Guess which big bank will suffer narrow NIMs in Q3

It is also expected to reflect biggest profit downturn.

Results season will be depressing for the three banking giants in Singapore, with DBS expected to post higher declines in profits and tighter net interest margins (NIMs).

According to CIMB analyst Jessalynn Chen, all three banks are slated to see their earnings fall.

"We expect 3Q16 net profit of S$1,000m (-4.9%qoq) at DBS, S$842m (-4.8% qoq) at OCBC, while we expect UOB to outperform on a relative basis at S$786m (-1.5% qoq)," the analyst said.

In terms of NIMs, Chen said there will be diverging trends, with DBS potentially seeing the biggest downside on lower loan-to-deposit ratio (LDR).

"We think DBS could see the largest NIM compression in 3Q as its LDRs have the
furthest room to fall and the higher LIBOR could push up its overall funding cost. We
expect provisions to remain elevated as it catches up on NPL (nonperforming loans) recognition for oil & gas," she explained.

In contrast, Chen stressed that UOB's NIMs could hold up relatively well as it already endured a big hit during the previous quarter.

"We expect UOB to see the most resilient earnings in 3Q as efforts to manage cost of
funds and improve asset yields should limit NIM downside. Its smallest exposure to oil &
gas also lends comfort as worries deepen," she furthered.

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