Rising rates to favour OCBC and UOB over DBS

OCBC gains about S$6m per 1 basis point movement in the rates of four currencies.

OCBC and UOB are expected to benefit from the rising interest rate environment, whilst DBS would lag them, according to RHB’s Singapore Research team.

The US Federal Reserve has recently raised the federal funds rate by 25 basis points (bps), whilst the 1-month and 3-month Singapore overnight rate averages (SORAs) have ticked up by an average of 1.24% or between 22 to 28 bps.

Should the balance of risks materialise, and the US Fed deliver two hikes, the 3-month SORA could reach 1.50% by end Q4 2026, RHB said.

Amongst the three banks, OCBC has guided for net interest income (NII) sensitivity of S$6m per 1 bp move in the rates of the four major currencies it is exposed to, Singapore dollar (SGD), Hong Kong dollar (HKD), Malaysian ringgit (MYR), and the US dollar (USD).

UOB’s management did not provide any recent NIII sensitivity information but guided that its books are more sensitive to SORA movements, and 80% of its loans are on a floating rate basis, RHB said.

DBS meanwhile is likely to see a positive impact if SGD rates rise but will lose value if USD rates rise due to the bank’s net liability position.

“Hence, while we revised up our [net interest margin] outlook for OCBC and UOB, we have left our DBS numbers unchanged at this juncture, pending further updates,” RHB said.

RHB expects OCBC and UOB’s profit after tax and minority interest (PATMI) to rise by 4% to 6%, and 4% to 5%, respectively between FY2027 and FY2028.