Singapore banks' largest contributor to total income revealed

This sector accounted for 64% of total income.

According to Bank of America Merrill Lynch, net interest income for the three banks is expected to remain loan growth driven with ongoing margin compression offsetting the gains.

Here's more from BofAML:

Key performance indicators to watch will be the slowing loan growth and ongoing compression in margins.

For the Singapore banks, net interest income has remained the largest contributor to total income.

For the quarter ended 30 Jun-12, net interest income contributed 64% to total income.

Individually, the three Singapore banks saw almost similar dominance of net interest income contribution to total income for FY11.

OCBC has a larger noninterest income contribution of 40% due to the impact of its insurance subsidiary, Great Eastern Holdings.

The key driver of net interest income has been loan growth with narrowing margins offsetting some of the growth.

The three Singapore banks saw average loan growth of 2.8% QoQ in 2Q12, which was an improvement from the 1.3% QoQ in 1Q12.

Individually, YTD loan growth for the three Singapore banks ranged between 2.4% and 5.4%.

With all three banks’ management guiding loan growth of highsingle digits for FY12, we believe that DBS and UOB appear to be tracking the guidance given their YTD loan growth of 5.4% and 4.1%, respectively.

OCBC’s YTD loan growth of 2.4% suggests that unless its momentum gathers pace, it may not achieve its guidance.

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