Why Singapore banks must be less worried over net interest margin dip

There's a more pressing problem.

According to DBS, NIM is likely to continue declining in the next two quarters. But with Basel III rules on liquidity requirements likely to be relaxed, pressure on funding costs should start to ease.

What remains under pressure is loan re-pricing of newer lower yielding loans vs older ones which have run down and persistent excess liquidity with limited
opportunities to be deployed given the low interest rate environment.

Here's more from DBS:

In FY12, we noted that banks have started to shorten the duration of its securities portfolio. In particular, UOB had switched out of its bank securities portfolio (which carried higher yields) to securities which are more liquid but unfortunately carried lower yields.

Mortgage rates have started to be priced up but the impact is unlikely to be seen so soon.

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