3 big risks Singapore banks are likely to face in 2013

Especially as a 3.2% economic growth is penciled in.

According to DBS, one of the key risks of Singapore banks is prolonged external slowdown filtering through to Singapore economy. 2012 GDP growth came in at 1.3% and the DBS economist is forecasting 3.2% growth in 2013. 

Further external shocks such as a slower than expected growth in China and prolonged recovery of the US economy could dampen growth.

Here are the 2 other risks DBS predicts:

Loan growth lags GDP growth by 4-6 quarters. A prolonged external slowdown could drag Singapore economy further and hence loan growth.

Asset quality deterioration. While we remain positive on asset quality, a sustained slowdown in the domestic economy could spark unemployment concerns, and adversely affect individuals and SMEs.

SMEs form the backbone of most economies and Singapore is no different.

Extended low interest rate environment. Singapore has already been in a low interest rate environment for over 2 years.

We are now expecting interest rates to finally edge up in 2015. But so long as interest rates remain low, NIM will not re-rate.