UOBKayHian (UOBKH) predicts that Singaporean banks DBS and Oversea-Chinese Banking Corporation (OCBC) will face Net Interest Margin (NIM) compression but benefit from a surge in management fees and stable asset quality during the third quarter of 2025. These trends are attributed to ongoing market uncertainties caused by trade conflicts and the US government shutdown, though easing trade tension and anticipated Federal Reserve rate cuts provided some uplift.
DBS Outlook
- NIM & Profit: UOBKH forecasts a net profit decline for DBS. It expects NIM to compress significantly by 12 basis points (bps) quarter-on-quarter (QoQ) to 1.93%.
- Growth: Loan growth is estimated to be modest at 0.5% QoQ.
- Fees & Asset Quality: Strong fee growth is expected, with wealth management contributions increasing by 8% QoQ to $700 million. Asset quality is predicted to stabilize with the Non-Performing Loan (NPL) ratio holding at 1.0%. The bank is noted to have a substantial general provision overlay of $2.6 billion.
OCBC Outlook
- NIM & Profit: UOBKH forecasts a flat QoQ net profit for OCBC. NIM compression is expected to be more moderate, easing by 7 bps QoQ to 1.85%, partly due to efforts to lower deposit costs.
- Growth: Loan growth is also expected to be muted at 0.5% QoQ, although a healthy 6.8% Year-on-Year (YoY) increase is still projected.
- Fees & Asset Quality: Wealth management contributions are anticipated to grow steadily by 20% YoY to $295 million. Asset quality is seen as benign and stable, with the NPL ratio remaining at 0.9%. UOBKH factored in total provisions of S$204 million, aligning with the higher end of the bank’s guidance.
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