Brokers' take

DBS Group Holdings | Neutral Target price: S$27.00 March 15 close: S$28.61 RHB Research, March 15

Three indicators point to more Sibor (Singapore Interbank Offered Rate) upside. The market is expecting the Federal Funds Rate (FFR) to be hiked 3-4 times this year. Currently, the spread of the London Inter-bank Offered Rate (Libor) over Sibor is 73 basis points - sharply wider than the 47 basis points historical average over 15 years. If we assume a reversion to mean, there is scope for the three-month Sibor to trend up further.

Thirdly, the Monetary Authority of Singapore's (MAS) April monetary policy statement will likely keep monetary stance unchanged. This means that Sibor is likely to trend up, in line with the FFR hikes. We are forecasting DBS' NIM (net interest margin) for 2018, 2019 and 2020 at 1.82 per cent, 1.88 per cent and 1.96 per cent respectively. This is an uptrend versus 2017's 1.75 per cent. The trend of rising Sibor would contribute to this uptrend.