The conclusion of favorable interest rate tailwinds is forcing Singapore's major lenders to navigate a more demanding landscape characterized by deposit competition and compressed margins. Third-quarter results illustrated this shifting dynamic, as only OCBC topped market expectations while DBS and UOB both lagged behind projections. DBS specifically absorbed a 65 per cent plunge in markets trading income, while UOB struggled with elevated costs despite a low-base profit surge. Going forward, the institutions are expected to register increasingly differentiated financial performance.
Key points
Lenders are experiencing tighter deposit competition and margin compression as the era of…: Lenders are experiencing tighter deposit competition and margin compression as the era of interest rates driving earnings comes to an end.
The three local institutions are expected to chart diverging performance paths, with UOB…: The three local institutions are expected to chart diverging performance paths, with UOB confronting more severe margin pressure while DBS anticipates its net interest income has bottomed out.
Recent drops in bank share prices reflect mounting investor disappointment alongside broa…: Recent drops in bank share prices reflect mounting investor disappointment alongside broader macroeconomic pressures and shifting global risk sentiment.
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The three Singapore banks reported a mixed bag of earnings this week, with DBS and UOB missing analysts' expectations.
SINGAPORE: Despite the prospect of higher interest rates, Singapore banks may face a tougher environment in 2027, analysts told CNA.
“The boom years did a lot of the work for Singapore’s banks,” said Mr Eric Xiao, head of sales in Asia for CMC Markets. “In 2027, they’ll have to do it themselves.”
He said it appears to be more difficult to cash in on the wealth boom than expected, noting that DBS took in a record S$15 billion (US$11.7 billion) of net new money for the third quarter of the year and still saw wealth fees fall 6 per cent because clients traded less.
Banks will eventually benefit from higher interest rates, he said, but margin income could get squeezed initially because rates on deposits tend to rise more quickly than rates on loans.
Overall, he does not expect the banks to see a “down year” despite the difficult conditions ahead.
Mr Ritesh Ganeriwal, group head of investment and advisory at…
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