Singapore banks' earnings likely to inch a tad 1-2% higher

Even NII will possibly be flat.

According to CIMB, looking ahead, the firm forecasts sector earnings growth to be only 1-2% for 2013.

The banks are guiding for 6-10% loan growth but NII could be flat as falling margins douse some of the volume impact. 

Margins should still contract in 1H13, though there is potential for NII upside later in the year if the yield curve steepens convincingly. Meanwhile, the inflated non-interest income base in 2012 leaves a higher hurdle to beat.

Here's more from CIMB:

The saving grace countering single-digit topline growth is muted cost pressure as well as relatively benign asset quality.

At 1.1-1.2x CY13 P/BV, downside looks capped though the lack of earnings growth means that the banks are unlikely to perform convincingly. We rate the sector a Neutral, with DBS as our only Outperform.

2013 could be the year of the investment bank if equity markets continue to rise and corporates put their cash hoards to expansionary use.