Singapore Banking Monthly – Interest rates finally stabilise
8 Jun 2026-
Singapore interest rates are showing signs of stabilisation with May’s 3M-SORA up 2bps MoM to 1.07%, the first MoM increase in 2 years, and fell by 124bps YoY, the smallest YoY decline in 13 months. Singapore YoY loan growth the highest since post-COVID (Apr26: +7.9%). Banks have maintained low-to-mid-single-digit guidance. CASA rose 14% YoY, and CASA ratio to deposits is stable at 20.5% (Mar26: 20.6%), the second highest in 41 months and a tailwind for banks, lowering funding costs and cushioning NIM compression.
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Maintain NEUTRAL. MAS’s 14 April tightening of the S$NEER appreciation path remains in force, alongside the Fed’s higher-for-longer stance, with markets pricing in zero US rate cuts for 2026. The rate backdrop is NIM-supportive, with stabilisation expected to extend through 2H26 as deposit repricing flows through. Oil retreated about 20% from its 2026 peak in late May amid optimism over a US-Iran ceasefire and easing pressure from imported inflation, though the conflict remains unresolved and markets remain volatile. That volatility continues to benefit capital markets income and wealth management fees, a meaningful offset to NII headwinds. Banks’ dividend yields remain attractive at 4.5%, with ongoing buybacks improving ROE. We prefer DBS (fixed dividend policy with a 1Q26 guidance upgrade) and OCBC (wealth management growth and excess capital). We raise our target prices for all three banks, DBS: S$67.50 (prev. S$61.00), OCBC: S$24.00 (prev. S$22.00), UOB: S$39.00 (prev. S$37.00), as we lower our risk-free rate and equity-risk premium assumptions on a more stable interest-rate environment.
3M-SORA showing signs of stabilisation
Singapore’s interest rates rose 2bps MoM to 1.07% in May, the first MoM increase in
2 years, since May 2024. May’s 3M-SORA fell by 124bps YoY, the smallest YoY decline
in 13 months, and was 6bps lower than the 1Q26 3M-SORA average of 1.13%. May’s
SORA uptick reflects reduced expectations of US rate cuts and firmer domestic
liquidity after MAS’s April policy tightening. We expect SORA to continue drifting
modestly higher into year-end as the gap with US rates closes.
Hong Kong interest rates rose in May, partially reversing the decline from Nov 2025
to Mar 2026. The 3M-HIBOR rose by 31bps MoM and 61bps YoY to 2.81% and is 15bps
higher than the 1Q26 3M-HIBOR average of 2.66% (Figure 1).
About the author
Glenn Thum
Research Analyst
PSR
Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.
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About the author
Glenn Thum
Research Analyst
PSR
Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.


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