On the other hand, net interest margin (NIM) expansion is likely to offset much of the weakness. DBS’s management has articulated that a 100 basis-point (bps) rise in interest rates over a 12-month period would provide around $1.8 billion to $2 billion more in net interest income.
Undoubtedly, the price performance and valuations of our local banks have been somewhat burdened by geopolitical tensions, war, famine and inflation. Rising interest rates may be negative for the general population, and for wealth management and equities in general, but for the local banks they are a definite plus. Hence, banks’ 2Q2022 results could allay some concerns as the market awaits further guidance.
It’s no surprise then that CGS-CIMB, in a recent update, is expecting DBS Group Holdings 2Q2022 results — to be announced on Aug 4 — to be affected by softer wealth management income, lower investment gains as interest rates rise, and upwards normalisation of credit costs.
