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SINGAPORE: DBS could lag behind its Singapore peers this year. With Singapore interbank rates not expected to move for the next six months, analysts said this could affect DBS's net interest income.
And this, in turn, could make UOB and OCBC more attractive to investors.
Competition among Singapore's banks is expected to heat up this year with lenders looking to drive loans growth in a tight local market.
But analysts said that with the Singapore interbank offered rate not expected to budge for most of 2010, lenders with weak loan to deposit ratios could see a tougher year, as net interest income drops.
Leng Seng Choon, associate director, co-head of research, DMG & Partners Securities, said: "Banks that have a lower loans deposit ratio will actually see lower interbank yields. One of them is DBS, which only has a Sing dollar deposit ratio of only 55 per cent. So in our view, given this low SIBOR, DBS's net interest margins will not improve and in fact could continue to be depressed.”
OCBC currently sports a loan deposit ratio of 80.4 per cent while UOB currently has a ratio of about 82 per cent.
Experts see the other two local lenders pulling ahead this year under such conditions but for different reasons.
Moh Tze Yang, lead analyst, SIAS Research, said: "UOB will still remain the biggest player in terms of commercial loans, retail loans, especially property loans. We are quite sanguine on the prospects of the property sector going forward, and that's where we see UOB actually continuing on in strength."
Mr Leng said: "For OCBC, we see it benefiting from the consolidation of the ING Asia private bank and that would be one area we can see some good growth going ahead into 2010."
Industry observers also see strong growth opportunities in overseas markets for the three banks, but expect competition in Singapore to remain the focus.
And experts said the three local banks might not be able to meet loans growth guidances for this year.
Both DBS and UOB have suggested single growth for 2010, with OCBC hinting at double digit growth.
But observers said if the property market doesn't expand fast enough to support all three banks, volumes and margins could take a hit. - CNA/vm
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