Analysts' optimism for the sector is dampened as signs of slowing revenue growth in 2Q raise concerns.
According to CIMB, Sector NII fell 1.5% qoq. Loans grew 2.8% qoq. Margin compression from lower lending yields and funding competition led to a decline in sector NII. NIMs fell 5-9 bps across the sector.
Loans growth outpaced deposits in the quarter. LDR crept up from 84.3- 86% in 1QFY12 to 86.3-89% in 2QFY12. S$ liquidity remained comfortable for all three banks, with LDR at 67-89.5%, CIMB added.
"Concerns on asset quality were unfounded in 2QFY12. While banks are turning cautious in 2H12 and have taken to making stringent re-classifications, asset quality has not deteriorated. NPL ratios remained low at 0.9-1.4%. Provisioning remained largely stable at 125-137%."
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