RETAIL BANKING | Staff Reporter, Singapore

Chart of the Week: Loan re-pricing boosts Singapore banks' interest income

The net interest income of DBS and UOB may rise 9.3% and 7.4%.

As the net interest margin (NIMs) of Singapore banks widen in the coming months, lenders may cash in on higher interest income brought about by the re-pricing of loans which have already started in late 2018, according to OCBC Investment Research.

NIMs, a common measure of profitability, ranged from 1.72-1.87% in Q4 2018 after hitting a low in late 2016, with headline figures set for further upside. Based on the SIBOR one-month rate, rates have been trending up from 1.517% in September 2018 to 1.763% at end-2018. 

DBS outperformed the other two with its NIM widening 9 basis points in 2018, compared with 5 basis points increase for OCBC, and 1 basis point decline for UOB, data from Moody's show. 

Also readSingapore banks turn to loans to boost earnings as wealth income weakens

"We expect this to be positive for the banks, especially in terms of interest income. We are projecting a 9.3% rise in net interest income for DBS and a 7.4% rise for UOB in FY19. As a result, we expect the Net Interest Income to account for 68% of total revenue in FY19, up from 63-64% in FY16 and FY17," analyst Carmen Lee said in a report.

UOB is also set for a similar boost with net interest income set to form 68% of total revenue versus 62% in FY16 and FY17. 

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