3 biggest threats to Singapore banks' profits in the near to medium term

Macro environment has been risky for them.

According to Credit Suisse, 1H13 was marked by record profits for Singapore banks driven by better-than-expected strength in noninterest income and loan growth.

But the macro-economic environment in their core markets (mainly Singapore, ASEAN, and India) has seen a visible deterioration over the past few months, thereby increasing earnings risks.

Here's more from Credit Suisse:

While we are unlikely to see significant impact in 2H13, there are material risks to 2014 consensus earnings expectations.

1. Loan growth: Singapore banks’ strong overall loan growth has been helped by a renewed strength in regional trade finance, offshore corporate loan bookings and steady mortgage growth in Singapore.

However, with further downgrades to regional GDP growth estimates and an imminent slowdown in mortgages, the risks are to the downside in the next few quarters.

2. Net interest margins: Investors now appear more optimistic about a potential NIM recovery. We believe the consensus might be getting too bullish about FY14 NIM prospects given: (1) ASEAN loan growth being bound to slow along with further NIM pressure, (2) continued SGD funding competition and (3) stress in USD funding markets.

3. Credit costs: We have probably seen the bottom for this cycle in terms of credit costs. Singapore banks’ managements now expect a normalisation in credit costs going into 2014. Given the historical low net interest margins, profit sensitivity to higher credit costs is now probably higher than the previous cycles.

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia