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Citi Downgrades UOB To ‘Neutral’, Lowers Target Prices On All Three Banks, As It Sees Downside Risks To NIMs

TigerNews SG03-12

Citi Research analyst Tan Yong Hong believes there could be downside risks to Singapore banks’ net interest margins (NIMs) due to plummeting rates on the Singapore Overnight Rate Average (SORA) and the market pricing in more rate cuts from the US.

“Despite stable US rates, SORA has been pressured lower on [the] Monetary Authority of Singapore’s (MAS) incompletely sterilised foreign exchange (forex) interventions and flush banking system liquidity,” Tan writes in a report dated March 11 (US Eastern time).

In his view, this could continue as long as there is scope to lower the Singapore dollar nominal effective exchange rate (S$NEER) within the band. On Jan 24, the MAS said it would reduce the slope of its S$NEER policy band “slightly”, marking the first easing conducted by the central bank since March 2020.


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Comment（5）

  • Tigerwong
    ·03-13
    NIM to narrowed is common sense as interest rates decline in Singapore.  The crux of the issue is by how much and how fast?  Which in this case may be a slow process as the world uncertainties may keep the rate stubborn to decline.  Another factor to consider is how much is NIM contribution to profitability and that all the 3 local banks are moving towards fees income such as international wealth management that can be seen in their exponential growth recently.  Not sure if Citi has taken these into their considerations.  
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  • RASing
    ·03-12
    NIM will certainly come down and impact profitability. It s good to forewarn the investors. Though all 3 banks are super solid, the golden days of mind boggling NIM is coming to an end. My point of view.
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  • SuperDuper1
    ·03-12
    The rationale for downgrading is not historical earnings but bawd on their expectation that NIM will decline. 
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  • KienBoon
    ·03-12
    This Citi is fast to downgrade bank counters despite their record earnings for last Q. Did Citi take that into consideration or their business growth plans? Moreover, banks are giving very good dividend plus special dividend to shareholders. It will generate very good market sentiment. How can Citi just downgrade Singapore bank counters just based on that ?? Just disappointing indeed with this Citi.
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    • KienBoon: 
      *Quite disappointing...
      03-12
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  • SnideWhistle
    ·03-12
    Not only you see, everyone also saw 🤣. I'll Give you the thumbs up if you tell me something I didn't see or also know ...
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