Singapore Banks Poised for Strong Q4 Profit, But Trade Wars Loom This title accurately reflects the content of the blog post, which discusses the expected strong performance of Singaporean banks in their fourth-quarter earnings, but also highlights the risks posed by ongoing trade tensions between the US and China.

Singapore Banks Poised for Strong Q4 Profit, But Trade Wars Loom

As Singaporean banks prepare to release their fourth-quarter earnings, analysts are predicting a robust performance driven by strong net interest income and higher fees income. However, ongoing trade tensions between the US and China pose significant risks to the global economy and could impact Singapore's growth prospects.

A Strong Q4 Performance Expected

Singaporean banks, Southeast Asia's largest by assets, are forecast to post higher fourth-quarter net profit on-year, according to LSEG estimates. This performance is expected to be driven by

Robust Net Interest Income Higher interest rates have benefited Singaporean banks, allowing them to generate more revenue from lending.
Higher Fees Income Strong inflows of wealth in Singapore have led to increased demand for banking services, resulting in higher fees income.

But Trade Wars Loom Large

However, the ongoing trade tensions between the US and China pose significant risks to the global economy. The main worry is an escalating cycle of tit-for-tat tariffs sparking a broader global trade war.

Rising Growth Risks Local banks may need to increase provisions for potential bad debts amid rising growth risks, which could come at the expense of earnings.
Heightened Global Uncertainty This uncertainty could dampen loan demand, as businesses and consumers adopt a more cautious stance on borrowing and spending.

DBS Group Leads the Pack

DBS Group, the largest among the three Singapore lenders, is projected to record a 9.8% rise in net profit in the October-December period versus a year earlier, according to LSEG estimates. Oversea-Chinese Banking Corp. (OCBC) and United Overseas Bank (UOB) are forecast to post net profit increases of 11.6% and 4.3%, respectively.

Capital Return Plans Under Scrutiny

Besides the outlook, analysts said a key focus during the earnings announcements will be on capital return plans, such as potential special dividends and bigger share buyback programs, following strong earnings by the banks in previous quarters. UOB could surprise with special dividends, according to Thilan Wickramasinghe, Maybank Investment Banking Group's head of research for Singapore and regional head of financials.

Moderation Ahead?

Looking ahead, some moderation in banks' earnings is on the cards as Singapore's economy, which grew 4.0% in 2024 for its fastest pace in three years, is forecast to slow to 1.0% to 3.0% in 2025. The country's central bank said in late January that the impact of shifts in global trade policies could weigh on the domestic manufacturing and trade-related services sectors.

Inflationary Environment A Silver Lining?

On the flip side, Maybank's Wickramasinghe also raised a potentially beneficial scenario for banks stemming from an inflationary environment created by Trump's tariffs. This would make the Fed cautious on easing too early. A higher-for-longer interest rate scenario is likely to support net interest margins for Singaporean banks.

Conclusion

As Singaporean banks prepare to release their fourth-quarter earnings, it's clear that the trade tensions between the US and China pose significant risks to the global economy and could impact Singapore's growth prospects. However, a robust Q4 performance is expected, driven by strong net interest income and higher fees income. As we look ahead, moderation in banks' earnings is likely, but an inflationary environment could provide a silver lining.

Key Takeaways

Singaporean banks are poised for a strong Q4 performance, driven by robust net interest income and higher fees income.
Trade tensions between the US and China pose significant risks to the global economy and could impact Singapore's growth prospects.
Capital return plans, such as special dividends and share buyback programs, will be in focus during earnings announcements.

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Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.