Singaporean Banks Anticipate Robust Fourth Quarter Profits Amidst Global Economic Uncertainties

Singaporean banks are expected to report solid earnings for the fourth quarter, driven by favorable interest income and fees income. However, analysts caution that global economic headwinds, including U.S. trade tariffs and other policies, could hinder growth in 2025.

Strong Fourth Quarter Performance

Singaporean banks, with their extensive regional presence, have benefited from higher interest rates and steady wealth inflows due to Singapore's political stability. As a result, LSEG estimates indicate higher net profits for the fourth quarter.

DBS Group is projected to experience a 9.8% rise in net profit, while Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB) are anticipated to see increases of 11.6% and 4.3%, respectively.

Risks from Global Uncertainties

The escalation of trade tariffs could spark a global trade war, posing risks to Singapore's economy and financial sector. Banks may need to increase provisions for potential bad debts and face reduced loan demand due to heightened uncertainty.

Outlook and Capital Return Plans

Analysts anticipate announcements on capital return plans, such as special dividends and share buybacks, following banks' strong quarterly results. UOB is seen as a potential surprise performer in this regard.

Moderation in Earnings Expected

While Singapore's economy experienced robust growth in 2024, it is forecast to slow in 2025. This moderation is likely to affect bank earnings.

Inflation and Interest Rates

Inflationary pressures caused by tariffs could impact banks favorably. The Federal Reserve may become more cautious in easing interest rates, leading to higher interest margins for Singaporean banks.