UOB Kay Hian, OCBC’s NIM will likely expand by 6bp to 1.61% in 2022 and expand 27bp to 1.88% in 2023, whilst its earnings will grow by 11.0%  in 2023 and 6.1% in 2024.

“We expect DPS of S$0.56 in 2022 and S$0.60 in 2023, which represents a dividend payout ratio of 50.2% and 48.4% respectively,” the analyst added.