Fed Hike Boosts UOB Shares as Singapore Banks Benefit from Higher Rates

The US Federal Reserve raised interest rates for the first time since 2023 on September 16, hiking its benchmark rate by 25 basis points to a target range of 3.75 to 4 percent.

This move provided some relief to net interest margins (NIMs) for Singapore banks, as elevated US rates can feed through to Singapore interest rates, allowing them to reprice loans at higher rates and support net interest income (NII).

UOB shares rose 1.26 percent across the week to close at $41.78 on September 18, while DBS slipped 0.18 percent to $76.86 and OCBC fell 0.7 percent to $31.38.

Macquarie Equity Research's Jayden Vantarakis noted that UOB has the most to gain from higher Singapore rates due to its greater exposure to Singapore-dollar lending, with about 43 percent of its loans denominated in Singapore dollars compared to 37-38 percent for DBS and OCBC.