
Local interest rates to rise by 50bp-95bp in FY15 and FY16: analyst
This could lead to an even greater expansion in return on equity.
Singapore bank stocks were up by an average of 14% in 2014, outperforming the local market by 8%.
According to a report by Nomura, while the stocks are trading close to their historical mean valuation, higher interest rates expected in the second half of 2015 can provide a strong catalyst for a rerating.
Nomura estimates local interest rates to rise by 50bp in FY15F and 95bp in FY16F, which could lead to a 140bp boost to ROE by the end of FY16F. Historically, this has led the stocks to trade close to +1 standard deviation above their mean valuation.