Find out what the loan growth drivers of DBS, OCBC, and UOB are

But overall net interest income is feared to slow in 2013.

According to CIMB, in 2012, margin compression was a major net interest income headwind. This was mitigated by relatively healthy loans growth and net interest income held up over the past four to five quarters. Average loans grew around 7-8% across the sector in 2012.

Here's more from CIMB:

However, we think that this is likely to moderate in 2013. Management of three banks gave loans growth guidance of 6-10%; lower than the previous year’s high to double digit growth guidance. This is likely to come from overseas markets, given the recent slew of measures to cool asset inflation in Singapore.

S$ mortgage demand, a major loans growth driver in 2012 is likely to moderate in 2013, after the latest property cooling measures. We think that business loans in Singapore is likely to slow in 2013, as companies grapple with higher labour costs as they reduce reliance on foreign labour and focus on increasing productivity.

From our channel checks with contacts in MNCs, we understand that it is already getting increasingly difficult to renew working visas for skilled foreign labour and many have been sent packing home.

We think that loans growth drivers will be very different for the three banks. DBS should benefit from a gradually reviving Chinese economy – trade financing related loans have picked up in late Dec and earnings momentum is likely to spill over to 2013.

Additional net interest income growth could also come from Indonesia, if its proposed acquisition of Bank Danamon is approved. Similarly, OCBC is focusing efforts in corporate and SME Indonesia and sees major opportunities in bridging inter Sino-ASEAN expansion.

UOB expects loans in regional markets to drive loans growth in 2013.

NIMs declined 5-8bps in 4Q12. On a full year basis, margins declined 10bps for DBS, 15bps for OCBC and 19 bps for UOB. This was the consequence of 1) stiff competition pushing down lending yields; 2) declining investment securities yield and 3) deposit competition inflating funding costs.

We think that the margin environment could improve in 2013 and NIMs could bottom-out by 1H13. A steepening yield curve could provide some respite for investment yields in 2H13.

Both DBS and UOB have moved down the yield curve in anticipation of further steepening, preferring to sacrifice near-term margins in return for bond portfolio value protection in coming quarters.

 Competition for mortgage has also let up in December and mortgage margins could look prettier later into 2013. Funding cost pressure should ease in 2013 as Basel III LCR requirements have been relaxed, which means that competition for deposits is unlikely to be as intense as 2012.

In 2012, for DBS, OCBC and UOB, net interest income grew 9.5%/9.9%/6.5% respectively. In view of moderating loans growth and continued margin compression, we forecast net interest income growth of 1.8%/2.1%/2.7% for DBS, OCBC and UOB in 2013.