Banks' earnings to take a nosedive in 2H

Blame it on flattish net interest income.

Here's from CIMB:

We expect the sector to report sequentially weaker earnings in 2Q12.

While net interest income should grow on the back of firm credit demand across the region, we think that NII growth will be flattish as competitive pressures halt the recent quarters’ margin expansion trend.

The fall in earnings will largely stem from a decline in non-interest income, a consequence of market volatility
in 2Q12.

We could see weaker wealth management. Investment-related returns from insurance will also be muted and trading will be equally affected.

Stock broking and investment banking fees will reflect low volumes in the weaker 2Q12 market environment though deal-flows did return, so things should not be that bad.

Overheads should not be an issue when foreign banks are shedding staff and expertise is available, albeit with less Asian-centric experience. While asset quality remains sound, leading indicators company bankruptcy petitions
and credit card charge-off rates have been creeping up, and must be a precursor to higher credit charges in 2H12 or 2013.

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