3 biggest issues in 2014 that will keep Singapore bank players awake at night

Net interest margin may be a headache.

According to Maybank Kim Eng, as 2014 approaches, it expects the market to focus on three key issues.

Here's more:

Asset-quality risk. After several years of strong loan growth amid soaring real-estate prices, every now and then, there is concern over credit quality erosion.

Asset quality has remained surprisingly strong over the past three years, as reflected in the low credit charges and non-performing loan (NPL) ratio. Any credit quality slippage would dampen earnings growth.

Liquidity risk. With domestic banking unit (DBU) loan-to-deposit ratio (LDR) at 101.8% at end-Sep 2013, system liquidity is at its tightest since Oct 1998. This carries two key negative implications:

 Loan growth could be curbed.
 Irrational competition for deposits.

Direction of net interest margin trend. The industry net interest margin (NIM) has been on a consistent decline over the past few years as interest rate remained depressed. With a higher probability of a tapering of quantitative easing sometime in 2014, the key question is whether industry NIM would start to trend upwards.