Lower for longer — Singapore banks’ net interest margins (NIMs) have tumbled to all-time lows while loan growth looks set to stay modest. It’s the low US rates that  have driven this, and HSBC’s economists don’t expect rates to rise any time soon. In 2021e, we are aligned with consensus in pricing in flat NIMs, but we also expect flat NIMs in 2022e-23e whereas consensus expects a slight increase (c3-8bp). That suggests upside risk to our target prices. Sensitivity: a 10bp rise in NIM would equal a 7-8% increase to our EPS estimates.

Recovery — More positively, the economic recovery and fiscal support may improve asset quality, with moratorium loans already down to 1-2%. It’s a case of the positives (PMIs, vaccines, China recovery) versus risks (ASEAN cases of COVID-19, longerterm  ME/consumer damage, lagging credit cycle); but, on balance, we believe credit costs can normalise. Our 2021e credit costs are c30%/10bp lower than consensus. Sensitivity: a 10bp fall in credit costs would equal a 5% rise in our EPS estimates.