Singapore Banks Hold Steady as US Fed Hikes Interest Rates Again

The US Federal Reserve's decision to raise interest rates by 25 basis points on September 16 had a mixed impact on Singapore banks. While it provided a more favorable earnings backdrop for local lenders, their share prices did not see significant gains.

UOB rose 1.26% over the week to close at $41.78 on September 18, while DBS slipped 0.18% to $76.86 and OCBC fell 0.7% to $31.38. The rate hike supported local interest rates and slowed the compression in net interest margins (NIMs) for Singapore banks.

Analysts expect further rate hikes, with RHB predicting one more 25-basis-point increase and UOB anticipating two more hikes in December 2026 and the first quarter of 2027. A higher-for-longer US rate environment could provide some relief to NIMs for Singapore banks.