Chart of the Day: This graph shows that Singapore banks' NIM hit the bottom in 4Q13

Will it rebound soon?

According to Maybank Kim Eng, Singapore banks’ earnings performance was a mixed bag in 4Q13 but the broad trends were unmistakably encouraging.

First, all three banks under our coverage delivered sequentially higher net interest margin (NIM), led by UOB (+3bps).

Here's more from Maybank Kim Eng:

Second, credit quality stayed benign with no signs of asset quality stress. Third, loan growth came in stronger than expected (+18%) in 2013 with trade loans the main driver. Last but not least, SGD liquidity profile remained strong while USD loan-to-deposit ratio (LDR) improved to 102.3% (2012: 117.7%).

The banks managed to chalk up an impressive 55.1% growth in their combined USD deposits in 2013, demonstrating their ability to raise substantial USD deposits in a short period.

Bank managements believe that industry NIM has reached a bottom in 4Q13 and should hover around the current levels in 2014.

We have conservatively factored in a further contraction of 5bps for 2014 as we expect loan margins to remain under pressure due to competition (Figure 3). In our view, sector NIM may rebound in 2015 in tandem with the rise in SGD SIBOR. We project three-month SGD SIBOR to increase to 1.0% by end-2015 and 2.0% by end-2016 (currently 0.4%).