Singapore banks loan growth to remain strong at 11% this year:DBS

However, earnings growth may not be attractive in 2011 at 7% due to continued NIM pressure.

According to DBS, NIM compression will remain a feature for Singapore banks in 2011. An 11% loan growth would be sufficient to ensure net interest income grows at 11% with a 5bps NIM compression compared to a 3% contraction in net interest income with a 23bps NIM compression.

DBS still expects a visible SIBOR uptick only in 4Q11. An earlier than expected SIBOR uptich would be a key re-rating catalyst for the Singapore banks.

Earnings growth may not be attractive this year due to continued NIM pressure with low SIBOR despite sustainable and strong non-interest income traction but higher expenses and benign provisions.

The SIBOR re-rating coupled with sustainable growth in non-interest income could rev up earnings growth to 17% in 2012.