2022e ROEs to improve with bright spots in core fees, credit costs

We forecast loan growth to be mid to high single digits. HSBC economists expect no US rate hikes in 2022e, implying that SG banks’ net interest margins (NIMs) should remain stable. With increased CASA ratios, the banks have become more sensitive to US rate hikes, with DBS the most sensitive. If two US rate hikes occur (what the market is pricing in) and if they happen in 2H22, they would impact DBS’s NIM by 7bp (5% of EPS), OCBC’s NIM by 5bp (c4% of EPS), and UOB’s NIM by 5bp (c4% of EPS). We forecast core fees, especially wealth, to grow by low to mid double digits and credit costs will remain benign. Negatives include opex seeing some labour cost pressure, but we expect cost income ratios (CIRs) to stay at 43-45%.