For DBS Group Holdings Ltd. went a little bit wrong in the last quarter.

Singapore's largest bank, the last to report profits, posted a profit jump of 76 percent. Net interest margins widened by 13 basis points, and borrowing costs were 71% lower than a year earlier. Investment Banking fluctuated but trading income increased to offset this.

However, the joy of being a bank in a rising interest rate environment could come to an end.

Consider deposits. The cheapest versions of these staples – Singapore Dollar's current and savings accounts – fell 1 percent from June. Including all currencies, total deposits stagnated, costing 10 basis points more than in the previous three months.

The bill continued to run as, among other things, the Bank's trade-related credit yield increased by 22 basis points between June and September. However, pricing is only part of the equation. Quantities are also important. If the recent slump in trade financing volume is an indication, the recovery from multi-year global trade in global trade may not be able to withstand Trump's customs struggle with Beijing.

As far as pricing is concerned, the net interest margin of the three Singapore-based banks – DBS, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. – has not risen by 2 percent after twelve months.

DBS CEO Piyush Gupta expects margins to increase as two to four expected rate hikes by the US Federal Reserve next year are forecasted. However, for almost two years, interbank rates in Hong Kong and Singapore have fallen short of the US Libor. There is a good chance that Singapore Bank borrowing will not recover to the highs reached before the financial crisis by the time the Fed is finalized.

Add to that the renewed hawkish attitude of the Singapore government in the local real estate market, and the good times for the Singapore banks seem to be over.

To contact the author of this story: Andy Mukherjee at

To contact the editor responsible for this story: Paul Sillitoe at

This column does not necessarily reflect the opinion of the editors or the Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist for industrial companies and financial services. Previously, he was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

© 2018 Bloomberg L.P.


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