Bank earnings to plunge if Fed fails to hike rates

DBS is the most vulnerable.

The market has long been banking on the US Federal Reserve’s expected interest rate hike in 2015. However, Maybank Kim Eng today warned that local banks’ earnings are at risk ib the event that rates remain unchanged until the end of 2015.

Maybank Kim Eng notes that should the Fed fail to hike interest rates, DBS will have the most earnings downside as its earnings could fall short of its estimate by as much as 14%.

“UOB may be better insulated. Our forecasts, especially for FY16E, are significantly higher than consensus. On this basis, consensus appears less optimistic than us on interest rates. This suggests share-price reactions in our coverage universe may be mild when interest-rate hikes do get pushed back,” noted Maybank Kim Eng.