Before the Fed began its rate cuts, all three Singapore banks have already been taking active steps to protect their net interest income (NII) by hedging and adding duration and fixed rate assets to their portfolios, to mitigate the impact. As such, NII sensitivity is now lower than it was at the beginning of the rate hike cycle, notes RHB.
RHB Bank Singapore has maintained its “neutral” stance for Singapore banks after the US Federal Reserve (Fed) lowered its rates by 50 basis points (bps) on Sept 18. Among the banks, DBS Group Holdings remains the team’s top pick for capital management with a target price of $41.40. Amidst “flattish earnings” and as the interest rate cycle turns, RHB turns their focus to dividend yields and dividend per share (DPS) growth.
Following the rate cuts, RHB is maintaining its earnings forecast but expects the sector’s profit after tax and minority interests (PATMI) for FY2024 to increase by 6% y-o-y, supported by mid-single-digit operating income growth and stable credit costs. However, RHB expects that FY2025 PATMI will remain flat, amidst net interest margin (NIM) compression and moderation of non-interest income (non-II) growth.
