“The sharp decline was exacerbated by huge deposit inflows experienced during the quarter as well as a lagged repricing of deposits. As such, we are expecting NIM to recover slightly in subsequent quarters with repricing in deposits and liquidity outflow,” writes Tay in a broker’s report issued on August 24.
Like the deep roots of a mighty oak amid a ferocious storm, the strong capital reserves of Singapore’s banks should stabilise their credit position despite a harrowing 2Q20. PhillipCapital research analyst Tay Wee Kuang has therefore maintained his “neutral” call on the Singapore banking sector. Recovery in business, he says, will benefit non-interest income as banks are likely to be past troughs in income levels.
Local banks reported sharp declines in net interest margin (NIM) in 2Q20 with double digit declines in base points across the board y-o-y. The quarterly average NIM of 1.57% across all banks is approximately 10 base points than the previous quarterly low of 1.65% in 2013 despite similar interest rates.
