Fearless forecast: Guess which bank will beat peers in 4Q13 earnings race

Your guess is as good as ours.

According to CIMB, the three Singapore banks will report their results on 14 Feb. CIMB's checks suggest that they have not noticed any liquidity strain or a pick-up in NPLs, since the emerging markets went into a tailspin two weeks ago.

Here's more:

As the Fed tapering and a deterioration in the Thai political situation only started in late Dec, the banks said that it is too early to see any adverse impact. Hence, we believe that 4QFY13 is likely to be uneventful.

What We Think
Likely 4Q13 trends. The guidance means that the 3Q13 trends are likely to continue. We expect to see flat NIMs, seasonally lower non-interest income and slight NPL upticks. Cost ratios are likely to inch up as income slows. The banks chased US$ deposits in 3Q, in anticipation of a tightening in the dollar liquidity.

We doubt that they would let their dollar deposits fall in this environment. More likely, they will let their S$-fixed deposit shares erode. On system loans data, we note a big pick-up in agriculture and commerce loans in 4Q.

These are most likely US$-loan opportunities and compensate for the drastically slower mortgage growth. The banks are likely to see stronger business loans.

What can go wrong? We are not too concerned that the credit costs might spike in 2014. We are more worried about the slow grind of funding cost pressures and slower wealth management and capital-markets fees.

What You Should Do
DBS remains our top pick. DBS can have a more resilient earnings profile in 2014 as its funding costs pressure is lower. Its more diversified fee stream and geographical exposure away from ASEAN should also help.