The way rates and liquidity shifts affect Singapore banks is through their net interest margins (NIM). The local banks tend to benefit from higher interest rates as they can reprice their loans faster than their deposits. Moreover, the local banks’ funding is mainly through low-cost Casa and fixed deposits rather than wholesale funding.
JP Morgan expects local banks to be hit with 3-5% EPS declines based on three rate cuts to offset a tariff-generated slowdown.
On April 8, JP Morgan issued a banks' report where the analysts expect banks to be impacted by worries on growth, interest rates and liquidity shifts. In the report, JP Morgan says loan volumes, including trade finance loans, fees, wealth management, capital markets, and asset quality of exporters with cash flow risks are also concerns.
