While valuations of Singapore bank shares undemanding, upside in near term limited as net interest margins expected to remain under pressure, says Deutsche Bank, according to Dow Jones.

Deutsche Bank notes interest rates in Asia generally rising, but Sibor likely to remain low for longer than initially expected as rates in Singapore linked to Fed policy; “while NIMs should stabilise in 2011, the near term is challenging and we think risks are to the downside.”

Research house notes average 2Q10 NIM for all 3 banks at 1.98% vs 2.32% peak in 4Q08. Says loan growth for 2H10 likely to remain positive as Singapore economy still growing, but loan expansion may slow in 2011 pending global economic conditions.

Keeps DBS (D05.SG), OCBC (O39.SG) at Buy, UOB (U11.SG) at Hold with respective targets of $17.20, $10.40, $21.00. DBS flat at $13.74, OCBC -0.2% at $8.64, UOB +0.2% at $18.46.