Trading, investment earnings to fall 14% in 2Q12
Blame it on banks raising wholesale funding instruments.
DBS Vickers said that after a strong 1Q12, 2Q12 trading income are likely to pale in comparison. For one, trading and investment income would likely slip while NIM would remain flat at best. There might be a slight blip in 2Q12 as banks raised wholesale funding instruments and the full impact would kick in from 2Q12.
Here's more from DBS Vickers:
The negative impact however could be partially offset by higher loan spreads for new business loans. Judging from the 2.8% cumulative DBU and ACU loan growth in April and May and assuming a decent 1% m-o-m growth in June would still imply close to 4% q-o-q growth for the banks. As at end May 12, loans grew by 2.2% m-o-m and 22.5% y-o-y; business loans remain dominant while housing loan growth was stable.
Net interest income would remain supported by stable loan growth in 2Q12. Elsewhere, we think expenses will remain flattish q-o-q. All in, we expect earnings to contract 14% q-o-q but y-o-y momentum should remain strong at 8%.