Singapore banks reveal 5 biggest factors that affect their outlook

Stable margins, slower residential transactions expected.

Barclays Research noted that the 3 major Singapore banks -- namely, UOB, DBS and OCBC -- have revealed the 5 most important factors that will guide their near- to medium-term outlook.

First, these Singapore banks will see stable margins for the next few quarters with upside medium term. Second, the banks expect high single digit to low teens loan growth for FY14, which is slightly slower than for FY13.

Third, loan/deposit ratios should remain steady at about 90%. Fourth, the recent slowdown in new residential property transaction volumes post the implementation of TDSR should be reflected in 2H14, a time when loans are drawn down.

And finally, Singapore banks should experience stable asset quality with no signs of systemic stress with a few exceptions like in India, for which DBS’s management believes the worst is over, said Barclays.

Overall, "the management teams guided for margins to remain stable near term and for loans to grow at a slower pace next year," said Barclays.

"Uncertainty over the timing of the US tapering may lead the banks to remain focused on funding in case of liquidity tightness in the region. We continue to like the Singapore banks for their defensive qualities and strong funding franchise although near-term positive catalysts are lacking," it added.