- May 3M-SIBOR was up by 27bps MoM, the highest in 26 months.
- Hong Kong’s domestic loans grew by 1.73% YoY but fell 0.69% MoM in April. Malaysia’s domestic loans growth increased 98% YoY and 0.41% MoM in April.
- Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive with upside surprise due to excess capital ratios. Improving economic conditions and rising interest rates remain tailwinds for the banking sector. SGX is another beneficiary of higher interest rates.
3M-SOR and 3M-SIBOR up in May
Interest rates continued to increase in May. The 3M-SOR was up 41bps MoM to 1.47%, while the 3M-SIBOR was up 27bps MoM to 1.21%. The 3M-SOR is 93bps higher than its 1Q22 average of 0.54% and has improved by 120bps YoY. The 3M-SIBOR is 68bps higher than its 1Q22 average of 0.53% and has improved by 77bps YoY (Figure 1).
Five digital banking licenses awarded in Malaysia
Malaysia’s central bank, Bank Negara Malaysia (BNM), announced the five digital banking license winners on 29 Apr. They are Grab Holdings; Sea Group; Malaysian mobile carrier Axiata’s fintech unit Boost Holdings; AEON Financial Service and KAF Investment Bank. BNM has capped the digital banks’ assets at RM3bn (S$0.94bn) during the foundation phase, which could be mid-2026 to mid-2029. This means the total digital bank balance sheets will be less than 1% of the Malaysian banking system. The digital banks are more likely to focus on less capital-intensive areas, like payments and remittances, distribution of third-party investment and insurance products.
OCBC hit with additional S$330mn capital requirement over SMS phishing scam response
The Monetary Authority of Singapore (MAS) has imposed an additional capital requirement of about S$330mn on OCBC for its deficiencies in responding to a wave of spoofed SMS phishing scams in December 2021. The additional penalty will impact OCBC’s CET1 ratio by 0.21%, which would mean OCBC’s CET1 ratio would now be 14.99%. Nonetheless, this would not affect the bank too much as it still has a healthy CET1 ratio, which at 14.99% is still higher than DBS (14.0%) and UOB (13.1%).
Hong Kong loans growth stagnates while Malaysia’s loans growth rebounds in April
Hong Kong’s domestic loans grew by 1.73% YoY but fell 0.69% MoM in April. The MoM dip in loans growth for April was the lowest since Dec 2021 and the YoY loans growth declined by 51bps from March’s loans growth of 2.24%.
Malaysia’s domestic loans growth was 4.98% YoY and 0.41% MoM in April. The increase YoY in April was the highest since Mar 2019 and an increase of 42bps from March’s loans growth of 4.56%, while the increase MoM was a decline of 17bps from March’s loans growth of 0.58%.