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Broker's take: Singapore banks to post fatter margins for Q1

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SINGAPORE banks are expected to post stronger margins in it first quarter results due this month, thanks to the gains in benchmark rates, a Maybank Kim Eng report said this week.

"We look forward to sequentially better net interest margins (NIMs) from rising Sibor and SOR," said the client note on Wednesday, referring to the Singapore interbank offered rate and the swap offer rate.

Maybank Kim Eng keeps DBS as its top pick for its biggest exposure to loans with floating rates, though it warned that margins for the bank might be flat in the first quarter. Firmer non-trade loan margins could be overshadowed by tighter trade loan pricing and a larger deployment of US dollar to lower-yielding money markets.

"Its trade loans might have shrunk in the first quarter from intense competition and weaker demand," the brokerage said.

The report argued that on the whole, asset quality remained benign.

"Although sporadic weakness can be expected, we think it is too early to detect any stress as interest rates have only started to rise. Banks had also set aside more buffers for lumpy provisions in the fourth quarter. Liquidity should remain good."

DBS is due to report its first quarter results on April 27, while OCBC and UOB will do so on April 30.